New state revenue estimates anticipate an improvement in North Dakota's individual and corporate income tax collections, which could give the Legislature $8.3 million more to spend in the state's next two-year budget.

The forecast, given to the House and Senate appropriations committees Friday, contain the final numbers that budget writers will use to finish their work on the state's 2003-05 spending plan.

The estimates assume the Legislature will approve a substantial tobacco tax increase that was included in Gov. John Hoeven's budget proposal, even though the North Dakota Senate has already rejected the idea.

A 35-cents-a-pack cigarette tax increase, along with higher taxes on other types of tobacco, were included in Hoeven's budget to raise almost $30 million over two years.

Without the higher tobacco taxes, the Legislature's current spending plan is in the red. The Legislative Council, which is the Legislature's research arm, estimates the deficit at $26.5 million.

Hoeven argued that lawmakers could revive the tobacco tax. He said Friday's budget estimates should make it possible for the Legislature to rescind cuts made to his recommended spending on education and human services programs.

For example, legislators should restore $11.5 million, which was targeted for teacher pay increases, that was sliced from his recommended budget for aid to local schools, Hoeven said at a news conference Friday.

"Do North Dakotans really want to cut funding for a teacher salary increase? Do North Dakotans really want to cut programs that give our seniors a choice in care, that includes quality nursing facilities, as well as home- and community based services?" Hoeven asked. "We can, and we must, fund these priorities."

Sen. Raymon Holmberg, R-Grand Forks, the chairman of the Senate Appropriations Committee, said he regarded the Friday estimates as "pretty flat-line."

During the first half of the Legislature, the House and Senate appropriations committees focused on cutting back Hoeven's budget proposal, and that strategy looks good in retrospect, Holmberg said.

"I can see where we can close the session without having to go in and do additional cuts," Holmberg said.

The Legislature's Democratic floor leaders, Rep. Merle Boucher, D-Rolette, and Sen. David O'Connell, D-Lansford, said they considered the new numbers shaky, with the looming possibility of a war with Iraq.

"At least we don't have to look at the negative from this standpoint, when we take a look at the projections, it didn't say that we're going to see decreases in income, and decreases in revenues," Boucher said. "When we talk about the projections … they're probably based on very optimistic projections."

The new tax numbers project less in sales and motor vehicle excise tax collections than were forecast last November, when Hoeven presented his spending recommendations to the 2003 Legislature.

"Consumers are just not willing to go out and spend very much money, because of the impending war, the financial market is bad - it's just a significant consumer confidence issue," interim state budget director Pam Sharp said.

However, forecasts of individual and corporate income tax collections for the next two years have risen when compared to the November numbers than Hoeven used to finish his budget proposal.

Sharp said earlier estimates of income tax declines may have been too pessimistic.

Higher oil prices will give a $1.22 million bump to state revenue, but prices above $30 a barrel are not assumed to last past June, Sharp said.

"The current price of oil is quite high, as a result of a war premium," she said. "This forecast assumes that that price of oil will continue through June, and then we'll kind of smooth it down a little bit."

O'Connell said higher oil and natural gas prices will mean large increases in fuel and fertilizer costs for farmers.

"It's going to have a heck of a lot of effect on personal income that's going to be spent on Main Street," O'Connell said.

There will be strong demands on any additional money in North Dakota's budget.

At present, the Legislature's budget does not include pay raises for state workers, and human services advocates want more spending on care for the elderly.