The state Council on Revenues yesterday raised its already optimistic forecast for growth this fiscal year, another validation of Hawai'i's economy as Gov. Linda Lingle and state lawmakers prepare to debate the state's budget over the next several months.

The council predicted state revenues would grow by 8 percent by the end of the fiscal year in June, up from 6 percent in its last forecast in September. If the forecast holds, it could mean about $84 million in additional money for the state, according to the state Department of Taxation. The council estimated growth of 7.5 percent for the 2007 fiscal year, up from 6.6 percent in September, or a potential $131 million in extra revenue.

The estimates have been upgraded several times this year because the council's economic model has been unable to precisely track the state's revenue growth. The growth has been fueled by higher personal income, corporate taxes and more aggressive collections by the Tax Department.

"My interpretation of this is that the economy is growing very strong and the Tax Department is doing a really good job of collecting delinquent taxes and it's some kind of a combination of those factors," said Carl Bonham, a University of Hawai'i-Manoa economist who serves on the council. "It's really us raising our forecast to match the performance of the economy."

The Lingle administration has used the council's forecast to predict sizable budget surpluses that could cover tax relief and additional spending on school repair and maintenance, among other initiatives. The governor will release her budget priorities on Monday, which will go to the state Legislature for review.

The Tax Department reported last Tuesday that general fund tax revenues were up 13.7 percent during the first five months of the fiscal year, the major factor in the council's higher estimates yesterday.

State House and Senate Democrats met in separate closed-door meetings last week to discuss their priorities, including affordable housing, public education, energy efficiency and disaster preparedness. One House estimate shows a possible spending wish list of $2.7 billion, an example of how different interests might compete in getting a share of a projected $535 million surplus this year and a $632 million surplus in 2007.

The estimated surplus will likely increase after yesterday's forecast.

"I'm very pleased that the projections are so strong," House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), said in a statement. "We have let our infrastructure deteriorate because we didn't have the money. This gives us, for the first time in over a decade, the money we need to fix our schools, prepare for disasters, build affordable housing and invest in the future."

Senate President Robert Bunda, D-22nd (North Shore, Wahiawa), said lawmakers would likely be cautious about spending, because the economy could slow, but would take the opportunity to address longstanding issues such as the school repair and maintenance backlog.

"Part of the surplus will enable us to retire the backlog of repairs and give us the ability to keep up with a more responsible schedule of maintenance to prevent more expensive repairs in the future," Bunda said in a statement. "Affordable housing is another initiative that obviously takes money to implement, and we will also be looking for opportunities in that area during the session."

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.