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PHOENIX — State legislative leaders have agreed on a $10.6 billion budget for next year that provides far less in tax cuts than previously demanded by House Republicans.

The smaller tax cuts are being offered up to make the proposal more palatable to Democratic Gov. Janet Napolitano, who still must sign off on it.

The package includes about $10 million in tax reductions, mostly earmarked for business.

It also would, for the first time, give Arizonans a deduction for money they put aside for children or others to attend college.

And individuals would get a dollar-for-dollar state tax credit for contributions to a special fund to help cover the travel expenses for families of soldiers injured in combat to visit them in an out-of-town hospital.

But missing from the package is a GOP-backed 2.5 percent cut in corporate income taxes, at least in part because of its $28 million price tag. Also absent is a demand by House Republicans to make it easier for individuals to contribute to organizations that provide scholarships so students can attend private and parochial schools, which the state Department of Revenue fears could end up costing the state $42.5 million.

The package disappointed Rep. Russell Pearce, R-Mesa, who chairs the House Appropriations Committee. He called the tax cuts in the plan "peanuts" and "a pittance."

He cited one provision in the budget package repealing the law that bars state officials from promoting the KidsCare low-income health-care program in public schools.

Napolitano demanded the change, saying it simply tells people who are eligible for the program that it exists. And she noted the federal government provides $3 for every dollar spent by the state.

Senate President Tim Bee, R-Tucson, acknowledged that the tax cut package probably is smaller than even some Senate Republicans would like. But he said they have to deal with the reality of a Democratic governor whose signature they need, because there are not enough GOP votes for an override.

But Bee also said those who criticize the size of this year's tax reductions forget that the budget adopted last year contains some provisions that will reduce taxes for businesses and individuals this year, such as multiyear income- and property-tax cuts.

Bee said the new tax cuts for this year, while small, are designed to help as many businesses as possible.

The other will reduce the property tax that businesses pay on new equipment.

Gubernatorial press aide Jeanine L'Ecuyer said Napolitano was "very encouraged" by what she has seen of the deal, but the governor wants to review the package line by line before deciding whether to sign it.