SAN FRANCISCO - Graduate students won't get hit with the 40 percent fee increase the governor proposed if officials at the University of California can help it.

But the alternative the UC Regents will approve this spring may mean higher fees for undergraduates than originally proposed.

Deep budget cuts have affected nearly every area of the university. With more cuts on the way, the regents spent Wednesday in San Francisco discussing how best to minimize their impact and convey to legislators that continuing cuts will hurt the quality of the world-renowned institution and further restrict access to it for California's graduating high school seniors.

"The faculty won't stay, the best students won't come," said UC President Robert Dynes. "We won't be able to serve the state."

In January, Gov. Arnold Schwarzenegger proposed increasing graduate student fees by 40 percent and undergraduate fees by 10 percent for the 2004-05 academic year in order to raise $121 million to offset part of the budget cuts.

UC officials don't believe the graduate programs can maintain their prestige and quality with such a large fee increase. They say the increase will lead top students to opt for other schools.

The regents reviewed a number of scenarios for fee increases -- including raising fees for most graduate students by just 20 percent and hiking undergraduate fees 15 percent.

That would increase most graduate students' fees by $1,050 annually to $7,893, a figure that includes campus-based fees. And it would increase undergraduate fees by $750 annually to $6,280.

This approach actually would generate more money than the governor's proposal, which UC officials contend would fall $8 million short of his $121 million target, said Vice President for Budget Larry Hershman.

The regents likely will vote on a fee increase at either a special meeting in late April or their regular meeting in mid-May.

"I remain flexible," Regent Joanne Kozberg said of the various options for fee increases. "I'm concerned about the enormous increase for the graduate students. The graduate student doesn't have a parent helping out. The graduate student cuts are additional cuts to the university."

Academic departments cover the fees for teaching assistants and research assistants -- a role many graduate students play -- through state funds and federal grants.

The governor has proposed cutting UC's budget next year by $372 million to $2.67 billion. UC officials view it as salt in their wounds. The state has already fallen far behind on a promise to give UC more than $1 billion over the past three years.

Another way to look at the numbers: The university has seen both a 16 percent increase in enrollment and a 16 percent decrease in state funds over the past four years.

Regent Ward Connerly characterized the current fiscal crisis as dire, unlike anything the university has been through before. It won't do for UC to simply trim programs and ask legislators in Sacramento for more money.

"Times have fundamentally changed," he said. "Education is not going to be a right in this new paradigm. ... Right now we're just reacting and we're going to lose. We need to think through a coherent UC for the 21st century."

The regents also learned Wednesday that UC's faculty salaries have fallen far below those at the four public and four private institutions the university likes to compare itself with. The average faculty salary for that group is $101,787, while the average at UC is $95,815. The differential is even greater between UC and the average salary of the private universities in the comparison group -- Harvard, MIT, Stanford and Yale. That average is $116,781.

UC Berkeley has seen a number of its professors leave for private universities since 2000. Of the 160 offers made to faculty, 122 came from private institutions, and 25 percent of those offers were accepted.

At the end of his presentation, UC Berkeley Executive Vice Chancellor and Provost Paul Gray flashed a single statement on the huge screen before regents.

"Sacramento, we have a problem."