The only budget he would sign, Daniels said, was one with absolutely no tax increases, a $1 billion reserve cushion and no gimmicks.
"The Senate has produced an excellent compromise," Daniels said. "It goes a little further than I would have, but it's fair."
On Wednesday, representatives from the Democrat-controlled House and the Republican majority Senate sat down in a committee to hammer out a compromise budget plan. The current 2009 budget ends at midnight on Tuesday, and the General Assembly was called back into special session two weeks ago to work out a budget deal.
A part of the Senate Budget includes a resolution that would extend the 2009 budget through the next fiscal year, if a compromise cannot be reached.
Daniels stopped in Brazil Wednesday morning to chat with representatives from the Banner Graphic, Brazil Times and Greene County Daily World about how he was feeling with a vote imminent on the contentious budget.
Daniels said while he would have preferred no reserves be used in the budget, he did agree to let about a quarter of them be tapped into.
"The reserves are the taxpayers' last line of defense," he said. "There are many House Democrats who would rather vote for a responsible budget than bankrupt the state."
Daniels was vocal about his disdain for the actions of Speaker of the House Patrick Bauer, D-South Bend.
Daniels said Bauer needs to "relax his iron grip" on House Democrats and "allow people to vote their conscience."
"We will not be blackmailed and bullied into raising taxes on Hoosiers at a time like this," he said.
Daniels noted that although cuts were made in most areas of the budget, increases were made for local school funding.
"When your income as a whole is down 8 percent, you don't increase spending on anything unless you really care about it," he said. "Nothing else avoided real cuts."
Daniels said Indiana's triple-A credit rating was recently affirmed.
"What that means is when our schools and towns go to borrow, they can save money," he said. "It's just another reminder that it really matters that we protect our budget and taxpayers."
Daniels said Indiana stands a better chance of recovering from the recession more quickly than other states because it was on more solid footing when the recession began.
"We entered into this recession with one of the best (industrial) reputations, and that hasn't changed," he said. "There is certainly interest in Indiana. The inflow has really not slowed down; it's being overwhelmed by the losses that we've had."
Daniels said he has heard constituents' concerns about money being too tightly bound within certain funds in the budget.
"I happen to agree," he said. "Conditions change, problems change, and we do lock ourselves in. I'd like there to be more flexibility."
With bipartisan support, Indiana senators voted Tuesday 33 to 17 to pass a balanced $28.8 billion two-year budget that includes about $1 billion in federal stimulus funds.
The Senate budget reduces state spending to reflect declining state revenues, maintains $1 billion in emergency cash reserves and avoids general tax increases.
The Indiana House voted last week on straight-party lines for a one-year state budget that calls for spending more than $14.5 billion in 2010, giving the approval for big increases in university building projects and no money to build new prison space.
All 52 House Democrats voted yes, while all 48 of the Republicans in the chamber voted no.
"We have to balance budgets," Daniels said. "We don't have a printing press like Washington D.C."