The University's annual state appropriation will decline slightly under a proposal outlined Tuesday by Gov. Robert P. Casey before the state Legislature in Harrisburg.

Penn State's appropriation of $248.7 million will decline $500,000 from last year's level of $249.2 million, said Vince Carocci, Casey's press secretary.

The slashed funds were to be used largely to support agricultural research, he said, adding that funding for agricultural research at the University will drop from $18.3 million to about $17.8 million. Carocci noted that agricultural research experienced a similar cut last year.

Although this year's appropriation is slightly below last year's level, the University may be eligible for additional state funds under the resuscitated Tuition Challenge Grant Program, he said.

The program, discontinued two years ago because of a lack of state funding, will give state and state-related colleges and universities $200 per full-time undergraduate Pennsylvania resident, Carocci added.

With 42,698 full-time undergraduate state residents, the University could reap $8,539,600 through the program, said Richard Althouse, University budget officer.

In order to get additional funds, the University must keep tuition increases to 4 percent a year -- the expected growth in the consumer price index, Carocci said.

The state has weathered the recession and can revive the program because of modest budget growth, he said. The state currently allocates about 1.3 billion --almost 9 percent of the state's general funds budget -- to higher education.

In a news release, University President Joab Thomas said the University is grateful for new funds the proposal will provide and is relieved that no additional budget cuts were proposed.

"Given the economic conditions, this is not disastrous, but it's not as much as we liked," said Executive Vice President and Provost John Brighton, adding that the proposal was disappointing, but understandable.

In his address, Casey coupled the allocation and the tuition challenge with "a renewed call that institutions of higher learning do all they can to control their spending in order to reduce tuition increases to an absolute minimum."

State Rep. Lynn Herman, R-Centre, called the cuts to agricultural research "most alarming to the state's senior land grant institution" and added that Casey failed to mention agriculture -- the state's largest industry -- in his budget address. Herman also said he is committed to working with the state House Appropriations Committee to seek the restoration of funds.

Graduate Student Association Vice President Ken Martin said he hoped for an increase in state funding. Increasing costs for health care and liability are unavoidable, he said.

Calling the budget proposal "hardly a cause for celebration," Martin added that he does not consider tuition challenge funds guaranteed. Martin said he did not know if the University will meet the program requirements.

But Undergraduate Student Government President Rob Kampia called the proposal "overall good news," and said the cuts to agricultural research were minor compared to the possibility of receiving tuition challenge funds.