House and Senate negotiators agreed to a state budget Monday night that pays back most of a 2-year-old deficit, gives employees a 3 percent raise, and commits the state to a Palmetto Bowl college football game.

Lawmakers were enthusiastic that their $5.5 billion budget dealt with core state spending needs better than they had hoped three months ago, thanks to an extra $253 million in tax dollars projected last week by state revenue forecasters.

But their work prompted another clash with Republican Gov. Mark Sanford, who went around the conference committee and urged all 170 legislators not to accept a compromise budget document unless it paid back an outstanding $155 million deficit in cash.

In a letter mailed to lawmakers Friday, Sanford wrote that the additional tax money should go to the deficit and replenishing diminished reserves, not to paying ongoing needs as the General Assembly proposed.

“If I am presented with a budget that fails to address these basic concerns, then I may have no other alternative than to veto all or substantial portions of the budget,” Sanford wrote.

This angered chief Senate negotiator Hugh Leatherman, chairman of the Finance Committee and the Senate Republican leader. He pointed out that rules preclude the negotiators from spending money as Sanford desired; the conference committee can only spend money strictly as the House did, or as the Senate did, not in some new way recommended at the last minute.

“The governor obviously don’t know the process,” said Leatherman, R-Florence.

The House’s lead negotiator, Ways and Means Committee chairman Bobby Harrell, said writing the budget the way Sanford suggested would require the approval of two-thirds of the House and Senate, a virtually impossible test.

“If the governor can deliver a two-thirds vote in the House and Senate, I’d be happy to talk with him about it,” said Harrell, R-Charleston.

The exchange over the letter marked another dip in the bumpy road between the Republican governor and the Republican leaders of the House and Senate. The tension is important because it comes late in the session, with only nine legislative days for Sanford to push through stalled priorities, such as charter schools, private school vouchers, and income-tax cuts.

The budget conference committee spent two days poring over each provision of the proposed 2004-05 spending plan, working out differences between what the House wanted and what the Senate wanted.

The Senate prevailed sometimes, keeping asthma and diabetes drugs within a plan meant to control Medicaid drug spending. The House won a few, too, winning over senators on a bowl game proposed for The Citadel, with $380,000 a year for as much as 15 years to pay for stadium improvements.

The conference committee work is a key step in a long budget-writing process that began in January. The committee will meet briefly this morning to give final approval to the report, then send it on the full House and Senate for approval and to Sanford’s desk by the end of the week. He will have five calendar days, excluding Sunday, to consider the budget and return it with his vetoes. Once approved, the budget would take effect July 1.

Legislators are eager to see what Sanford does with their budget, before they take up issues that are important to him.

As it stands, the budget would;

n Pay back an outstanding deficit from the 2002 fiscal year, with $89 million in cash and $63 million in anticipated proceeds from the sale of the state fleet and excess property

• Give $54 million in tax relief, by complying with federal law repealing the estate tax and the marriage penalty

• Give the lieutenant governor control over the Bureau of Senior Services. Heretofore, the lieutenant governor has presided over the Senate but otherwise had only ceremonial, not policy, responsibilities.

• Leave the Guardian Ad Litem program under the jurisdiction of the governor, rather than move it to the attorney general’s office.

• Leave the John de la Howe School for troubled teens as a separate agency, outside the responsibilities of the Department of Juvenile Justice.

• Move the free-standing State Accident Fund to the Department of Insurance.

• Ask the State Budget and Control Board to decide whether agencies would be allowed to keep positions on their rosters if those positions had been vacant more than a year.

• Dictate that the museum for the Confederate submarine Hunley should be located in North Charleston, essentially ratifying the recommendation of the Hunley Commission.

Reach Bauerlein at (803) 771-8485 or vbauerlein@thestate.com