HARRISBURG - After nearly four hours of negotiations last night, several legislative leaders said they were hopeful they could reach a compromise on Gov. Rendell's $28 billion spending plan before dawn.

The two sides took a break from talks shortly after 9 p.m., with Democrats planning to meet with Rendell and then reconvene with Republicans around midnight.

"I'm shooting for a handshake deal tonight, so we're optimistic," said Sen. Vincent J. Fumo (D., Phila.), a key budget negotiator. "We still have to talk to the governor. We have some major issues to discuss with him. And he's not the easiest to get along with, especially at this time of night, but we're going to give it a shot."

Rep. Keith McCall (D., Carbon) said there were several issues still unresolved, including details on big-ticket items like funding for education and clean-energy projects - two things important to Rendell.

Still, both sides agree that the immediate goal is to reach a "gentleman's agreement" on the framework of a budget by midnight tonight, since it's virtually certain the state will not have adopted a spending plan by tomorrow's start of the fiscal year.

If such an agreement is reached, the two sides can avoid a repeat of last year's one-day furlough of state employees.

Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware), said last night that there was a lot of progress made in talks, but that "my gut says we will not reach a gentleman's agreement tonight. There's just a little too much ground to cover."

Earlier in the day, House Majority Leader Bill DeWeese (D., Greene) said the two sides were down to disagreements over roughly $200 million in spending.

"In an approximately $28 billion budget, that is not an insurmountable goal to overcome," DeWeese said. "It just seems that we have to grow closer together on exactly what cuts need to be made."

The two sides have until midnight to meet the constitutional deadline to approve a state budget - although Pennsylvania's leaders have not passed a budget on time since Rendell became governor in 2003.

An impasse in last year's negotiations resulted in the furlough of 24,000 state workers and the shutdown of state parks and driver's license centers.

Yesterday's talks were delayed until just after 5:30 p.m. because Rendell and several lawmakers attended funeral services for A. Richard Gerber, the father of Rep. Michael Gerber (D., Montgomery).

One issue dividing the two sides was Rendell's proposal for an extra $291 million for school districts - the largest increase in education funding in two decades.

Republicans say the administration did not follow the same funding formula when it came up with $34 million for Philadelphia's school district as for the rest of the state.

Education aside, issues of disagreement include billions of dollars in borrowing to help replace aging municipal water and sewer facilities, invest in cleaner-energy projects, and fix some of the state's structurally deficient bridges.