After a dry fiscal year in 1986-87, the state's finances have improved dramatically, according to a report by the Utah Foundation, a private tax research group.

The group's annual analysis of revenue and expenditures showed the state took in $51.5 million more than it spent between July 1987 and July 1988, the state's fiscal year. Revenues in Utah rose by nearly $100 million while expenditures decreased by about $8 million, making it the "first actual expenditure decline recorded in Utah history."The excess revenue would have been greater, but the one-time income tax refund of $77 million and other special appropriations lowered the total income. In addition, $22.9 million was transferred to the "rainy day" fund to be held against future financial problems.

Part of the improvement was due to a stronger economy, but most of it was caused by the difficulty in making accurate revenue forecasts after federal and state tax law changes in 1987 and 1986. The tax increases enacted by the 1987 Utah Legislature raised collections by $123.5 million, an 8 percent boost.

A continuing decline in federal aid is shrinking the excess revenue, however. The reports noted that federal funds coming to Utah dropped about $50 million in the last two years, and other non-tax revenues fell by $3.5 million.

The general sales tax is still the largest tax source, accounting for 37 percent of all state taxes and 24 percent of total revenue receipts. Last year, sales taxes produced $616 million for the state and an additional $146 million for municipalities, counties and transit districts.

Other major tax sources according to the report included the individual income tax which collected $531 million, the motor fuel and use tax totaling $175 million, unemployment taxes at $87 million and corporate income taxes at $83 million. Total general revenue for the state was over $2.5 billion.

The money leaves the budget in various ways, with education, social services and transportation taking over 83 percent. Education alone accounted for 42 percent, or $1.051 million, of total state spending, not including locally raised taxes and fees from state colleges and universities.

Social services, which include public assistance, mental and public health, unemployment, and medicaid and corrections used about 28 percent of all state expenditures, or $711 million.

The report listed other major spenders in the state budget, including highways and transportation at $310 million, natural resources at $58 million and community and economic development at $53 million.