By DOUG WILLIS
Associated Press Writer

SACRAMENTO (AP) -- California's strong economy is bringing in tax dollars at a record rate which should guarantee two more rounds of cuts in vehicle license fees for California motorists, the Legislature's chief fiscal advisor says.

The state is on track to bank a surplus of $2.6 billion at the end of the fiscal year. That amount is three times larger than the $881 million surplus anticipated just 41/2 months ago, when Gov. Gray Davis signed an $81 billion budget for the 1999-2000 fiscal year.

At current revenue and spending levels, that surplus would increase by another $427 million during the state's 2000-2001 budget year to exceed $3 billion, nonpartisan Legislative Analyst Elizabeth Hill said Wednesday.

"The real strength is particularly apparent in the personal income tax and the sales tax," which have exceeded monthly estimates since July and are expected to continue at those levels, Hill said. "We see a pause (in the growth of) capital gains, and slow but steady growth in the bank and corporations tax."

The Legislature reduced vehicle license fees by 25 percent in 1998. Lawmakers followed up this year with another 10 percent cut that takes effect in January.

The 1998 measure provided for two more cuts, for a total reduction of 67.5 percent, if future state revenue exceeded certain benchmarks. Hill said the revenue estimates are on track to trigger those additional cuts in 2002 and 2003.

The cuts already enacted cut fees about $1.5 billion this year, an average of about $75 per vehicle. The savings for motorists would nearly double by 2003 if Hill's revenue predictions hold.

Hill's revenue forecast "looks pretty good" but doesn't consider factors such as an estimated $500 million in smog impact fees that Gov. Gray Davis has promised to refund, said Sandy Harrison, a spokesman for the state Finance Department.

Davis said he would issue the refunds of fees dating back to the early 1990s after a state appeals court ruled last month that the $300 fees charged to out-of-state motorists registering vehicles in the state unconstitutionally interfered with interstate commerce.

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