A panel appointed by the City Council will announce today that New York should spend about $2.5 billion more a year to create “laboratory schools” where educators can test new teaching techniques.

The panel’s report is the second installment of recommendations from the 12-member commission created by the council speaker, Gifford Miller, and headed by a former schools chancellor, Anthony Alvarado. The panel was formed so the city would be prepared if and when Albany complies with a court order that would funnel more than $23 billion into city schools.

The panel also suggests spending $670 million to make pre-kindergarten slots available to all 4-year-old children across the city and extending the program to 3-year-olds in low-performing schools in high-need districts.

A draft of the document, the second of a three-part series, was obtained yesterday by The New York Sun. The first segment was released in April and called for increasing teacher salaries and directing more money into low-performing schools.

The court ruling is being appealed by Governor Pataki, who argues that the state’s elected officials, not the courts, should decide how to spend education dollars. The funding battle began more than a decade ago, when a group called the Campaign for Fiscal Equity filed a lawsuit charging that city students were being shortchanged.

The City Council commission plays an advisory role. Its findings were based in part on a series of town hall meetings, public hearings, and additional testimony submitted by 466 people.

The 12-member body includes education advocates, educators, and an assistant to the president of the United Federation of Teachers. The panel is headed by the president of Teachers College at Columbia University, Arthur Levine, and the president of the Community Service Society, David Jones.

The report lays out a list of nine key recommendations that would cost a total of $3.37 billion a year.

According to the proposal, the lab schools would be used to test instructional improvements and reforms before they are applied citywide. They would be scattered throughout the city and would together form a special “lab district” that would report directly to the chancellor.

Researchers at the schools would “develop and test hypotheses about how particular teaching strategies will impact student learning and performance,” the report says.

An education historian and professor at New York University, Diane Ravitch, called the funding slated for lab schools “excessive.” She said there are currently no public laboratory schools in the city.

Ms. Ravitch called the lab schools “incubators for progressive theory.” She said they would be places where progressive ideas “would be endorsed again and again and again, because the kind of people involved in lab schools have always been progressive educators, and they don’t come to lab schools to test out if their ideas work.” The report says the schools are important to “complete the link of research to practice.”

Another $126.7 million would be used to boost principal salaries by 3% and offer an additional 10% to principals working in high-need schools. Certain principals who achieve a newly established “distinguished” status would receive an additional 10% increase. The city principals have been working without a contract for more than two years and just yesterday re-launched a series of commercials targeted at the mayor.

“We think these recommendations are a good start and would be happy to negotiate specifics with the Department of Education, should the CFE money become available,” the executive vice president of the principals union, Ernest Logan, said.

The Department of Education referred calls on the report to the mayor’s office. A spokesman for the mayor, Robert Lawson, said he hadn’t seen the report and could not comment on it.

The mayor issued his own recommendations last year for how to spend the Campaign for Fiscal Equity dollars.

Mr. Alvarado, who was appointed to the panel by Mr. Miller, headed the city schools in the early 1980s but stepped down after a year when faced with allegations of financial misdealings. He later took control of District 2 in Manhattan and recently returned from San Diego, Calif., where he was the chancellor for instruction.

While the first set of recommendations focused on retaining good teachers in the city schools, the report to be released today, “Reengineering Reform,” is focused on evaluating and testing reforms. Together the two reports account for $5.6 billion in new annual spending. The city already spends nearly $20 billion a year on public schools.

Last year, the case was sent to a state Supreme Court justice, Leland De-Grasse, who appointed special referees and then accepted their recommendations. They said the city should receive an additional $5.6 billion a year after a four-year phase-in period for operating expenses such as buying books and paying teachers. They also called for an additional $9.2 billion over the next five years for capital costs such as building new school facilities.

The chairman of the Assembly’s education committee, Steve Sanders, who supports the equity suit, said the council recommendations might be an exercise in futility.

“In a way it is putting the cart before the horse,” he said. “Before you talk about what you’re going to spend the money on, there needs to be an agreement about how much additional money will be indeed be available.”

He added, though, that the panel’s work could help the city focus on where it needs to make improvements, regardless of what happens with the lawsuit.

The third part of the report, to be released in upcoming months, will address how to spend the money slated for capital costs.