The report was overwhelmingly positive, indicating Utah emerged from a sluggish economy during 2004 and is likely to see continued growth in employment and income.

However, the report also cited three potential stumbling blocks:

* Utah's rapid population growth will require increased state spending to educate its youth and to take care of its increasing number of elderly residents.

* Second, if a decision is made later this year to close Hill Air Force Base, Utah's economic well-being will be affected dramatically.

l Third, increasing energy costs could put a drag on economic growth.

Huntsman said the state's population boom - Utah is the nation's seventh fastest growing state - is something that must be accepted. "We have a growth engine that will be with us forever. There is nothing we can do about that but prepare to pay the bills over time."

On the positive side of the ledger, he said, the construction industry is still thriving, and the state saw a 25 percent increase in defense spending in 2004.

To increase the economic momentum, Huntsman said he will attempt to continue former Gov. Olene Walker's tax reform program in the next two Legislatures. "In two sessions, we will be able to achieve much of what Governor Walker rolled out."

Regulatory reform is another need Huntsman will champion. He is calling on small businesses to help his administration define regulations that hindered their growth.

Huntsman said he will pay more attention to travel and tourism, for which the state has had a "minimalist" approach up to now. With the boost from hosting the 2002 Winter Olympics gone, he noted, "we will have to earn every person who travels or tours in the state."

Asia will become a huge source of travelers to Utah, he added. "It's the wild West that has captured the imagination of the world."

glenwarchol@sltrib.com