Utah's reviving economy is generating more tax revenue for state government, but that doesn't mean there will be rejoicing in the public sector when Gov. Norm Bangerter unveils the new state spending plan next month.

Just when it appeared the once-faltering economy might yield a fatted calf, voracious new federal programs and a ravenous education system threaten to spoil the feast."There's no question it's going to be tight, and I don't see that changing in the near future," said Dale Hatch, director of the state Budget Office. "The money that's going to be available is going to be considerably less than the amount that's going to be requested."

An overall increase in anticipated tax collections for the first three quarters of 1988 has budget writers cautiously optimistic that Utah's modest economic upswing will boost state revenues and provide some relief from the stringent budgets of the past two years.

With BP Mineral's Kennecott operation booming and Geneva Steel of Utah on track in Utah County, unemployment has fallen sharply and taxable sales climbed 8 percent, 3.9 percent when adjusted for inflation.

It appeared the upward trend might continue during the third and fourth quarters, said Doug MacDonald, the commission's chief economist.

If the projection holds, it would mark the first annual increase in taxable sales since 1985. Sales declined in 1986 and 1987.

Another plus is growth in personal income. Kelly Matthews, chief economist for First Security Bank, said income grew 5.6 percent during the first two quarters of the year, and he projects a 5.9 percent increase for the full year.

Those promising indicators helped propel Bangerter to his come-from-behind re-election over Democrat Ted Wilson, and have ignited hopes there will be more to go around when the Legislature begins the appropriations process in January.

"Those items we generally look at as indicators look real good," said Rep. Franklin Knowlton, R-Layton, co-chairman of the Legislature's Executive Appropriations Committee. "It looks like we will have some extra; we'll have adequate for growth."

The one drawback in the economic revival is state income tax, which apparently still is fluctuating as a result of changes last year in the law, he said.

Knowlton said it appears some residents will pay less this year because they generated additional revenue, such as the sale of stocks, to avoid an increase this year in the capital gains tax. As a result, tax receipts in 1987 were abnormally high because of the extra income and this year appear to be unusually low.

Bangerter, scheduled to release his budget recommendations for fiscal 1989-90 in mid-December, aired hope during his campaign that there will be enough new money to provide salary increases for teachers and public employees.

Hatch said that will remain uncertain until final revenue estimates for the year are in. Depending on just how much revenue increases, there are new costs to the state that could stand in the way of any raises.

"We would like to do that; we think teachers deserve it," Hatch said. "It will depend on revenues and priorities."

Among the biggest expenses is $10 million in new Medicaid programs the federal government has mandated, but will not finance.

"What it means is we're going to have to come up with another $10 million just to keep the programs even," Hatch said.