SACRAMENTO - Gov. Arnold Schwarzenegger unveiled a budget deal Tuesday he's reached with state university officials that raises student fees and caps enrollment, but promises to increase funding in future years.

Flanked by top California State University and University of California officials, Schwarzenegger detailed a multiyear compact that would save the state $664 million in fiscal year 2003-04. In return, it grants public universities the long-term funding stability they want and lowers by half of the 40 percent increase in graduate-school tuition the governor originally proposed.

"This agreement did not happen overnight, I did not make it happen by myself," Schwarzenegger said during a news conference. "I asked education leaders for their ideas ... They worked with me, and we found a solution acceptable to everyone."

Schwarzenegger negotiated directly with the public university systems, bypassing Democrats to cut a deal with one of their staunch allies and most vocal proponents of government spending and tax increases.

The tactic - which Schwarzenegger used to reach an earlier compact with schools and community colleges, and which is expected to be on display again today when the governor announces an agreement on funding for local governments - angered Democrats about as much as the content of the deal itself.

"I believe a lot of people that have been pulled into these rooms are being squeezed by the neck," Treasurer Phil Angelides said during a news conference held to criticize Schwarzenegger's budget plan. "These are not straight up, "Let's talk about what's best for California' (deals). These are deals where people are being hauled in, and essentially they're acquiescing."

But UC President Robert Dynes and CSU Chancellor Charles Reed lauded the agreement. They called it "the right compact at the right time," and insisted it would reverse a recent trend of annual budget cuts and unpredictable tuition increases.

The deal is subject to the approval of the Democrat-controlled Legislature.

The two university systems had reached compacts with Schwarzenegger's three predecessors. UC Vice President for Budget Larry Hershman, involved in all three of those negotiations, said he expects this deal to be honored, as the state made good on the earlier agreements - except for one that unraveled during the fiscal crisis at the end of Gov. Gray Davis' administration.

"One of our goals here was to make sure that there weren't going to be more cuts, No. 1. And No. 2, that we would start to rebuild," Hershman said. "And we're pleased. We worked very hard on this for the past couple months."

Leading Democrats, among them Assembly Speaker Fabian Nunez of Los Angeles and state Senate President Pro Tem John Burton of San Francisco, expressed concern for the deal's potential consequences but refrained from criticism pending further review.

Others criticized the agreement for breaking a 40 year-old promise to provide a "quality" higher education to all eligible Californians.

"The governor's deal robs an entire cohort of students from the promise of the California Master Plan, and sends the wrong signal to the employers in our state that rely on educated and trained graduates to fuel our economic vitality," said Sen. Jack Scott, D-Pasadena, chairman of the higher education subcommittee.

He predicted the public would support a tax increase to fully fund the 1960 state Master Plan for Higher Education, which guarantees the top 12.5 percent of qualified high school students admission to the UCs, and the top third to the CSUs.

On Thursday, Schwarzenegger will release his revised 2004-05 budget proposal, updating his plans to close a projected $17 billion deficit. Last Friday, he released details of an agreement to spend $99 million more on California's trial court system than he had proposed in January.

"And I'm very happy, to be honest with you, that all those compacts and those deals are being made," Schwarzenegger said. "Someone will be able to look at it and say: "Well, there's one thing I don't like about this, there is something else I don't like about that.' But they're all great deals."

Staff writers Lisa M. Sodders and Troy Anderson contributed to this report. David M. Drucker can be reached by e-mail atDavid.Drucker@dailybulletin.com or by phone at (916) 442-5096.

@infotext:Here are highlights of the higher-education deal unveiled Tuesday by Gov. Arnold Schwarzenegger:

- Increases base funding - which pays for various university operations - by 3 percent a year from fiscal 2005-06 to 2010-11.

- Restores funding for outreach and college preparatory programs.

- Enhances K-12 math and science education, including plans to increase the number of "highly-qualified" teachers.

- Increases annual enrollment by 8,000 for the Cal State and 5,000 for the UC systems from fiscal 2005-06 to 2010-2011.