After giving back most of its excess money to taxpayers, Utah's state governmnet ended fiscal 1988 with a $3.5 million surplus, state financial officials said Friday.

The surplus is good news for state officials who hoped to match the state's $2.5 billion income with its expenditures.

"That's really cutting things close when you consider how large athe budget is," Lynn Vellinga, state assistant controller, said about the surplus.

Vellinga said the extra money will be available for use during the currnet fiscal year. The state usually ends up with a small surplus, he said.

The state is required by law to report its financial position each year at this time. Independent auditors then examine the budget before the state releases a more detailed report in December.

Fiscal 1988, which ended June 30, was not a pleasant one for Gov. Norm Bangerter and state lawmakers. The state was headed toward an estimated $110 million surplus when Bangerter called a special legislative session in July.

Following a plan proposed by the governor, lawmakers decided to give $80 million back to taxpayers, $10 million to education and $20 million to the state's "rainy day funds" for emergencies.

Because the surplus was a result of a Bangerter-proposed tax increase in 1986, lawmakers also followed the governor's advice to reduce income tax rates by 5 percent and restored a third of the deduction for federal income taxes paid to avoid future large surpluses.

When the last-minute maneuvering was figured in, the $3.5 million surplus was all that was left.

The report released Friday also shows the state's debt as of June 30 was equal to $170 for every man, woman and child in the state. However, 27 other states had higher debt last year, and Utah was able to keep a triple-A bond rating--the highest possible.

The report notes, however, that the bond rating is in jeopardy because of three tax-limiting initiatives on the ballot in November.

Standard & Poors Corp., a national bond rating agency, has placed the state on a "credit watch" pending the election.

Moody's Investor Service, another national rating agency, ahs also cautioned tht passage of the initiatives would have "negative" credit consequences for those who bought bonds issued by the state.

If Utah had received only a double-A rating in 1987, it would have paid $1.2 million more in interest on its $58.5 million in general obligation bonds tath year, the report said.

The state's largest expenditure in 1988, as in previous years, was for education. Utahns spent $782.7 million on public schools and $263.5 million on colleges and universities. Health and welfare programs cost the state $570.7 million in fiscal 1988, the report said.