The state will face an estimated $14 million surplus by the end of the current fiscal year, according to Gov. Norm Bangerter.

Unlike last year's surplus, this surplus is good news - because officials believe it comes as the result of an improving economy rather than a large tax increase.Bangerter said Monday the surplus estimate comes from his budget office, where accountants have been examining state revenues during the first quarter of the fiscal year, which started in July.

The office will release a report on the revenues later this week, he said. The predicted surplus is small compared to the $2.6 billion overall budget.

Bangerter is expected to announce his recommended budget for fiscal 1989-90 in early December. The Legislature then will draft the final budget during its regular session beginning in January.

Bangerter said his next budget will include an estimated $80 million in growth due to a rebounding economy. That may be good news for state employees.

"We expect we will have some growth to accommodate some salary increases," Bangerter said, noting about $12 million to $13 million is needed for a 1 percent increase.

Bangerter, who was elected to a second term earlier this month, made the comments as he was preparing for an afternoon budget hearing. He appeared especially pleased with the economic news after having endured difficulties with the budget during his first term.

"It's much nicer to see our economy expanding," he said. Bangerter announced Tuesday a committee of 11 local aerospace executives who will work to recruit more aerospace companies to Utah.

The committee will primarily work to attract businesses that support larger aircraft-production facilities. Officials said the aerospace industry is poised for a major expansion nationwide.

"I am confident Utah can capture a good portion of this business if we continue to be aggressive and organize our resources for further aerospace development in Utah," Bangerter said.

He hinted Monday that economic development will be an important part of his recommended budget.

"We certainly will be as aggressive (with economic development) if not more during the next four years," he said.

Last summer, Bangerter called lawmakers into a special session to tackle a $110 million surplus that came one year after he successfully pushed a tax increase. Lawmakers, following recommendations from the governor, refunded $80 million to taxpayers and reduced income tax rates by $70 million.

The state still ended the 1987-88 fiscal year with a $3.5 million surplus. Since then, sales and income tax collections have been better than predicted.

"It's safe to say the numbers look better than last year," Bangerter said.

The predicted surplus does not include the $25 million the state is expected to receive from a settlement reached earlier this year in a dispute with two Utah mining companies over coal royalties.

The companies, Utah Power & Light Co. and Coastal States Energy Corp., had disputed a change in the way the federal government computed royalty rates imposed on underground coal mining.

Most of that money, however, must go into designated programs. About one-third will go to the Community Impact Fund and another third will go to higher education. About one-fourth of the money will go into the state's general fund.

/asst/csi/1129/pass3/0092