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Minn. officials predict $1 billion budget surplus

ST. PAUL (AP) — Minnesota finance officials on Thursday predicted a budget surplus of more than $1 billion, a dramatic turn for a state coping with deficits for years.

That estimate means the state can fully pay the remaining IOUs to public schools that piled up during tougher budget times. And it leaves $825 million left for lawmakers to work with during their election-year session.

The Department of Minnesota Management and Budget's comprehensive review of tax-and-spending patterns will help set expectations for the session that starts in February. Gov. Mark Dayton and lawmakers from both parties planned to address the report at news conferences.

The report has an immediate impact for schools, which will receive $246 million in payments that had been previously deferred. The state is also replenishing an airport account from which lawmakers diverted $15 million five years ago.

It is the first economic forecast since the state enacted a new budget that raised taxes by more than $2 billion. Democrats, who have both the governor's office and majorities in both legislative chambers, said they hoped tax hikes would bring stability to a budget after years of spending cuts and accounting maneuvers. Republicans have pointed out that the positive trajectory began with the no-new-taxes budget they helped craft during their two years of legislative dominance.

The extra money adds intrigue to a session for which spending and tax-cut proposals are already stacking up.

It will enable lawmakers to ditch some of the unpopular tax increases that just took effect, such as sales taxes imposed on farm equipment repairs, telecommunications supplies and commercial warehousing services.

Groups that lobby for education interests and caregivers have also made it known they'll be after more money. A campaign to give raises to personal care attendants for the frail and disabled is in full swing, attracting nods of support from prominent Democrats and Republicans.

State finance officials will deliver another economic forecast in late February. Dayton has said he will wait until then to produce his own set of budget recommendations.