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Minnesota's budget is showing a surplus again

The federal government's tax bill is behind the change in fortunes.
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The great Minnesota budget deficit scare of December 2017 didn't last long.

Just over two months ago, the state was facing a budget deficit for the 2018-19 biennium of $188 million, in part because of uncertainty at the federal level over funding for the Children's Health Insurance Program (CHIP).

This was the first time in several years the state had projected a deficit, but fast-forward to today and Minnesota's financial situation looks somewhat rosier.

The state's Management and Budget office now projects the state will have a $329 million surplus that, while not as high as in recent years, will give lawmakers something to discuss how to spend during the legislative session.

What changed?

The federal tax bill, for one thing, which the Management and Budget says has provided "short term stimulus" to Minnesota coffers. 

An agreement in Congress on CHIP funding also helped with a $167 million reduction in the state's projected spending, seeing as Minnesota will no longer have to fund the program itself.

Data since November has shown strong consumer and business spending, as well as rising employment and disposable income.

Minnesota's unemployment rate of 3.1 percent in December, 1 percent lower than the national average, is also helping, with the labor market still adding jobs despite available workers growing increasingly scarce.

Despite this, budget officials remain cautious, with state economist Dr. Laura Kalambokidis noting before media on Wednesday that less than 30 percent of the state's revenues for the next two years are in yet.

This could shift things in the future in either a positive or negative way, with Dr. Kalambokidis also noting the economy could be slowed with inflation and interest rates expected to grow.

In a statement, Minnesota GOP leaders, Speaker Kurt Daudt and Senate Majority Ldr. Paul Gazelka, hailed the national tax cuts, and criticized the budget department and Democrats for being "overly pessimistic" following the projected deficit in December.

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