Anticipated Minnesota surplus swells to $1.87 billion as lawmakers eye new spending, tax cuts

Economic IndicatorsAssociated Press

Minnesota's bank account is projected to run up a $1.87 billion surplus over the next two years, which will drive calls for new spending, tax cuts or most likely a mix.

The Department of Minnesota Management and Budget provided the figure Friday in an updated economic forecast. It sets the parameters for upcoming debate over a new two-year budget that Gov. Mark Dayton and the Legislature will adopt this spring.

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The surplus is substantially more than the $1 billion estimated in December. The forecast revenue would be enough to support a roughly $42.5 billion budget.

Officials had been counting on good news given encouraging recent reports about wage growth and a run of low fuel costs, which left more money in household budgets for people to spend on other taxable purchases.

Full details were to be provided later Friday. But the state budget agency said in a news release that the swelling surplus was due to tax collections that were running $616 million ahead of earlier predictions and spending that was $115 million lower.

Dayton said on Thursday that he hopes to earmark some money for debt costs on a possible $850 million public works construction bill. He has also mentioned nursing homes as a beneficiary.

A coalition of groups pushing a 5 percent reimbursement rate increase for long-term caregivers said the improved budget situation should elevate their request, which would affect 90,000 caregivers for older adults and people with disabilities.

"We simply must have the resources to pay our caregivers a good wage and assure quality care," said Bruce Nelson, a spokesman for the campaign.

Republicans who run the House have signaled they'll seek a healthy chunk for tax cuts. The news could also bolster their push to use money from the surplus for road projects in the short term, rather than turning to new transportation fees and taxes as Dayton has proposed.

House Speaker Kurt Daudt said it would be "illogical" to raise gas taxes when the lower per-pump costs are helping drive the state's economic gains.

"Why would we go back to Minnesotans and take more money out of their family budgets to pay for something they're already giving us something to pay for?" Daudt told a reporter.

It's the latest in a string of strong reports as Minnesota and the rest of the nation climb back from the Great Recession. The state's unemployment rate is well below 4 percent, and tax collections have steadily picked up steam

Minnesota has also retired its IOUs and replenished its rainy-day reserves.