The federal deficit is running sharply lower through the first nine months of this budget year as the growth in revenues continues to outpace spending growth.

The Treasury Department reported Thursday that the government ran a surplus of $27.5 billion in June, up sharply from the $20.5 billion surplus recorded in June 2006. The government normally runs a surplus in June, a month when individual taxpayers and corporations make quarterly payments to the Internal Revenue Service.

With the June surplus, the total deficit through the first nine months of the budget year, which began Oct. 1, is $121 billion, down 41.4 percent from the same period a year ago, when the deficit totaled $206.5 billion.

The Bush administration this week announced a new deficit projection for this year of $205 billion, down significantly from the $244 billion deficit it forecast in February, reflecting the fact that revenue growth has continued to come in at higher-than-expected levels.

That imbalance would be the lowest in five years and an improvement from the $248.2 billion deficit recorded in the 2006 budget year that ended last Sept. 30.

President Bush hailed the new forecast at a White House ceremony on Wednesday, saying it showed that his economic policies of tax cuts and spending restraint were working.

(AP)