COLUMBIA--Gov. Mark Sanford called upon the S.C. Senate on Monday to use any extra money this year to pay off the state's debt.

The Senate begins debating the state's $16.7 billion budget today, $5.3 billion of which is state-controlled money.

Earlier this month, the Senate Finance Committee approved a budget that gives state employees an across-the-board 3 percent raise, fully funds the state Conservation Bank, increases the budget of the state Department of Natural Resource and avoids cuts within the Corrections Department.

Those moves were made possible after the state Board of Economic Advisors announced an expected $110 million surplus in state revenues. Senators quickly used that money to shore up an almost identical hole in the budget.

On Monday, Sanford said he would like to see the Senate use that money to pay off the $155 million deficit the state incurred during the 2001-2002 fiscal year.

"The bottom line is we shouldn't even be thinking about a surplus for this coming year until the unconstitutional deficit from three years ago has been dealt with," Sanford said.

Across the country, states are seeing their finances turn for the better, but they have a long way to go before things are good again, the National Governors Association reported Monday.

Revenues are mostly on target, spending is picking up, and reserves are stable, the report said. It noted, however, that health care costs continue to grow too quickly, and nearly half the states had to cut programs midyear. So optimism should be tempered with caution.

"If states were a patient, the patient is certainly out of intensive care but is certainly still in the hospital," said Scott Pattison, executive director the National Association of State Budget Officers.

In some ways, the news was only good in comparison to how bad it has been the past few years. For instance, 18 states were forced in recent months to cut budgets midyear, saving an overall $4.8 billion. That was less than half the 37 states that cut budgets each year in 2002 and 2003.

Among them was South Carolina, which has operated with a deficit the past three years despite a provision in the state constitution that forbids it.

The fact that it has done so has yet to be challenged in court, Sanford said.

At risk, Sanford said, is the state's AAA credit rating, which saves South Carolina millions of dollars in future borrowing costs.

"You can't spend money twice," Sanford said. "We've already spent this money once, for goods and services. We can't spend it again."

There are a number of plans already in play in the Senate addressing the deficit, including certain parts of Sanford's altered income tax reduction plan.

The finance committee last week passed Sanford's plan to the full Senate, after making some changes.

Originally the plan called for reducing the state's highest income tax bracket by .225 percentage points annually for the next 10 years, dropping the rate from the current 7 percent to 4.75 percent. The cut would not occur unless the state's general fund grew by 2 percent or more, based on projections by the BEA.

Senators amended that plan, pushing the trigger to 4 percent. The first 3 percent would go to repay old debt, part of which is the deficit.

Should that bill fail to pass, senators also have the option of passing the Fiscal Discipline Act on its own. The act, already passed by the House, stipulates that the state must pay back the deficit by summer of 2006.

The act, however, would not take effect this year.

Sanford said the state should not bank on future money to pay off the deficit, especially when money is available now.

Reached by phone Monday, Senate President Glenn McConnell, R-Charleston, agreed.

McConnell has not yet seen the document approved by the finance committee, but he said the Senate should work to pay off the deficit as soon as possible.

"The last thing we need to do is increase spending," McConnell said. "We need to get rid of the red ink."

Sen. Larry Grooms, R-Bonneau, a finance committee member, said senators would have a hard time using the entire surplus to pay off debt.

"I don't see any sentiment in the Senate to cut $110 million out of the budget to pay off the deficit," he said. "I'm sure there will be some reshuffling of where money goes, but I'd imagine that would be it."

Sen. John Land, D-Manning, also on the finance committee, said he intends to stick with the document he helped write. He said the governor can veto parts he doesn't like.

Land also said he doesn't believe the state really has a deficit.

"The deficit was not a true deficit," he said. "If it was, we would have had checks bouncing everywhere."

Land said he does not think the Senate will use the surplus to pay back the old debt.

"It doesn't make sense," he said. "You don't pay money back to your savings account and not feed your family."

The Associated Press contributed to this report. Clay Barbour covers the Statehouse. Contact him at (803) 799-9051 or at cbarbour@postand courier.com.