SAN FRANCISCO – Four years of state budget cuts are putting the University of California in danger of losing ground as one of the nation's leading institutions, leaders of the nine-campus system warned Wednesday.

"We are on the edge," UC President Robert Dynes told the nine-campus system's governing Board of Regents as they began discussing how to absorb millions of dollars in cuts in the coming year.

UC officials estimate that since 2000, they've received $1.6 billion less from the state than expected.

Gov. Arnold Schwarzenegger, seeking to close a $16 billion state budget shortfall next fiscal year without raising taxes, is proposing a 10 percent fee increase for undergraduates along with higher increases for graduate and out-of-state students. The hike would raise average undergraduate fees from about $5,500 a year to $6,000.

Regents didn't make any decisions on fees Wednesday and probably won't until May at the earliest. However, they did look at a number of options, including raising undergraduate fees by more than 10 percent to avoid levying the 40 percent hike the governor is recommending for graduate students.

Budget director Larry Hershman told regents that although the governor is proposing $370 million in budget cuts, the true impact of losing that money could come to more than $500 million.

"This is a crisis point," he said.

Among other things, the governor is proposing cutting freshman enrollment by 3,200, reducing the amount of financial aid available, raising the student-faculty ratio from just under 18:1 to just over 20:1 and eliminating $33 million set aside to recruit poor and disadvantaged students.

The enrollment cut is all but inevitable since admissions decisions have mostly been made. Those students are to be redirected to community college with the promise of free tuition there and a guaranteed spot at UC as a junior. However, Hershman said he doubts many will accept that offer.

UC officials have indicated they won't change the student-faculty ratio and hope to salvage some outreach programs. They are trying to negotiate some budget relief from legislators, campaigning on the message that UC brainpower is an investment rather than an expense.

Regent Ward Connerly said advocating for more money is fine, but not a permanent solution.

"Right now we're just reacting," he said. "We need to think through a coherent University of California for the 21st century and how do we get there. We're not going to be able to sustain the way that we've done business in the past."