The state apparently will collect about $25 million more than it can legally spend in fiscal 1995, forcing Gov. Mike Leavitt to propose some creative budgetmaking.

Tucked away in the budget he released Monday, Leavitt recommends the creation of a new Transportation Investment Fund that would absorb the bulk of the excess money and defer its expenditure.That maneuver makes it possible for the governor to show 1995 appropriations at $1.1 million below the spending cap when revenues actually exceed it by more than $25 million. Since the money isn't being spent in 1995, there appears to be no technical violation of the Appropriations Limitations Act.

But it certainly violates the spirit of the law, said Sen. Howard Stephenson, R-Draper. By transferring the excess money into a new fund, the governor has simply solved the problem of the spending cap with "purple smoke and mirrors," he said.

Leavitt rejected that assertion, saying the spending limit left him with three options - cut taxes, roll items over into next year's budget or put money into a special purpose account - "and I've done all three."

He said that while it was "effectively true" that the budget proposal sidesteps the spending limit, "it's something that has happened many times over in the past 10 years."

According to Leavitt, the action is "clearly within the spirit" of the law because there is no requirement that all of the surplus be spent this year. By putting the money into a new transportation account, it may be spent two or three years down the road, he added.

Lynne N. Koga, director of the governor's Office of Planning and Budget, also defended the budget action, arguing that since budgetmakers work in two-year cycles, it's appropriate to set aside extra money one year for spending in the next.

While conceding that it was the spending cap that forced budget-makers to divert the surplus money from the appropriations stream, Koga said, "We don't feel that violates the spirit of the limitation act."

According to Koga, the factors that have been driving the unprecedented growth in the economy, especially construction, are showing signs of tapering off. Yet the demands of that growth will continue to put a strain on state government, she said.

Legislative fiscal analyst Leo Memmott also confirmed the spending cap's role in the 1995 budgetmaking process, saying, "It does enter into it."

Based on the latest revenue projections, the state will be able to spend a little more than half of this year's $65 million to $75 million surplus, he said. With ongoing revenue growth expected to put an extra $200 million into state coffers next year, the cap could once again be a factor in the 1996 budget.

The spending-limit law is due to expire next year. The Revenue and Taxation Committee voted two weeks ago to introduce a bill extending the limit for another 10 years.

"The law as written establishes limits in any given year, and I support that, and I will support the law's renewal," the governor said.

Stephenson, who heads a tax watchdog group, said the governor is not only being too stingy with the ongoing revenue surplus but is also breaking faith with voters.

"When he ran for governor, Mike Leavitt made a very open, public pledge not to allow state spending to grow faster than the average family's ability to pay," Stephenson said. "Whether he's found this loophole or not, to me he's violated his promise."