Plagued for several years with serious problems, Utah's financial picture improved dramatically over the past year, which ended without any across-the-board spending cuts and an unallocated surplus of $9.7 million.

According to the Utah Foundation, the state ended the 1987-88 fiscal year with a $109.6 million surplus. Most of the funds were allocated for a one-time income tax refund totaling $77 million and a $22.9 million transfer to Utah's surplus "rainy day" fund.Gov. Norm Bangerter has proposed a budget of $2.9 billion for the 1989-90 fiscal year. The proposal would allow a general salary increase of 3 percent for state and education employees and still permit a $19 million tax cut, according to the research group.

The total also includes recommendations for $312.6 million in capital outlays and $64.7 million for debt service. The proposal is about $20.7 million more than total authorizations for 1988-89, but that budget included one-time appropriations to settle Utah's thrift crisis and other nonrecurring items.

Despite a hard-fought battle, tax initiative organizers saw their three tax-cut proposals - which would have slashed state and local tax revenues by $280 million to $330 million per year - soundly defeated at the polls. But the report says the protest movement has had a definite impact not only on political thinking for the coming Legislative session but in government operations.

The report says that from June 1987 to June 1988, total state and local non-school employment in Utah declined by approximately 300 jobs. The drop is in sharp contrast to the 1976-86 period, in which non-school employment in Utah grew 31 percent - or an average of 2.7 percent annually - at the state and local level.

It shows that the early retirement program, enacted by the 1987 Legislature, yielded 2,511 state and education employees who exercised that option. Only half of the 638 state employees who retired were replaced with new workers.