The past few years have been good for Liz Moore.

A real-estate agent and the broker in charge of the Realty Group's office in Kahala, Moore has been in a perfect position to thrive in Hawai'i's economy. The state's low unemployment rate and higher personal income level has made it possible for more people to purchase their own homes despite soaring housing costs.

"I believe in home ownership," said Moore, who has been in real estate for 25 years and takes pride when she works with first-time home buyers. "I feel it's not just about selling real estate.

"It's about providing the American dream for more people."

Shannon Belin, a business agent for a painters union, was one of the fortunate ones. He and his wife made a profit on a townhouse and upgraded to a bigger home with a nice yard in Kailua, where he grew up. But property tax increases have made his home more expensive. That together with the state's high cost of living make Belin worry whether he can keep up with the payments.

"It's basically a month-to-month thing," said Belin, who has two young children.

The experiences of people such as Moore and Belin will be on the minds of lawmakers this week as they open the new session of the state Legislature facing a $574 million budget surplus.

Hawai'i, like many states across the country, has started the first quarter of the fiscal year with sterling revenue growth and a kind of financial optimism that generally had been missing in state government since the Sept. 11, 2001, terrorist attacks hurt tourism and the state economy.

The surplus gives Republican Gov. Linda Lingle and the Democrats who control the Legislature a chance to talk not only about what is practical but also what is possible. It presents genuine public-policy questions that, in an election year, may give voters more insight into the approach of the two political parties than any campaign commercial.

Should some of the surplus be returned as tax relief to the people responsible for driving the economy or to the people just struggling to hold it together? Should it be invested in restoring aging infrastructure, including public schools and irrigation systems that might provide the foundation for future economic growth? Should it be spent on new programs, on public education, housing and healthcare that help the most vulnerable?

Dieter Rauscher, who is retired and lives in Mo'ili'ili, has advice for the governor and lawmakers. "Treat it like it was your own hard-earned money," he said.

GROWTH EXCEEDS FORECASTS

The surplus has been built on the strength of Hawai'i's economy, which many worried was fragile after 9/11.

University of Hawai'i-Manoa economist Carl Bonham, who serves on the state Council on Revenues, says the state actually has just finished a record ninth year of economic expansion. Tourism and construction have been the engine, creating jobs and income growth that in turn produce more tax revenues for the state. Bonham has told lawmakers that while inflation and overheating in the housing market pose risks, economists predict slower but steady growth.

State revenue growth in Hawai'i, which has consistently outperformed the council's forecasts in the past year, appears to match similar improvements on the Mainland. According to a survey from the National Conference of State Legislatures, 42 of the 49 states that shared information had revenue collections above economic forecasts after the first quarter of the fiscal year.

The Lingle administration has used the council's forecasts to estimate a budget surplus of $574 million by the end of this fiscal year in June and a surplus in excess of $700 million by the end of the 2007 fiscal year.

Lingle has proposed using about $300 million of the surplus for tax relief, along with spending increases directed mostly at public education, human services, health and public safety. Under the governor's budget, a $152 million surplus would remain after the 2007 fiscal year.

DIFFERING PRIORITIES

House and Senate Democrats have said their spending priorities will be in public education, affordable housing, economic development and alternative energy, with tax relief possible only if other needs can be met.

In speeches at the start of the last session, Lingle and Democratic leaders were careful to balance talk of the glowing economy with caution about the people struggling to keep pace with the cost of living. Similar warnings likely will be heard again when Senate President Robert Bunda, D-22nd (North Shore, Wahiawa), and House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), open the session on Wednesday.

Although the new spending proposals would cover millions in taxpayer money, Lingle and Democratic leaders have been rather cautious, even surgical, about how they would use the surplus. The state is in the second, or supplemental, year of a two-year budget cycle. Ambitious new programs could swell the budget, and generous tax relief could limit future revenue, leaving the state in a more precarious financial position if the economy dives into recession.

Politically, Lingle and the Democrats have no reason to take any wild risks. The governor is popular and on course for re-election in November. Democrats hold overwhelming majorities in the House and Senate that are not in immediate jeopardy. But election years can be volatile, and a half-billion-dollar surplus is something that might catch people's attention. A backlash over higher property taxes down at the county level, unless diffused by the mayors and county councils, could also reach the state Capitol.

"It's time for action by the governor and Legislature rather than more words and promises," said William Starr Moake, a writer who lives in Nu'uanu and would like to see more state spending for the homeless.

SCHOOL AID, TAX RELIEF WANTED

An informal survey by state Sen. Bob Hogue, R-24th (Kailua, Kane'ohe), of constituents in his district showed what other lawmakers have heard as they traveled across the Islands over the past several months. The people in Hogue's district, who tend to be more politically conservative than in other parts of the state, ranked repair and maintenance at public schools as the priority for the surplus. A tax refund was a close second.

Moore, the real-estate agent, said the surplus suggests that state tax rates are too high and should be restructured. She said lawmakers should also return some of the money as tax relief and use some for items such as school repair and maintenance.

"I think you need to take more of a long-term approach and say, 'All right, I think we need to do some restructuring,' " Moore said of the tax code.

Belin, of the painters union, said his family certainly could use tax relief. But he said he would like most of the surplus to get to public schools.

"It's a feel-good thing to get money in your pocket," Belin said. "I'd like to see the money go towards education or, if they are going to talk about tax cuts, instead of getting a rebate, look for something long-term."

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.