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Sources close to the negotiations told NY1 that the plan would remove one of the main obstacles that trouble State Senate Democrats, by giving money to school districts to cover the cost of a new payroll tax.

The payroll tax would provide the MTA with about $1.5 billion a year, but some suburban state senators have complained that local school districts would need to hike already high property taxes to be able to pay the payroll tax.

Under the governor's plan, the state would reimburse school districts up to $70 million a year.

"Of the painful remedies, this was the one I thought would cause the least pain," said Paterson. "Let the school districts pay the payroll taxes, let the businesses pay the payroll taxes and then we'll come around next year, and we'll augment the budgets of all the school districts in next year's budget."

Democratic Westchester Senators Andrea Stewart-Cousins and Suzi Oppenheimer said they are inclined to vote for the bailout, which could enable the plan's survival.

"We are prepared to pass a bill," said State Senate Majority Leader Malcolm Smith. "We are prepared to make sure that the public does not suffer from the increases that the MTA has offered."

As of late Friday, there were still two holdout senators from Long Island. But Paterson could get some support from Mayor Michael Bloomberg, who has good relations with State Senate Republicans who could make up the difference for unwilling Democrats.

Bloomberg met with Assembly Speaker Sheldon Silver on Friday.

"At this critical time, it is important that the mayor and I have a conversation about how we achieve a goal that I know we both share, and that is an affordable mass transit system," said Silver.

Critics say the plan will not go far enough to solve the MTA's budget woes, and the proposal still calls for a dollar surcharge on cab trips, with half the money going to pay for roads and bridges statewide.

Silver, Bloomberg and other officials want the surcharge taken out of the proposal, and they may get their way.

Meanwhile, MTA officials said they are not waiting for Albany, and are moving forward with plans for cutbacks.

In addition to fare hikes that take effect at the end of the month, there may be another round of fare hikes and service cuts that go into effect as soon as September.

The State Senate hopes to vote on a bailout bill by early next week.