Gov. Arnold Schwarzenegger appears to have responded to some of the anguished pleas that the cuts he proposed earlier this year would inflict permanent damage to the state's unrivaled system of public higher education.

After absorbing painful budget blows for four successive years, the "compact" announced Tuesday by Schwarzenegger and UC President Robert Dynes and CSU Chancellor Charles Reed should allow both university systems -- as well as the students enrolled there -- to plan for the future. The compact includes a compromise that the universities have agreed to accept most of the cuts Schwarzengger proposed for the coming academic year. In return, UC and CSU would be assured a 3 percent increase in state general funds in 2005-2006 and 2006-2007. For four years after that, they would receive 4 percent annual increases. Enrollments would be allowed to grow by 2.5 percent a year.

Undergraduate fees will rise 14 percent next year, and 8 percent for each of the succeeding two years. Although these are painful, at least students and parents won't be blindsided by unexpected fee increases. Graduate students will still face a 40 percent fee increase -- but those increases will be spread out over three years, rather than levied all in one year, as Schwarzengger originally proposed.

It's not clear where the money will come from to pay for the compact. The governor's Department of Finance says that the state's economy is expected to grow by 6 percent, easily covering the 3 percent growth proposed by Schwarzenegger. But according to the state legislative analyst, California will still have a $7 billion deficit in 2005-2006, even assuming a 7.1 percent growth in state income tax, a 5.6 percent increase in sales tax and a 9.1 percent increase in corporate taxes.

It is also unclear whether the plan would be enforceable should the state not have the necessary funds -- or at what point Schwarzenegger would agree to higher taxes to meet all the financial commitments he is making to a rapidly growing list of constituencies.

Whatever happens, the compact on higher education is a recognition that the state's system of public higher education is not a luxury, but is essential to California's future. That is a welcome step forward.