Budget negotiators in Texas have reached agreement after talks stalled over a proposal by Gov. Rick Perry to overhaul state spending on higher education by rewarding colleges for each student they graduate.

Leaders of the Republican-controlled Legislature added $100-million in incentive funds to increase graduation rates — a sum less than the $350-million Mr. Perry had requested but enough to avert a veto by the governor, a fellow Republican. They also moved some of the state earmarks for higher education to a portion of the budget where Mr. Perry will be able to use his line-item veto authority, the Houston Chronicle reports. He had originally proposed eliminating earmarks for university projects.

In addition, the budget includes $13.6-million in supplemental funds for Texas Southern University, which is facing severe financial and governance problems. An additional $25-million would be allocated for academic programs at the university, but would be contingent on approval of a reform plan there.

The budget agreement must win approval from the full House and Senate before the Legislature adjourns, on Memorial Day. —Karin Fischer