The Department of Education and Science is expected to secure an increase of more than 11 per cent ocurrent spending in next week's Estimates.
Government sources say education is on course to receive the highest increase of any Government department, including health, in current spending.
There is speculation that the Minister for Education, Ms Hanafin, could even secure funds to allow for the recruitment of several hundred extra teachers, but negotiations on this issue with the Minister for Finance, Mr Cowen, are continuing.
There will also be a major increase in funding for computers and the provision of broadband technology in schools. Other areas set to receive an increase in funding are thought to include special needs education and disadvantaged schools.
A major increase in current funding for third-level is also expected in Thursday's Estimates. The colleges have suffered a cut of more than 14 per cent in current spending in the past two years. The recent OECD report proposed a "quantum leap" in funding for the sector to allow it to compete internationally.
In a sign of the increased funding available to the sector, Ms Hanafin yesterday lifted the freeze on spending on capital projects at third-level. She gave immediate approval for key projects including new facilities at teacher-training colleges and in the health skills area.
The Minister said the end of the spending freeze was a "signal of her determination to address the overall infrastructural needs of the higher education sector moving forward".
It was, she said, the first step in the process of addressing the infrastructure deficit.
An expert group on third-level capital needs said an investment of almost €1.9 billion was required over the next 10 years just to meet the infrastructural needs of the sector.
The Kelly report also said a large number of existing third-level buildings were in need of renovation.
Ms Hanafin said she would be considering the recommendations of the Kelly report "in the context of the funding available when the capital for the education sector is determined in the Budget".
The council of directors of the institutes of technology (IoTs) have welcomed the ending of the freeze on capital spending.
Its chairman, Mr Paul Hannigan said: "The council met the Minister last week and we put forward the case for a single national policy framework in the third-level sector.
"We stressed to her our belief that the Kelly report is an important step forward in identifying and addressing the needs of the IoTs in the context of national priorities. The Minister indicated to us that a clearer picture of spending will emerge at the forthcoming Budget, and we look forward to this.
"The Kelly Report's emphasis on structured, multi-annual funding will strengthen the capacity of the IoT sector to forecast, plan and develop programmes that will meet the future skill needs of our economy, particularly at a regional level, where the contribution of IoTs to economic development is very significant.
"The institutes believe that excellence is developed, not born. Through the planned investment in infrastructure that the Kelly report sets out, the IoTs will be in a position to contribute to realising the ambitious goals set by the Enterprise Strategy Group, the National Spatial Strategy and the OECD report."