The financial picture for the state's higher-education systems got a little brighter today with the announcement of an agreement between the governor and the universities.

The multi-year compact between Gov. Arnold Schwarzenegger and the University of California and California State systems will halve the proposed tuition hikes for graduate students next year and ease freshman enrollment caps after the next school year. It also provides for annual growth in funding for the schools' budgets.

"The compact is important because it provides some stability after several years of significant budget cuts," UC spokesman Brad Hayward said. "It stops the bleeding and provides a plan for healing and recovery."

Under the agreement, graduate student tuition will increase 20% rather than the 40% proposed in Schwarzenegger's January budget. They will increase another 10% each of the following two years.

Undergraduate fees will increase 14% this year and an average of 10% annually for the next three years. But long-term, fee hikes will cap out at 10% per year.

"For the first time in recent memory, it's going to give students and parents the chance to plan for the future in terms of fee increases," Hayward said. "And it will give faculty and staff some hope and confidence in the system for the future so they won't leave and go to another institution."

As required by the state, UC schools are still reducing freshman enrollment by 10% for the fall. Students eligible for admissions but denied because of lack of space will be guaranteed admissions after two years at community college.

Universities will get funding for an additional 5,000 students starting in 2005-06, which should prevent enrollment caps.

Under the agreement, universities will have to meet accountability requirements, including enrollment objectives, expanding outreach programs and reporting annually to the state.

"Together, we have found a compromise that will protect the quality of our world-renowned higher-education system," Schwarzenegger said in a press release. "We have made a long-term commitment for greater investments in our schools and equipping California's work force with the best and the brightest for years to come."