HARRISBURG - Budget talks took an encouraging turn Wednesday, with Gov. Rendell and legislative leaders saying they were making progress on a deal a week ahead of the June 30 deadline.

The gap between what Senate Republicans say they are willing to spend in the budget year that starts July 1 and what Rendell and House Democrats can accept is narrowing amid negotiations, which both sides described as cordial.

"I'm optimistic," Rendell said Wednesday afternoon after leaving an hour-long meeting with House and Senate leaders in the Capitol. "We are working on trying to figure out the amount we can spend . . . while recognizing our obligation in tough economic times to keeping the spending down."

Perhaps the most optimistic words on negotiations to date came from a Senate Republican.

President Pro Tempore Joe Scarnati (R., Jefferson), who also serves as lieutenant governor, told reporters Wednesday that he thought there was an 80 percent chance that a spending accord would be reached on time - a first since Rendell took office in 2003.

In the last few days, Democrats, who hold the majority in the House, have whittled Rendell's nearly $29 billion budget proposal to just over $28 billion. Republicans, who control the Senate, have maintained they do not want to spend more than $27.5 billion. But both sides say they are willing to compromise.

"We continue to look for a [spending] number that we can sustain and a number we can agree to," said Scarnati.

Sen. Jake Corman (R., Centre), chairman of the Appropriations Committee, said $27.5 billion was the GOP's "basement" figure for negotiations.

"We're not saying we can't move," he said. "But we are a world away from $29 billion."

Whatever spending legislators eventually settle on, they must also address how to close a $1.5 billion shortfall in revenue. Rendell and House Democrats have laid out "a menu" of tax options totaling about $300 million for Senate Republicans to consider. Among the options are new levies on natural gas extraction from Marcellus Shale and on cigars and smokeless tobacco - as well as increased cigarette taxes. Also still under discussion is a proposal to eliminate the vendor discount businesses get for paying sales taxes on time.

Rendell said he would review on Thursday a list of spending cuts presented to him by Senate Republicans and "see what I can live with."

Rendell originally proposed an increase of $355 million in basic aid to public schools, which has been trimmed to $300 million in the negotiation process.

He says he wants to preserve the extra education money well as funds for programs in the Department of Community and Economic Development that help create jobs.

House Minority Leader Sam Smith (R., Jefferson) cautioned that there were still "revenue issues to be resolved."

Scarnati said he would like to see a budget brought to the House floor by Monday in time to have it approved by both chambers by July 1.