Maryland's billion-dollar surplus could guarantee full funding for the state's $1.3 billion school-reform effort, a mandate that has been in peril since its inception three years ago, political leaders and fiscal analysts said yesterday.

The surplus from the past fiscal year, announced Tuesday by Gov. Robert L. Ehrlich Jr., also could bring a tax break for Maryland homeowners and restore some programs cut in recent years.

In many ways, the surplus relieves the pressure to find funding for the Thornton plan, which increases education spending by hundreds of millions of dollars each year until 2008. Several times over the past three years, Ehrlich (R) and others have warned that there was no way to continue funding the ambitious initiative.

"The governor made a commitment as far back as the campaign to fully fund Thornton," spokesman Henry Fawell said yesterday. "He has kept that commitment. He intends to keep that commitment in the future."

News of the surplus launched several other discussions yesterday over how else to spend the money. Chief among the potential ways: a tax cut. The governor pledged tax relief for residents but said it was too soon to say what form that would take.

"He supports property tax relief, and we'll have those discussions with his staff in the coming weeks and months in terms of how best to do that," Fawell said. "And it might not be limited to just the property tax. We're now blessed with a $1 billion surplus."

Two years ago, facing a shortfall nearly that large, Ehrlich and the General Assembly agreed to increase the state property tax by 5 cents on every $100 of assessed value.

The House of Delegates tried to reduce the rate by 2 cents in the past legislative session but met resistance from the Senate. Ehrlich later tried to enact a 1-cent reduction by going through the Board of Public Works, but he could not gain support from his fellow panel members, State Treasurer Nancy K. Kopp (D) and Comptroller William Donald Schaefer (D).

Schaefer said through a spokesman yesterday that he opposes cutting the property tax, even with a surplus. Kopp said she had not decided what to do.

Ehrlich announced yesterday that he would use a small portion of the money to restore programs highlighted by the General Assembly, including $1.5 million for health care funding for pregnant legal immigrants already receiving services, and $880,000 for day care for the elderly.

Del. Adrienne A. Jones (D-Baltimore County), a member of the House Appropriations Committee, cautioned that state officials should be mindful of the school funding obligations as they consider spending the surplus.

"Obviously, it's better to have a surplus than a deficit, but education is a big part of our budget," she said. "A tax cut today will have implications for later years. We've got to be very careful."

The Thornton initiative, designed to boost spending so all students receive an "adequate" education, increases education spending by $400 million each year between now and 2008, said Warren G. Deschenaux, director of the legislature's Office of Policy Analysis.

"We're going to be able to keep things going, at least, for the next two years, barring anything cataclysmic," Deschenaux said. The surplus "makes it more likely that we can meet the commitments to education that are already in the law without causing other parts of the budget to suffer so greatly as they have."

The legislature has funded the plan every year, and the initiative is covered through fiscal 2006, which ends in June. But Ehrlich and legislative leaders have operated under the assumption that the state eventually would need a new source of revenue to cover the eventual $1.3 billion expense. The governor periodically has proposed legalizing slot machines as a revenue source; Democratic lawmakers have suggested taxes on gasoline, sales, corporations and income.

In the past year, though, the improving national economy and a surge in tax revenue of all types has left Maryland in the black. As least 34 others states, including Virginia and the District, have seen revenue outstrip projections.

Staff writer John Wagner contributed to this report.