That's $140 million higher than the $3.61 billion forecast by the council in May. The state's actual revenue this past fiscal year was $3.45 billion. The council makes the revenue forecasts on which the state bases its budget.

While state revenues have risen only in small increments, nominal personal income has grown 4.7 percent since 1997 and 5.1 percent since 2001, said Paul Brewbaker, chief economist for Bank of Hawaii and a former member of the board.

A good portion of the increase was based on increased economic activity, with the rest the result of new tax laws and a reduction in the amount of tax credits being granted by the state, said Mike Sklarz, chairman of the commission.

Budget Director Georgina Kawamura said the rosy forecast for fiscal 2005, which runs from July 1, 2004, to June 30, 2005, relieves much of the pressure on the state budget by erasing a projected $77.5 million deficit anticipated in the 2006 budget year.

Kawamura said the state still needs to practice what she called fiscal prudence. "A good projection ... doesn't mean that we're gonna go hog-wild and start spending as of tomorrow," she said.

Gov. Linda Lingle's administration had "restricted" financing for a series of health and human services programs pending yesterday's forecast.

Kawamura said much of that money can be restored following a review to ensure "that they will provide achievable results for those constituents those programs are supposed to be helping."

The administration has been criticized by Democrats, as well as health and human services leaders, about the restrictions. But Kawamura has insisted that previous administrations also reviewed programs before releasing money for them.

Leaders in the Democratic-led Legislature urged the Republican governor to release money that has been withheld.

House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), said economic development initiatives started by the Legislature helped contribute to the rosier economic outlook.

Releasing money allocated by the Legislature in education reform and drug-fighting bills would go a long way toward "addressing some of community's major concerns," he said.

Senate Ways and Means Chairman Brian Taniguchi, D-10th (Manoa, McCully), said the higher projection reflects a rebound in the state economy since the Sept. 11 terrorism attacks.

Taniguchi said that while the state should be "responsible" with how it budgets its money, "the governor should release some of these monies that she said were being withheld because of some of the concerns with the economy. I think we've got a better picture now, and I'm hoping she'll reconsider and release the monies we appropriated."

Kawamura noted that about $7 million of $29 million in grants-in-aid programs have been released to date. Additionally, she said, about $7 million of $11 million for the Legislature's education reform package has been released, as has $219,000 of a $14 million anti-ice bill.