University President Bryce Jordan expressed encouragement yesterday over a 7 percent budget funding increase for higher education proposed by Gov. Robert P. Casey, but said the raise falls short of University needs for the coming school year.

Meanwhile, local legislators expect the final 1989-90 general budget to contain a larger higher education funding increase than Casey outlined yesterday in his budget message.

The 1989-90 budget Casey proposed to members of the Pennsylvania legislature included a 7 percent increase in general funding for state universities and state-related schools.

The prepared statement made yesterday by University President Bryce Jordan said the plan "falls short of meeting Penn State's real operating requirements" and would not change the state's 47th place ranking nationwide in state funding per full-time student.

However, Jordan's statement said the budget message shows an effort toward solving higher education funding problems and lays the groundwork for a "genuine team effort" toward increasing funds.

"His plan demonstrates a genuine interest in public higher education and reflects a continuing commitment to all of higher education through the Institutional Assistance Grant program as well as through grants provided by the Pennsylvania Higher Education Assistance Agency," Jordan's statement said.

Local legislators were also confident that the 7 percent, which exceeds the 6.7 percent increase which the University received last year, would be upgraded in the final 1989-90 general funds budget.

Rep. Ruth Rudy, D-Centre, suggested that the actual increase would be at least 9 percent and could easily reach up to 10 percent. "Usually the legislature gives the universities a higher percentage than what the governor proposes," she said.

Rep. Lynn Herman, R-Centre, said the final higher education increase would probably be determined by the size of the surplus from 1988-89 general budget. Current estimates from both Casey and Republican leaders set the surplus at $275 million, Herman said.

Mike McGinnis, a member of the staff of Sen. J. Doyle Corman, R-Centre, said Casey's message provided a "good base" for future negotiations on the budget.

"It appears on a lot of priorities that there's a good bit of consensus (between Casey and Republican leaders) on the issues that need to be prioritized," McGinnis said. "It's just a matter of the kind of money we get."

Rudy agreed that the budget message "certainly was a step in the right direction. I think the governor is realizing the need for higher education as well as basic education."

"Both the House and the Senate education committees proposed at least a 10 percent increase (in 1988-89). The governor realized he would be battling both education committees," she said.

Herman said the 7 percent figure counters a trend of neglect by Casey which last year delayed the passage of the final budget, which normally takes effect June 30, until October. Last year, higher education was one of the major areas of contention preventing a budget agreement, he said.

"The governor's budget is certainly responsive to many in the legislature to recognize the need for additional state support," Herman said, adding that the early support for higher education will smooth this year's budget process.

The governor also proposed a tuition challenge program, giving universities an extra $100 per student if the schools keep annual tuition increases below a $100 maximum. A 5 percent preset tuition increase for 1989-90, passed at a November meeting of the University Board of Trustees, would raise tuition $180.

The proposal interested Corman, McGinnis said, but needed more investigation because of questions about funding. The plan was similar to a proposal Corman made last year providing additional revenue for universities which develop alternatives to tuition increases, he said.