Once again, budget matters are expected to dominate discussions in state legislatures in 2004. But this year the gloomy economy that has plagued public colleges for the past two years has improved slightly, leading many higher-education officials to hope that the worst is behind them.

As 36 states begin their legislative sessions this month, lawmakers in several will be greeted with budget news that is moderately better than a year ago. Twenty-four states reported having a stable revenue outlook for the rest of the fiscal year, which ends for many on June 30, and 21 states said that their revenues were coming in above forecasts, according to a November survey by the National Conference of State Legislatures. At the same time last year, eight states called their revenue outlook stable and only three states said that their revenues were greater than projected.

Another recent report on state revenues, from the Nelson A. Rockefeller Institute of Government, the research arm of the State University of New York, shows the first annual increase in state tax receipts in two years, of 0.4 percent (when adjusted for inflation and changes in tax laws).

"I think we've hit bottom," says Scott Pattison, executive director of the National Association of State Budget Officers. But he and others are quick to add that a full economic recovery in the states -- and significant increases in appropriations for higher education -- are still some years off. State budgets are likely to remain tight for at least two more years, Mr. Pattison says.

"We are seeing real slow, steady, lackluster improvement," he says. "There might be some slight budget increases, but just the absence of more big spending cuts is the good news. To the extent people can avoid further budget cuts, they ought to be happy."

Before public colleges can cash in on improved revenues, states will first have to confront growing costs for programs like Medicaid and health care for state employees. Even when funds are freed up for other items, lawmakers will probably make restoring money for elementary and secondary education a higher priority than appropriations for colleges.

And the improved fiscal condition of the states is appearing only in pockets of the country. Budget projections are looking somewhat better in many Great Plains and Rocky Mountain states, like Oklahoma and Colorado, and in scattered places elsewhere, including Delaware, Florida, and Washington. But the outlook remains dreary in California and New York, as well as in several Great Lakes states, where the economy relies heavily on manufacturing. In those states, public colleges are confronting yet another round of budget cuts scheduled for the middle of this academic year.

In Michigan, for instance, Gov. Jennifer M. Granholm, a Democrat, has proposed cutting spending for public universities by as much as 5 percent to help the state close a $900-million budget gap. Last month Gov. Arnold Schwarzenegger of California, a Republican, ordered a 1-percent budget cut for the state's two public-university systems. That equaled $29.9-million at the University of California and $23.7-million at California State University. The governor took the action to help the state, which faces a $14-billion budget deficit, make up for revenue lost when he revoked an increase in California's vehicle-license fee.