Raises for teachers proposed this week by a state labor panel could cost the city more than $1 billion, according to Independent Budget Office estimates.

An arbitration panel put in place to help the teachers union and the Bloomberg administration forge ahead with contract negotiations recommended increasing teacher salaries by 11.4% over three years. The contract would begin retroactively, starting from June 1, 2003.

The $1.16 billion includes estimated raises for the next fiscal year.

The raises would cost the city approximately $410 million through the end of this fiscal year and would balloon to about $750 million for the following year, a spokesman for the Independent Budge Office, Doug Turetsky, said.

The city has about $320 million put away in its labor reserve fund.

An administration official last night called the dollar amount “a couple hundred million too high.”

Teachers are entering their third year without a contract. The administration and the teachers indicated earlier that they would use the state Public Employment Relations Board’s nonbinding recommendations, which were delivered to both parties on Monday, to move negotiations forward.

The teachers union president, Randi Weingarten, seemed unfazed yesterday by the $1 billion estimate and said that even with an 11.4% increase, New York City teachers will make less than those in neighboring suburbs.

“The city complained it did not have the money to pay for police raises, but within a week of the PBA award, they were able to budget for it,” Ms. Weingarten said about the police union contract. “The arbitrators believe the city has the ability to pay to give teachers this kind of increase, and given that the city enjoyed its largest-ever surplus last year, we do too.”

A spokesman for Mr. Bloomberg said, “We’re not going to negotiate the contract through the media.”