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Minn. budget forecast likely more bad news

ST. PAUL (AP) — Minnesota lawmakers were braced for bad news with Thursday’s release of a state economic forecast.

Expectations at the Capitol were for somewhere between $500 million and $1 billion in red ink in the state general fund. That would set the table for another showdown between Democratic Gov. Mark Dayton and Republican legislative majorities, with both sides still smarting from last summer’s budget battle that led to a state government shutdown.

In that case, Dayton and lawmakers had to resolve a $5 billion shortfall. Lawmakers balked at Dayton’s proposed income tax hikes, while he refused to cut as deeply as Republicans wanted. After six months of dispute that culminated in a 20-day shutdown, they agreed on a mix of cuts, borrowing and delays to school aid payments.

“You’d have to put me in the pessimistic camp,” said Deputy Senate Majority Leader Geoff Michel, R-Edina. “All of our members are very much aware of the economic situation and the probable need for us to be budgeters next session.”

The yearly November budget forecast takes in the condition of the local, national and world economies, and measures that against state expenses for the rest of the two-year budget forecast.

Factors this time around could include the failure of the congressional “supercommittee” to agree on deficit reduction measures and the debt crisis in Europe.

“One of the things that’s different about this forecast is that there’s a lot more upside potential and a lot of downside potential,” said Tom Stinson, the state economist.