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HELENA — The state's projected surplus still exceeds $500 million, the top legislative fiscal analyst told lawmakers Friday.

Terry Johnson said he is projecting an "ending fund balance" of $547 million at the end of the 2007 fiscal year, or next June. He said his information is based upon tax and revenue collections through June 28, just two days before the close of this fiscal year.

In even better news for lawmakers, Johnson said he predicts a stronger likelihood the projection will increase in coming months rather than decrease. Earlier projections had placed the ending fund balance at just about $500 million.

"Bottom line, when you take this all into account … you have the potential of ending the 2007 biennium with a balance of $547 million," Johnson told the Revenue and Transportation Committee on Friday. "It's a rather substantial amount, by far the largest balance in my tenure with state government, and I have been here a long time."

The governor and lawmakers have already been making plans how to spend the money.

Gov. Brian Schweitzer recently unveiled a plan to send property tax rebates of about $400 to Montana residents who own homes. The offer, which would cost about $100 million, excludes nonresidents and large corporations.

The governor has also said the state expects to spend more money on education, although he has said the state will do so voluntarily and not because of an ongoing school funding lawsuit. The state filed court papers this week saying the lawsuit is "moot" after funding increases last year.

At the same time, Schweitzer has cautioned lawmakers against making plans to spend all of the projected excess, citing the state's need to put money into a pension system that has a projected deficit in excess of $1 billion.

Republicans have proposed tax cuts of their own, including a property tax cut.

The issue of how to spend the surplus is becoming a hot topic on the campaign trail, as Republicans vie to take back control of the Legislature.

"Our economy is booming in Montana, and we're taking in more tax revenue than we need. The economic growth we've experienced over the last decade and the tax revenue is set to continue into the future," Sen. Corey Stapleton, R-Billings, said. "The taxpayers deserve that money back in the form of permanent property tax reform and relief."

Johnson said he expects a better projection in September when all the tax collections for the 2006 fiscal year have been tallied.

The 2007 Legislature will have to decide if the uptick in collections will continue for the following two year spending period, which ends in 2009. Johnson said it is hard to predict, especially since much of the current increase is based on more tax revenue from oil and gas due to rising prices in that sector.

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