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Lawmakers and lobbyists alike are awaiting Gov. Norm Bangerter's budget, due out Tuesday, to find out what the governor proposes to do with the state's anticipated $300 million surplus.

Bangerter has been kept busy in recent weeks, alternating between meeting with his budget staff and the many legislators and lobbyists who want a say in where the extra tax revenue that's accumulating in state coffers goes.One decision the governor already has made is to recommend that the Legislature spend the money during the general session that begins Jan. 8 - all of it, according to his chief of staff, Bud Scruggs.

"All of it" means at least $125 million in tax dollars left over from the state's 1989 and 1990 budgets plus whatever is collected beyond current spending levels during the 1991 budget year.

What Bangerter won't touch is the $48 million sitting in the so-called "rainy-day fund," established by the Legislature as a cushion against future economic downturns that could leave the state short of cash.

Using the surplus money already in the bank as well as building the expected surplus into next year's budget means lawmakers, at least temporarily, likely will have to repeal the spending limitation they passed only last year.

The law tying the amount legislators can spend to the state's population and inflation rates was passed in response to a failed tax initiative that would have set even stricter limits.

The prospect does not sit well with the Utah Taxpayers Association, the group behind the initiative. Chairman Jack Olsen recently wrote Bangerter warning that lifting the limits now means tax increases later.

But Scruggs said the governor isn't worried the economy will take a sudden turn for the worse. Besides, he said, lawmakers already cut taxes by $35 million during the last special session.

That tax cut, some $14 million deeper than the governor wanted, will allow even the most conservative lawmakers to spend beyond the limitation with clear consciences, Scruggs said.

So far, no legislators have come forward to oppose spending beyond the limitation. And Scruggs said the statewide teachers walkout in September has helped solidify public support.

The walkout, in response to the special session, ensured that the public wasn't going to forget they got a decrease in their taxes. And, Scruggs said, it also emphasized the need for more to be spent on education.

That's where the governor is expected to suggest much of the surplus be used, promising the highest-ever boost in education spending. Educators may get a sneak preview of just how much that is on Monday.

The possibility remains lawmakers may have to reverse themselves only to spend the $125 million surplus.

State Budget Director Dale Hatch said the limitation may not have to be lifted for the 1991 budget year, which begins July 1, 1990, depending on how much tax revenue is expected to be raised that year.

Although Hatch and other state budget officials are tight-lipped about just how much they think will be raised above current spending levels, they say estimates of between $110 million and $130 million are close.

According to Legislative Fiscal Analyst Leo Memmont, the amount of money that can be spent during the next budget year without bumping up against the limitation is between $120 million and $125 million.