The state received some welcome news last week.

Forecasters predicted the state will collect $164 million in unanticipated revenue in 2005 and 2006. The additional money could be a godsend for the Legislature, which will need to come up with money to fund heating assistance for low-income Mainers and to replace a reduction of federal support for programs such as Medicaid.

But the projection also represents good news for individuals and businesses. According to Rebecca Wyke, the commissioner of Administrative and Financial Services, personal income in Maine has grown by 5.4 percent, including income for small businesses that flows through to the owners. Corporate income taxes to produce 21 percent more revenue between 2005 and 2006 due to higher profits. In addition, taxes on one exceptionally large estate are estimated at $17 million for this year.

The income growth is not spread evenly across the earnings ladder. Much of the strong showing, Wyke said, can be attributed to strong stock performance and dividend gains. Income for people without those assets have not fared as well. Nonetheless, the growth numbers are good news.

Spending caps put in place on state government last year dictate how much of the unexpected revenue will be directed and limit what can be appropriated. Of the $112 million of new revenue projected for 2005, $35 million will go to the budget stabilization fund, a cash reserve meant to protect the state in the event of an economic downturn.

The new funding for the stabilization fund will bring the account balance to more than $70 million, up from zero three years ago when Gov. Baldacci took office. The goal is to build a fund equal to 12 percent of state revenue, an amount that would insulate the budget from an economic downturn like the one in the 1990s.

While increased revenues mean the state will have the ability to replace lost federal support without raising broad-based taxes, the more important story is the relative strength of the state economy and income growth.

There remains, however, a lot of work to do. The state has made progress in reducing the structural gap that plagues the budget, but even with improved revenue projections it remains between $200 million and $250 million for fiscal year 2008 and 2009. But we can’t count on a repeat of one-time estate payments or business income to stay about 21 percent indefinitely.

The state has improved its financial footing, but the economy remains prone to boom-and-bust cycles. Good news can turn bad quickly. The temptation to undo the forced discipline of the last budget fight will be great. It will be up to Baldacci and leaders in the House and Senate to hold that line.

Maine is moving forward. Staying on track isn’t guaranteed.