Howard County School Superintendent Michael E. Hickey proposed tonight a $90.6 million school budget for next year, including an 8.4 percent increase that would allow the county to shrink class sizes while accommodating an expected surge in enrollment.

The budget request for the 1985-86 school year is $7 million higher than this year's $83.6 million budget. About $4 million would go toward increases in wages and costs, but $3 million would be earmarked for 90 new teachers to reduce class size and expand the school's gifted and talented program in all elementary schools, a spokesman said.

Hickey is proposing his first budget since being named superintendent last March. The five-member county school board will hold a public hearing on the proposal next week and it must approve the budget by Feb. 20.

The budget includes money for 2.3 percent contractual step increases for school employes, but does not provide for additional pay raises, which are being negotiated. A supplemental request will have to be made for additional money needed for salaries.

School negotiators and representatives of the Howard County Education Association, which represents 1,500 teachers and administrators, met for the first time last week. The union is seeking a 19 percent raise in teacher pay, while the system is offering 4 percent, said Daniel E. Collins, the union president.

Hickey's boldest initiative is a $1.6 million plan to hire 72 teachers to lower class sizes in kindergarten, grades 1 through 5 and in the county's eight high schools, a spokesman said.

If the board adopts the proposal, which Hickey called a "critical component" of instructional improvement, classes in all but the middle schools would average 23.5 pupils, lower than projected class sizes in Montgomery or Prince George's counties. Howard classes now average 26.1 pupils in primary and high schools.

The proposal, Hickey said, "are the initial steps in what will become a long-term commitment to improving class size at all grade levels."

The proposal to reduce teacher-student ratios comes at a time when Howard County schools have had their first increases in enrollment in nearly a decade. Hickey said the trend is expected to continue well into the 1990s.

School enrollments had peaked in 1978 at 25,606 and declined steadily until this fall, when an unexpected increase pushed enrollments to 24,252 students, up 260 from last year.

By 1990, enrollments are expected to top the 1978 level and subsequently grow by as much as 700 students a year, a school spokesman said.