State House and Senate budget negotiators agreed last night to a $10.7 billion operating budget and $1.4 billion in spending on capital improvement projects next fiscal year, spending levels that are less than Gov. Linda Lingle proposed because of the state's slowing economy.

The budget, which will be up for final approval next week, contains $5.3 billion in general fund spending, the pool of money over which lawmakers have the most control. Lawmakers trimmed Lingle's budget proposal through spending restrictions in many state departments. They also approved almost no new spending on grants-in-aid to nonprofit community groups.

The limits on grants-in-aid, combined with a $22 million restriction in the amount of federal welfare money the Lingle administration can spend, will be felt among nonprofits and others that work with the poor and needy.

Lawmakers made the restrictions in welfare spending to keep a healthy reserve in the event more people seek welfare in an economic downturn.

"We have to live within our means, and I think we have," said state Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), the chairwoman of the Senate Ways and Means Committee.

State Rep. Marcus Oshiro, D-39th (Wahiawa), the chairman of the House Finance Committee, said the budget reflects slowing state revenue growth while meeting the state's "pressing needs."

Budget negotiators, resolving a dispute between the House and Senate, agreed to convert about $111 million in cash for public-school renovation projects into bond financing. The House wanted to keep the money in cash to avoid a higher bond debt. But the Lingle administration said it would not have released the money if it was left in cash, so the cash would have likely lapsed at the close of the fiscal year without being put to use. By converting it to bond financing, the state will have more time to complete the school renovation projects.

Lawmakers also tried to fulfill their promise to invest in improvements at the University of Hawai'i, where university administrators and former UH-Manoa football coach June Jones outlined deteriorating conditions.

The total amount for UH capital improvement projects ended up being less than anticipated because of economic concerns but still represents a sizable investment.

Lawmakers agreed to $58.5 million in UH repair and maintenance spending, $8.5 million higher than Lingle had requested.

Responding to specific complaints about athletic facilities in Manoa, lawmakers agreed to $1.2 million for improvements at Cooke Field, $2.5 million for women's locker room improvements, and $386,000 for repairs at Les Murakami Stadium.

Outside of athletics, lawmakers also agreed to $35.8 million for renovation to the Campus Center, $7.5 million for a new classroom building, and $3.7 million for an information technology building at Manoa. Lawmakers also backed $9.5 million for a regional biocontainment laboratory and $2.5 million for retrofits to improve energy conservation.

On the Neighbor Islands, lawmakers agreed to $25 million for a science building at Maui Community College, $11.2 million for improvements at Hawai'i Community College, and $1.6 million for renovations to a student services building at UH-Hilo.

Lawmakers declined to approve new spending for development of UH-West O'ahu, a library and learning center at Windward Community College, and a pharmacy school building at UH-Hilo.

State Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai), voted against the budget agreement. He called the restrictions on the Lingle administration's welfare spending "unconscionable" and questioned why lawmakers could not find more money to help charter schools handle increased enrollment.

Hemmings said the welfare restrictions would harm the most needy. "There's just no necessity to cut this funding at this time," he said.

In the coming weeks, as nonprofits and social-service providers begin to learn they will not be receiving state welfare money or grants-in-aid, lawmakers are expected to hear complaints about some of the spending that survived the knife.

State Rep. Kymberly Pine, R-43rd ('Ewa Beach, Iroquois Point, Pu'uloa), noted, for example, that $3.3 million for a synthetic turf football field and other improvements at Leilehua High School stayed in the budget.

"And they say we have no money," Pine said.

Oshiro, who played football at Leilehua, has defended the spending as important to the school and community. Players, he has said, have been using the same field for more than three decades.