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Minnesota gets $1.2 billion in good news on economic forecast

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ST. PAUL -- Minnesota's new budget deficit reportedly will be about $5 billion, down from $6.2 billion.

Still, the state faces a massive deficit that legislators and the governor will debate through the spring.

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The $5 billion figure for the next two-year budget was reported before the official announcement later today. The official announcement will include details about why the deficit dropped and what could happen if the economy takes another turn.

To put it in perspective, at $5 billion it still tops the Wisconsin deficit by more than $1 billion. Minnesota and Wisconsin budgets often are compared.

The figures released Monday give Democrat Gov. Mark Dayton and Republicans legislative leaders an idea about how much money they have to work with as they prepare a budget for the two years beginning July 1. They are supposed to wrap up their budget work by May 23, when the state Constitution requires lawmakers to end regular-session work this year.

Some in the Legislature predict that deadline will be difficult to meet, given the differences between Republicans and Dayton, and say a special session may be needed to prevent the state from running out of money and government services shutting down.

Going into Monday, legislative leaders said the best they could hope was a few-hundred-million-dollar-improvement in the $6.2 billion state budget deficit, but not enough to significantly change matters.

Dayton has said that a better budget could mean he would restore some of the cuts he proposed to nursing homes in the budget plan he released two weeks ago.

Republicans who control the Legislature say they will release their own budget outline within a couple of weeks. Committees hammering out budget details must have their work done by March 25.

In the meantime, Dayton needs to update his budget proposal to reflect Monday's budget report.

Big differences remain between Dayton and GOP leaders.

Dayton's budget plan calls for spending $37 billion, while Republicans insisted on $32 billion, but it was not immediately clear how they would deal with a better-than-expected budget projection. They said they will negotiate how to spend the $32 billion, but refuse to raise more money.

Among Dayton's proposed tax increases are his much-discussed plan to raise taxes on the richest 5 percent of Minnesotans, joint filers who earn more than $200,000 a year. He also would apply a 3 percent surcharge on people making more than $500,000 and tack on an extra property tax on homes worth more than $1 million.

Republicans say such tax increases will drive away businesses and business leaders that Minnesota needs to produce new jobs. They prefer cutting business taxes and finding other ways to make life easier for Minnesota companies.

Dayton and Republicans agree that they must cut spending from what agencies and other entities that receive state money expect to receive. Dayton's plan chops $1 billion from spending.

The governor would keep state payments to local governments stable, but in an early Republican budget bill, vetoed by Dayton, there would have been cuts.

Don Davis reports for Forum Communications Co.

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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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