PHOENIX - Arizona's state universities have slashed their budgets as much as possible, and if they have to fund an employee pay raise without state assistance, the level of education and services delivered to students will suffer.

That was the message delivered by university presidents during Friday's hearing on proposed recommendations for 1996-97 university budgets. More than 100 people, many of them wearing fluorescent green buttons that read "Support Higher Ed," attended the five-hour hearing.

The Joint Legislative Budget Committee recommended a 1.9 percent increase, or $11.6 million, to the university system while Gov. Fife Symington's office recommended a 0.5 percent increase, or $3.1 million. The major difference between the budgets is the continued funding of a 2-percent pay raise given to employees Jan. 1.

Legislators asked for $7.1 million to pay for the second half of the raises while the governor appropriated zero. If the universities do not receive the funding they will have to fund the raises from other sources, a move the governor, who referred to the university system as "bloated and inefficient," supports.

University of Arizona President Manuel Pacheco told committee members that the UA cut over $40 million during the years 1991-95. Pacheco said that, in retrospect, he did not know if he would have come to Arizona if he had known of such cuts.

But, Pacheco said, despite the cuts the UA has had achievements that have been "broad and deep."

He cited the initiation of the Total Quality Management and the Finish in Four programs and a streamlined process for admitting graduate students as a way to save money. Plus, Pacheco said, the university has eliminated some programs, merged others and placed four on a notice to improve.

Pacheco told the committee the Auditor General Office's December report, which analyzed the universities' administrators and support staff, had a "demoralizing effect on faculty and staff." He said he was at a loss to explain some of the report's recommendations.

"It recommended actions as if we have not been doing anything over the past four years," he said.

But the UA handles more students, handles them better and with less faculty. Pacheco, along with Arizona State University President Lattie Coor and Northern Arizona University President Clara Lovett, called for continued funding of the merit-based pay raise. Pacheco recommended it be an annual part of the state's budget.

Pacheco said the UA lags behind other comparable universities in the West and it will lose its best faculty members to higher paying jobs if the state continues to cut its budget.

Coor said that without consistent pay raises, employees at ASU will continue to gain experience at ASU and then to find higher paying jobs. Lovett said 15 percent of NAU's "hard-working" employees live below the poverty line.

Ben Driggs, president of ASUA, testified that if the state does not adequately support the universities, students make up the difference with increases in tuition and fees.

During the hearing, some legislators were sympathetic to the universities' needs.

Rep. George Cunningham, R-Tucson, said he wants to start a "Parody with Prisons" campaign to ensure education is given the same priority as the prison system, which received a recommendation of a 10.1 percent increase compared to the universities' recommended 1.9 percent increase. He said the university budget is a policy constraint, not a financial constraint.

Sen. Larry Chesley, R-Gilbert, commended the board of regents for doing what the state legislators had asked of them.

The subcommittee is scheduled to vote on the budget next week. It will then send it to the House and Senate's appropriations committees. The entire state budget should be adopted in mid-March.