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SAN FRANCISCO-Advertising agencies here and throughout the West are finding their freelance budgets growing.

The reason: Most agencies are lean, any fat trimmed during the early '90s. Business is growing but hiring isn't as agencies enter the new day ever more mindful of fixed costs.

"Agencies have figured it out: hire for valleys and use freelancers for the peaks," quips Kit Mill, president of Paladin Freelancers. He estimates annual payout to freelancers at $150 million in the Bay Area, and he plans to expand to Los Angeles, Seattle and Dallas next year to meet demand in those markets.

But agencies aren't always warm to freelancers, no matter their necessity.

"They have a very over-inflated idea of their worth, considering they were either asked to leave or forced out of their last job," notes an executive at a top San Francisco shop.

Attitudes aside, his agency uses freelancers regularly.

More accommodating is a Bay Area advertiser who sees freelancers as a plus at his agency.

"They didn't want to be part of agencies that were just standing around trying to figure out how to manage through the changes in the business."

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