Towson State University President Hoke Smith said yesterday he endorses a proposal to suspend the school's Division I-AA football program for a year in order to balance a $2.8 million athletic department budget 94 percent funded by student athletic fees.

Smith also said he anticipates the football program being reinstated at a lower classification as early as 1992.

"The choice was to suspend football or add $100 to the {student athletic} fee," Smith said. "I have an ethical problem" with raising the annual fee to $370 next year. "How much can you realistically ask kids to support an intercollegiate athletic program?"

Barring any last-gasp solutions offered at an open forum Thursday, John Connolly, an English professor and chairman of the nine-member Intercollegiate Athletic Committee, said his group will propose the plan to the University Senate Monday, with the stipulation to reevaluate the situation next year.

Smith said he would accept the proposal, pending the approval of the campus senate. "I'm particularly sensitive, since the kids pay the bills and there are six kids in the university senate," Smith said.

The football budget is $750,000, including $338,000 for scholarships.

Towson State's 21-sport program is expected to produce a deficit of $257,000 by the end of the current fiscal year. The savings for football, which Towson State plays as an independent, are expected to cover increased travel costs for East Coast Conference competition and possible increased costs to remain in Division I.

A proposal to base Division I membership on minimum scholarship expenditures is on the agenda for the NCAA's annual convention in January. Schools would have to spend $250,000 each for men and women for scholarships in sports other than football and basketball. An option would require a minimum of 25 scholarships each for men and women in sports other than football and basketball.

Another proposal to be considered in Nashville clouds the classification in which a resurrected Towson State football team would play. Currently, NCAA rules allow a Division I school to play football in either Division II or Division III. A proposal to prohibit that is being considered.

Without Division III status as a preferred option, Connolly and Smith said other options include forming a Division I-AA conference with a limited number of scholarships or playing a schedule against fellow Division I members who now play football in Division III, such as national basketball powerhouses Georgetown and St. John's.

Early on, Smith scuttled any ideas of the entire athletic program dropping to Division III, Connolly said. The men's basketball team played in the NCAA tournament for the first time last season and the Tigers' men's soccer, men's lacrosse and women's gymnastics teams are competitive nationally in Division I.

"Nobody really wants to drop football, because it's part of the fall hullabaloo on this campus," Smith said. "But you also can't run a football program or an athletic program without money. . . . It boils down to I-AA is a difficult division because it has costs, but it doesn't have television revenues and, in most cases, it doesn't have gate receipts."

The financial squeeze is not peculiar to Towson State. Athletic programs across the country are losing money and, as projections on the economy go downward, universities are being hit across the board.