* Strong economic growth boosted revenue
* Budget ends with $8.8 billion surplus
* Fast-growing Texas will also need more spending, analyst warns
By Corrie MacLaggan
AUSTIN, Texas, Jan 7 (Reuters) - The Texas Legislature will have 12.4 percent more revenue to spend in the next two budget years thanks to higher-than-expected tax collections boosted by economic growth, state Comptroller Susan Combs projected on Monday.
"Texas experienced a very strong rebound from a severe recession," said Combs, who issued her biennial revenue estimate a day before the Texas Legislature convenes.
Texas has a two-year budget cycle and lawmakers will craft a 2014-2015 budget during the session, which ends May 27.
Combs forecast revenue of $101.4 billion - which the comptroller says is 12.4 percent greater than corresponding funds available for the current budget cycle - including $8.8 billion expected to remain at the end of the 2012-2013 budget cycle.
The state's general revenue collections are projected to be $96.2 billion, $3.6 billion of which would be set aside for the state's rainy-day fund.
Combs estimated that the rainy-day fund will have $8.1 billion at the end of the current budget cycle and $11.8 billion at the end of the 2014-2015 cycle.
Collections of sales tax, oil and natural gas production taxes and motor vehicle sales taxes have exceeded expectations, she added.
"We are lucky to be right now in a very significant oil-and-gas-based effort, along with the motor vehicle sales tax," Combs said. "Other states do not have some of these extra benefits."
Texas has regained all of the 428,000 payroll jobs it lost in the recession and has added an additional 258,000 jobs beyond the pre-recession peak, Combs said. By contrast, the U.S. has recovered about half of the 8.8 million jobs lost, she said.
The comptroller now estimates that there is $90.2 billion available for the 2012-2013 budget cycle.
Two years ago, facing a budget shortfall, lawmakers underfunded the state's Medicaid program by $4.7 billion. They are expected to authorize money for that program when the new session begins.
Texas Governor Rick Perry said Monday that the comptroller's projection shows that the state made the right decisions two years ago in being careful with its budget in the face of a national recession.
"Even as we head into the 83rd Legislative Session with higher revenues, we still need to focus on separating our wants from our needs, and continue to follow the conservative principles that have led to Texas' ongoing success and will keep Texas strong," Perry said.
Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities, said that although the $101.4 billion is more than the state has had in the past two years, it is $7 billion short of what Texas needs to return to a pre-recession level of services.
"It does sound like a lot more money but don't forget: We're a fast-growing state and the things that the state pays for cost more every single year," said Lavine, whose Austin-based organization advocates for low- and moderate-income Texans.
The Center is urging lawmakers to tap the rainy-day fund to pay for population growth and inflation and to undo what it calls devastating cuts made in 2011 to education, health care and other areas.
Talmadge Heflin of the Texas Public Policy Foundation, which favors limited government, said the amount of revenue growth is a pleasant surprise but cautioned that lawmakers should "not go on a spending binge."