HARRISBURG -- The state budget for fiscal 2007-08 is now 16 days late, but the House and the Senate are finally moving quickly to correct that situation.

Six House and Senate leaders met in a conference committee last night to approve a $27.2 billion spending package for the fiscal year that began July 1, and votes in both chambers could come as soon as this morning.

State treasury officials have warned that if the budget isn't completed by today, this week's paychecks for thousands of state workers would likely be late. Payday for most state workers is Friday.

In another major action last night, a Senate committee approved a bill containing several important Allegheny County projects, including funding for a new $300 million arena for the Pittsburgh Penguins. The money will come from the state's new $2 billion gaming, economic development and tourism program. That program, which was included in the casino law approved in 2004, will be funded by a 5 percent tax on slots revenue.

Eight projects in Allegheny County, including the new arena and a convention center hotel, are to receive money over the next 12 years from this new gaming fund. It will provide $7.5 million a year for 30 years for the arena.

"This is wonderful news for Pittsburgh," said Sen. Jay Costa, D-Forest Hills. "It means the arena will move forward."

"This means the Penguins will be ready to go" to seek bids for the arena this summer, added Sen. Jane Orie, R-McCandless. "There was a strong bipartisan support from the Allegheny County delegation to move this project forward."

The House still must vote this week on the gaming fund, but it's a priority with Gov. Ed Rendell, and Mr. Costa said he's confident the fund will receive final approval before legislators leave Harrisburg for their summer recess.

Meanwhile, House and Senate members were expected to approve the new state budget by today. The spending plan includes a 3.5 percent increase in health and welfare spending and a 5.8 percent increase in education spending, the two biggest budget items. It calls for a 1.1 percent increase in the rest of the general fund.

Democrats wanted more money for veterans, the disabled, libraries and local firefighters but still were satisfied with the negotiated budget, said House Majority Leader Bill DeWeese, D-Waynesburg.

Lawmakers had extra incentive to pass the budget after receiving a letter from state treasury officials warning that thousands of state workers won't be paid on time Friday if a new budget isn't approved today. Treasury officials said they need a three- or four-day processing and issuing period for the checks.

Lawmakers are especially sensitive to late paychecks because earlier this month, the lengthy budget delay caused almost 24,000 "nonessential" state workers to be furloughed without pay for a day. Legislators were trying hard to prevent any more paycheck problems.

The governor's office is looking for a way for those furloughed employees to recoup the day's lost pay.

"The furloughs, unfortunately, happened," said Senate Appropriations Chairman Gibson Armstrong, R-Lancaster. "The pain that some people suffered was unfortunate, but in the long run the taxpayers will benefit."

The bottom line of the new general fund budget was adjusted slightly during negotiations, said Erik Arneson, an aide to Senate Majority Leader Dominic Pileggi, R-Delaware.

When the budget was first agreed to a week ago, it was at $27.37 billion. But some welfare spending was added, putting the total at nearly $27.5 billion, and $300 million for mass transit was shifted out of the general fund into a new transportation fund. That reduced the bottom line to $27.2 billion, or a 3.4 percent increase over the 2006-07 budget of $26.3 billion.

The Senate and the House -- after making little progress in recent days on the budget and several important side issues -- worked hard last night to make up for it.

The House spent several hours debating amendments that would water down a proposed smoking ban in public places and workplaces, but most of the amendments were defeated. The House's smoking ban legislation will still have to be reconciled with a bill already passed by the Senate. Both chambers would have to approve an identical smoking ban before it can be sent to Mr. Rendell for signature.

The $2 billion gaming tourism fund will pay for an $880 million expansion of the Philadelphia convention center as well as Allegheny County projects including a David L. Lawrence Convention Center hotel and developments at Pittsburgh International Airport.

Another major issue the Senate took up last night was the new school code for 2007-08, which also included language to give state Education Secretary Gerald Zahorchak the power he needs to reassign 200 students from the now-closed Duquesne High School.

The language doesn't specify which nearby schools the Duquesne students may be assigned to, but it does say that the districts must be within three miles of the borders of Duquesne. West Mifflin and East Allegheny are seen as two likely possibilities. Final action on that bill could come today.

The Legislature also was completing work on a new transportation funding plan, which would provide $450 million to repair roads and bridges in the next year, with $300 million to bail out deficit-ridden mass transit systems, including the Port Authority of Allegheny County.