In a best-case scenario, Penn State employees could see merit-based pay raises of as much as three percent this year, university spokeswoman Lisa Powers said Wednesday.

But those potential raises hinge on two key factors, she said. One is Penn State's annual appropriation from the state government. The other is the university trustees' approval of the annual budget -- including tuition rates -- proposed by the central administration.

Both matters should be decided in July, though state lawmakers have struggled in recent years to finalize appropriations by their mid-summer deadline.

"It's a wish of the president (Graham Spanier) to provide people with some type of an increase this year, simply because everyone went without last year," Powers said.

In a March interview with StateCollege.com, Spanier said Penn State is "very determined to give some level of pay increase" for the 2010-2011 academic year. The university had frozen pay rates for the 2009-2010 year, one of multiple cost-containment efforts.

"I don't think (the likely pay raises) will be as generous as people would like or deserve. But we don't think it's right to go two years in a row without a pay increase," Spanier said in March. "We have to find a way to help people keep up with their cost-of-living needs."

Penn State is seeking a 3.9-percent increase in its state appropriation this year -- the smallest increase request in at least 50 years, according to university records. A 3.9-percent increase would bring the university's state funding to $360.9 million for the year. The overall university budget is in the range of $3.7 billion.

With a state funding level of $360.9 million, the Penn State administration has said, it could hold tuition-rate increases to 4.9 percent for in-state students at the University Park campus and 2.9 percent for in-state students at other Penn State campuses.

"We think it's a pretty austere budget that we put together," Powers said. "Obviously, we are trying to approach the state with (a request) that's do-able, especially as we hear that the state's budget shortfall appears to get larger. ... We have tried to come forward with what we thought was an austere and reasonable request."

If state appropriations, tuition rates and the overall university budget materialize per the administration's hopes, the merit-based pay increases should take shape as planned, Powers said. That would put maximum raises generally in the range of three percent, she said.

And if any of the key financial factors fails to meet the administration's hopes? Powers said she believes Old Main will go "back to the drawing board" if that's the case.

Before the 2009-2010 academic year, typical merit-based pay raises at Penn State had often landed in the two- to three-percent range.