ST. PAUL, Minn. - The task of solving state government's projected budget deficit became easier Thursday.
Budget Commissioner Jim Schowalter announced Thursday that it shrunk by 40 percent in the past three months.
The February economic forecast, released at the State Capitol, shows the predicted deficit has shrunk to $627 million, down from $1.1 billion in November.
That's an improvement of $463 million.
"It is good news. It is certainly a good situation with the economy is on track," Schowalter told reporters at a press conference that has become an annual tradition.
"I wish we were telling you that there's no deficit. And starting at even would be really good. We're certainly not there."
That $627 million gap is the difference between what the State is expected to collect in operating revenue during FY 2014-2015 and projected spending for the same two-year cycle. The legislature must bring that projection to zero before FY 2014 begins on July 1, 2013.
Read the full revenue forecast at this link.
State Economist Tom Stinson credited better than expected revenues for the improved numbers, especially an uptick in income tax revenue due to the improving economy.
Those revenues also contribute to a projected positive balance of $295 million in the current biennium, which will help pay back some of the delayed payments to school districts that were part of previous budget deals.
"Next month we will pay another $290 million owed to our school districts from previous borrowing," Gov. Mark Dayton told reporters.
"We've now paid almost $2 billion of that debt in the last year. That's progress."
Lawmakers will use the new forecast to move forward in crafting a state budget for the next biennium.
And, while the shrinking deficit eases some of the pressure to raise new revenues, the tax debate continued in the aftermath of the report.
"The only people who'd think this isn't good news would be people that want to raise taxes," Rep. Kurt Daudt, the House Minority Leader, said.
"We don't want to be choosing winners and losers and that's the problem with the governor's tax increase; he's choosing winners and losers."
Dayton said the main impetus for trying to raise income taxes on the state's highest earners is to increase funding for K-12 education and higher ed.
"The State contributes less now to higher education - University of Minnesota, MNSCU and student aid - than at any time since 1981."
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