UPDATED: 4:32 pm

House and Senate leaders on Thursday will seek passage of a $39.15 billion budget accord for the fiscal year that begins on Friday, crafting a compromise in the face of unstable economic conditions that cuts $750 million in projected revenue and $413 million in proposed spending from previous plans.

The deal, reached on Wednesday by six negotiators from both branches, preserves increases to local aid and school funding for cities and towns, as well as substance abuse programs, but made tradeoffs that will result in many agencies and programs receiving level funding from this year over the next twelve months.

House Ways and Means Chairman Brian Dempsey said the compromise budget cuts $260 million from the roughly $39.5 billion spending plans approved by the House and Senate in April and May, including $142 million from Medicaid by deferring some payments until fiscal 2018 and reducing caseload estimates.

The budget bill, which will be put before House and Senate lawmakers Thursday for passage, also cancels a proposed $200 million deposit in the state's reserves due to lower than anticipated capital gains taxes, which have taken a hit from the volatility in the stock market.

Dempsey said the budget conferees, with the help of the Baker administration, identified $100 million in savings through “procurement efficiencies,” and are no longer assuming a reduction in the income tax rate from 5.1 percent to 5.05 percent in January, freeing up $80 million in taxes for spending.

As a result of the lower anticipated revenues in fiscal 2017, automatic transfers to the School Building Authority and the MBTA from sales taxes will occur at lower levels, reducing the amount delivered to each entity by about $30 million, Dempsey said.

Earlier Today:

A deal has been reached between House and Senate negotiators on a fiscal 2017 budget plan that could allow both branches to approve the spending plan before the start of the new budget year on Friday, according to a senior House Ways and Means official.

The conference committee, which is being led by Rep. Brian Dempsey and Sen. Karen Spilka, plan to file the agreement Wednesday evening.

Estimates of tax revenues needed to support next year's proposed $39.5 billion budget proposals were sharply lowered in the weeks since conferees sat down this month to begin working on a budget accord. Senate President Stanley Rosenberg has suggested spending levels would be reduced.

In a joint statement released late Wednesday morning, House Ways and Means Committee Chairman Rep. Brian Dempsey and Senate Ways and Means Chair Karen Spilka said, "The House and Senate members of the conference committee have reached an agreement on the FY17 budget. We expect to file the conference report tonight for action by the branches tomorrow."

No details of the budget accord were announced.