New York City's executive budget for fiscal year 1985 provides for significant service increases, after a decade of severe fiscal constraints. The Educational Priorities Panel (EPP) therefore proposes a $50.7 million increase in the education budget of the City Council and the Board of Estimate, to be directed toward the following priorities: (1) restore PEG cut supplanting federal Chapter 1 funds ($13.7 million); (2) increase funding for high schools, contingent on per capita formula ($15.0 million); (3) provide additional support services for middle schools ($5.0 million); (4) provide additional funding for school repairs ($13.0 million); (5) increase funding for school opening fees ($4.0 million). Executive budget service increases endorsed by EPP include reduction of first-grade class size, repairs for school buildings, full funding for special education, and a school health program. These recommendations are discussed in detail, accompanied by illustrative tables and charts. The overall goal of the EPP's budget position is to rebuild a school system better than the one substantially dismantled a decade ago. An appendix presents recommendations to improve special education. (TE)