SAN FRANCISCO -- University of California, struggling with a possible $372 million in state budget cuts, hasn't ruled out raising undergraduate fees above 10 percent next school year and has ordered campuses to begin planning for an immediate 10 percent reduction in enrollment next fall, the system's budget guru said Wednesday.

"We're not ruling in or out anything," said Larry Hershman, the system's vice president for budget, when he met with reporters after he presented UC regents with tough options for coping with anticipated state budget cuts next fiscal year.

Gov. Arnold Schwarzenegger has called for cutting UC funding, raising student fees and reducing enrollment in the nine-campus system, which serves about190,000 students.

It would be the fourth-straight year of cuts for UC, which has seen its state-funded budget shrink by $530 million since 2000.

Schwarzenegger's proposal would raise undergraduate fees 10 percent -- on top of 40 percent increases in the past two years -- and would hike graduate fees 40 percent. Tuition for out-of-state students would jump 20 percent.

But Hershman and regents, meeting at UC San Francisco, were particularly concerned with one of the governor's proposals that would put only 20 percent of revenue from any fee increases back into financial aid programs. Historically, UC has put one-third of fee revenue into financial aid.

Hershman said the 20 percent -- especially with the proposed 40 percent increase on grad fees -- would make it tough for the system to maintain its current financial aid program, including a new initiative that began this year to offer aid to middle-income students.

The system may have to consider raising undergraduate fees above even the 10 percent suggested in the governor's budget proposal, he said.

"The reality is, we can't make it work the way it's structured" in the budget proposal, Hershman said. "The choices are, do we consider higher fees? Should we consider shifting financial aid from middle-income to low-income students? ... We know the governor's saying 10 percent, and it would be very hard for us to go above 10 percent, but it may be the board wants to look at options."

A 10 percent increase would take base undergraduate fees to $5,482 a year, a $498 increase. This fall, fees increased from$3,834 to $4,984.

Graduate fees would increase to $7,307 a year under the proposed 40 percent increase, a $2,088 jump. Tuition paid by students who aren't California residents would also increase 20 percent, to $24,672 for undergraduates and $23,968 for graduate students.

Regents are expected to vote in March on any potential fee increases, Hershman said.

Students at the meeting called on regents to deny any additional fee increases.

"Don't just accept the budget the governor gives you, but stand up for the students you represent," UC Berkeley student Arman Rezaee implored regents. "Fight student fee increases."

Enrollment reductions

The system is already feeling the effects of the governor's proposal, even though the plan has yet to pass the Legislature. Schwarzenegger has also called for enrollment reductions in UC, as well as the California State University system.

The governor's proposal calls for each of the four-year universities to divert 10 percent of their new freshmen next year to community colleges, where their fees would be waived. For UC, that's the equivalent of 3,200 students; at CSU, that's 3,800 students. UC also won't receive enrollment growth funding next year, which would have provided money for an additional 5,000 students.

Hershman said campuses are already planning to admit 10 percent fewer students in the fall. Some students will be offered a dual admission program in community colleges. The governor has also called for giving UC an additional $1.6 million next year so staff could provide academic counseling to the diverted students to help them eventually transfer into UC.

Hershman said such dual admission programs have been unpopular with students in the past, although he didn't know if the fee waiver would help as an enticement.

Student to faculty ratios

The regents on Wednesday also got their first look at a number of priorities that will guide UC's budget planning. Some of the priorities are in conflict with the governor's proposal, specifically a plan that calls for increasing the student to faculty ratio.

Schwarzenegger wants the ratio to increase from its current 20 to 1 to about 21 to 1. Hershman said officials want to maintain the current staffing level and eventually reduce it down to about 18 to 1.

Still, Hershman and regents said the budget proposal could have been worse, and officials said they will continue to work with the Legislature and the governor.

Hershman said he is optimistic a compromise could be worked to save some funding for outreach programs, which help disadvantaged kids get into college. The governor has suggested eliminating all outreach funding -- $33 million -- but Hershman thinks some of that will be restored.