New budget forecast: State deficit shrinks dramatically

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State budget officials delivered great news Thursday: The state's budget deficit over the next two fiscal years (2014-15) is only expected to be about $627 million – more than 40 percent less than the November projection of $1.1 billion.

And fiscal year 2012-13 is now projected to have a positive balance of $295 million, state budget officials said in a brief release on Thursday.

The Star Tribune notes that the estimate of growth in the state's tax collection suggests Minnesota's economy has improved at a faster rate than that of the nation. One indicator: In December, Minnesota had an unemployment rate of 5.5 percent, compared to the U.S. rate of 7.8 percent, the newspaper notes.

The widely anticipated revised budget forecast is important because it frames the debate in the Minnesota Legislature over how best to trim the deficit. State lawmakers have about three months to finalize a budget plan.

Gov. Mark Dayton, using the $1.1 billion estimate as a guide, had proposed sweeping tax reforms. Those have met with strong opposition from many GOP state lawmakers and many business leaders.

Now it remains to be seen if Dayton will scale back his proposed tax increases given the new deficit estimate. Among his recommendations is a plan to tax more goods and services.

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Slow growth means Minnesota will likely face another budget deficit

The state's top economist says growth just isn't what it needs to be to keep the state in the black. The governor and the Legislature based their previous budget deal on growth of about 3.2 percent. Unfortunately, that's not what we're seeing, and that means Dayton and legislators will likely have to wrestle over another deficit soon.