[img_assist|nid=727|title=House Majority Leader Bill DeWeese (D-Fayette County) talks with reporters after leaving to review the GOP's proposal|desc=Politicker Photo|link=none|align=none|width=417|height=359]

UPDATE, 1:18 a.m.: We have a budget! Rendell has just announced they have reached a budget agreement in principle. 

Here are the highlights:

• Spending increased 3.8 percent, down from Rendell's February proposal of 4.2 percent.
• Rendell said he made about $525 million in cuts, which he said were necessary during difficult economic times.
• First time a budget agreement, even in principle, has been reached before the June 30 deadline during Rendell administration.
• All sides emphasized they thought deal was a fair compromise.
• Budget now will take about three days to go through the necessary parliamentarian hoops to reach the governor's desk. But for all intensive purposes, Pennsylvania has a budget for the 2008-09 fiscal year.

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UPDATE, 1:05 a.m.: Budget Secretary Mike Masch tells PolitickerPA.com, "You know, I don't think we're going to be in there a lot longer" as he steps out of negotiations for a moment.

It's good news -- PolitickerPA.com doesn't have a change of clothes for tomorrow if we're forced to stay here all night. 

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UPDATE, 12:15 p.m.: Of course, moments after PolitickerPA.com wonders where the Senate leaders are, Pileggi and Scarnati walk into the negotiation room. 

All parties are now represented, and there's no telling how long they'll go. 

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UPDATE, 11:55 p.m.: Where are Pileggi and Scarnati? The governor, Senate and House Democrats, and House Republicans have arrived and are in the negotiating room now.

But only state Sen. Gibson Armstrong (R-Lancaster County) is representing Senate Republicans, so far at least. 

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UPDATE, 11:30 p.m.: So what happens if they reach an agreement tonight? Number crunching, number crunching, number crunching.

And it would start right away. According to Pro, staff for the House appropriations committee have changed into sweats in preparation for a long night. If an agreement is reached, they will start working right away. 

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UPDATE, 11:15 p.m.: PolitickerPA.com is back outside the governor's office, coffee by our side. Stay tuned through the night for updates.  

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UPDATE, 9:45 p.m.: Republican spokesmen Arneson and Steve Miskin just did a brief tour of the newsroom. They basically echoed what Democrats were saying outside the governor's office, although they played down talk of a handshake agreement tonight. 

"My gut says that's not going to happen tonight," Arneson said. 

But he and Miskin emphasized progress has been made, although they, like everybody else, wouldn't delve into details. 

As said earlier, the four caucuses and Rendell will meet face-to-face tonight at 11:30 in the Capitol. 

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UPDATE, 9:15 p.m.: Will there be a handshake agreement tonight? We're going to find out, but not until much later after legislative leaders meet face-to-face meeting with Rendell.

Lawmakers just walked out of the governor's office and told reporters they are close to a budget deal in principle.

"We're shooting for a handshake agreement tonight," said state Sen. Vince Fumo (D-Philadelphia), taking a big part in negotiations just days after collapsing on the Senate floor. 

Lawmakers said they will return to the governor's office about 11:30 p.m. to meet with him. 

Fumo cautioned that Rendell might stall negotiations once again.

"He's not the easiest person to deal with, especially at this time of night," he said.

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UPDATE, 8:05 p.m.: Staffs have begun streaming out of the governor's offices, but leadership remains. PolitickerPA.com is told they will probably continue meeting for a while. 

Said Pileggi spokesman Erik Arneson, "I don't have a sense an agreement is imminent, but there were feelings of optimism."

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UPDATE, 7:00 p.m.: House Democrats just returned to the negotiations, and apparently there's progress after the latest Republican proposal. 

"I can tell you they are very optimistic," said Johnna Pro, Evans spokeswoman. "The temperature has decreased a little bit since Friday night."

She could not say whether that optimism will lead to a deal tonight.  The big issues remain the sticking points, she said, including education, economic development and energy.

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UPDATE, 6:40 p.m.: Democrats left a short time ago to review the latest Republican proposal. They indicated they would return in 30 minutes.  

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UPDATE, 6:00 p.m.: The doors to the meeting room are locked, the press corps outside, and representatives from each caucus and the governor are inside. Budget negotiations have restarted after an almost 48-hour delay.

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UPDATE, 5:00 p.m.: Republicans and Democrats might actually come to a budget deal if they ever meet. But that's becoming harder than it seems after another meeting was delayed just minutes ago, this time until 5:30 p.m.

The pushback didn't please Minority Appropriations Chairman Mario Civera (R-Delaware County).

"This meeting was originally scheduled for 12," he said. "Now it's back to 5:30. It's got me a little concerned."

He and House Majority Leader Bill DeWeese (D-Fayette County) held a impromptu mini-question-and-answer session with reporters after House Republicans, who had already arrived outside the governor's reception room, returned to their offices.

DeWeese said the meeting was originally pushed back so the governor could attend the funeral of Richard Gerber, the late father of state Rep. Mike Gerber (D-Montgomery County).

The majority leader then explained what he thinks is keeping the two sides apart, saying Rendell is reluctant to cut funding to programs he sees as important to the state's future.

"We have maybe the most progressive governor in all the 50 states," he said. "He is loathe to take out the meat cleaver."

Civera and DeWeese agreed the two sides are simply battling over their priorities, and DeWeese added he thinks they are close to a compromise.

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UPDATE, 4:00 p.m.: Everybody hurry up and wait. Budget negotiations have been pushed back to 4:30 p.m.

According to Rendell spokesman Chuck Ardo, a long night tonight will be a good sign.

"We will go as long as there's progress being made," he said.

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UPDATE, 3:30 p.m.: PolitickerPA.com is about to head to outside the governor's reception room, where the talks are supposed to take place. They have traditionally occurred inside Pieggi's office -- are Democrats trying to gain home-office advantage?

Everyone expects a long night, so hopefully it will be cooler there than the Senate. The Capitol seems to turn into the world's largest sauna during the weekend.

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UPDATE, 2:15 p.m.: PolitickerPA.com reiterates that you never know who you run into around Harrisburg and the Capitol. We just talked with Lt. Gov. Catherine Baker Knoll (D) as she got out of her car in front of the Capitol.

Knoll told PolitickerPA.com Republicans and Democrats are still talking, which is a good sign for a timely budget agreement.

"I'm very optimistic," she said before handing us a packet of information about the Capitol and legislative process.

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After two days of stalled progress and at times heated rhetoric, budget negotiators will try once again this afternoon to reach an agreement before Monday's fast-approaching deadline.

Spending disagreements continue to separate the two sides. Republicans are asking for an additional $200 million to $250 million in cuts; Democrats say they've already reduced their spending proposal by $600 million. They have not made any progress bridging that gap in two days, although House Speaker Dennis O'Brien (R-Philadelphia) said talks between staff members, if not leadership, yielded progress Saturday.

Each side still remains confident a handshake deal will be reached before June 30.

"The differences are not insurmountable by any stretch of the imagination," Greg Fajt, Gov. Ed Rendell's chief of staff, said yesterday. Senate Majority Leader Dominic Pileggi (R-Delaware County) echoed his belief earlier in the day.

Today's negotiations are scheduled to begin at 4 p.m., although scheduling a definite time for these talks has proven about as effective as building a sandcastle during a hurricane.

PolitickerPA.com will be here to document all the action.

EARLIER on PolitickerPA.com:

• No talks Saturday, but optimism remains for handshake agreement by June 30
• Budget negotiations to resume Saturday after 'disappointing' Friday talks