HARRISBURG -- After meeting with legislative leaders in a closed-door session last night, Gov. Ed Rendell made an abrupt turnaround and sounded much more optimistic about reaching an agreement on the state budget.

"We are not there yet, but we have made progress toward restoring revenue cut from education and economic development," he said last night. "I am cautiously optimistic that in the next day or two, we can agree on something to benefit citizens and, barring unforeseen circumstances, we can have a balanced budget."

Mr. Rendell provided few details about the meeting and did not say what led him to change his position. Only hours earlier yesterday, while attending a clean energy forum in Bucks County, the governor said there weren't enough recurring revenues to sustain the spending in the $27.95 billion budget.

Mr. Rendell said if the budget was passed by lawmakers, he would veto it.

But last night, he met with Senate Republican leaders, including Senate Majority Leader Dominic Pileggi, R-Delaware, and said they made "significant progress" on both revenue and spending.

Mr. Pileggi said a $200-million to $300-million gap remains between what the sides believe can be collected this year from the taxes, fees and other revenue sources in the plan.

Mr. Rendell said he expects there will be more meetings on the budget today and possibly over the weekend.

Legislative leaders yesterday did not make public details of the plan, but said it does not include an income tax increase.

Erik Arneson, communications director for Mr. Pileggi, was sharply critical of the governor earlier yesterday, saying he needed to get involved in the budget discussions.

"It is time for the governor to return to Harrisburg and engage in serious, face-to-face negotiations with legislative leaders," Mr. Arneson said.

One of the main issues has been revenue projections, which Mr. Rendell claims could be much too low.

House Speaker Keith McCall, though, said he's confident "the numbers we're working off of are good numbers."

Still, he said, legislative leaders are willing to consider additional revenue sources to make the governor more comfortable.

"We're cobbling together a revenue package from every source we can find without going to a broad-based tax," such as increases in the income or sales tax, said Mr. McCall, D-Carbon.

The compromise is being negotiated by leaders of the House Democratic, Senate Democratic and Senate Republican caucuses.

House Republican Leader Sam Smith is not participating in the negotiations. His caucus opposes the plan because it includes tax hikes, including an increase in the cigarette tax.