State of Minnesota projecting $876 million budget surplus

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ST. PAUL — Talk about early Christmas presents: Minnesota budget officials today estimated an $876 million surplus for the rest of their two-year budget, easing fears of another bruising political fight just months after partisan deadlock led to a partial shutdown of state government.

The surplus was a surprise. Most Capitol observers had expected bad news in the economic forecast, with red-ink estimates ranging from $500 million to $1 billion.

The figure was given to the Associated Press by a legislative staffer briefed on the forecast. The staffer requested anonymity because they were not authorized to release the number ahead of its official announcement later today.

The Legislature convenes in January. The economic forecast will be updated again in February, when it will be used to guide Gov. Mark Dayton and political leaders in budget talks.

State leaders have struggled with a series of deficit forecasts going back to 2007. The last budget forecast, in February 2010, presented Dayton and lawmakers with a $5 billion projected deficit. It eventually led to a months-long standoff between the Democratic governor and Republican legislative leaders.

While Dayton sought a mix of spending cuts and income tax increases on wealthy earners to erase the deficit, Republicans united against any tax increases and said Dayton was not willing to cut deeply enough. Their dispute dragged past the scheduled end of the legislative session in late May, and finally resulted in a 20-day government shutdown that began on July 1.

In the end, Republicans avoided backing any tax increases but Dayton avoided some of the deepest proposed cuts with a compromise package that included borrowing on future proceeds from state tobacco settlement bonds and delays in state aid payments to school districts.

This is a developing story. Check back for more details throughout the day.

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