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New Minnesota budget forecast shows $323 million surplus

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ST. PAUL, Minn. (AP) — A new economic forecast being released Wednesday shows Minnesota has a $323 million budget surplus.

The forecast is outlined in a summary document prepared by Minnesota Management and Budget and obtained by The Associated Press from two people who received it ahead of its official release. They provided the information on condition of anonymity because state budget officials were not scheduled to detail the forecast publicly until later in the day.

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The summary document also notes the entirety of the surplus already is spoken for under current law.

The first $5 million will be used to replenish the state's budget reserve, lifting that emergency fund to a total of $653 million. The remainder, $318 million, will be used to begin repaying more than $2 billion in state aid payments to school districts that were delayed as part of last year's compromise between Gov. Mark Dayton and lawmakers to close a large budget deficit.

The cushion in the state budget is a sign to state lawmakers that Minnesota's economy continues to stay on the mend. It's likely to set the tone for the remainder of the legislative session, giving ammunition to supporters of more state borrowing for new construction projects and backers of a state-aided Minnesota Vikings stadium.

The Management and Budget office was scheduled to publicly release the forecast at a Capitol briefing shortly before noon.

The summary document said about two-thirds of the $323 million surplus could be attributed to a slowdown in state spending. Republican lawmakers are likely to seize on that fact as evidence their attempts last year to instill frugality in state spending have paid off.

State Budget Commissioner Jim Schowalter had warned Tuesday not to expect a major shift from the last economic forecast in December, which showed a significant improvement in the health of the state's general fund only a few months after Dayton and Republicans finally resolved that deficit.

"I think if you look at all the information that's already out there, the state's economic indicators, you'd say we're pretty much on course," Schowalter said.

The December forecast showed an $876 million budget surplus after income and corporate tax collections came in higher than expected; state health care costs came in lower than predicted; and the state's economy outperformed those of other states.

But Schowalter said that surplus already is gone. By law, he said, all but about $5 million was shifted to a budget reserve fund and the state's cash flow account. That remaining $5 million shortage will be replenished with the new surplus.

Republicans and Democratic leaders in the Legislature were in rare agreement that the first priority should be starting to restore more than $2 billion in state aid payments to schools that were delayed as part of last year's budget fix. But individual lawmakers still could move to change the law that ensures repayment of the school shifts if they have other priorities for the additional money.

___

Associated Press reporter Brian Bakst contributed to this report.

Copyright 2012 The Associated Press.

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