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Although the proposed funding increase amounts to only a fraction of one percent of the state's annual $101 billion general fund, Schwarzenegger's finance department said the investment could help the university system win back more than $700 million in public and private grants by making the programs more competitive.

The University of California, Berkeley and UC San Diego are in the running for a $500 million grant from British Petroleum to open an Energy Biosciences Institute. Lawrence Berkeley National Laboratory and UC San Diego are also competing with universities nationwide for a $200 million federal grant to build a next-generation supercomputer - one 1,000-times faster than any that exists today.

"As a leader in developing new technologies, California will reap tremendous rewards for our economy and environment from this investment in our innovation infrastructure," Schwarzenegger said in a statement, which dubbed the proposal his Research and Innovation Initiative.