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Published February 29, 2012, 10:03 AM

Minnesota budget forecast shows $323 million surplus

ST. PAUL, Minn. (AP) — A new prediction of a $323 million surplus reflects Minnesota's steady economic conditions, the state's lead budget official said Wednesday.

By: PATRICK CONDON, Associated Press

ST. PAUL, Minn. (AP) — A new prediction of a $323 million surplus reflects Minnesota's steady economic conditions, the state's lead budget official said Wednesday.

The report released by Minnesota Management and Budget Commissioner Jim Schowalter on Wednesday is the second consecutive report predicting more money was coming in than going out. Most of that extra money is spoken for, however, to repay school IOUs taken out during a prolonged budget crisis.

"We are certainly in a holding pattern and a stable position," Schowalter said.

State lawmakers and Gov. Mark Dayton would need to reach common agreement to make tax cuts or spend the extra money in a different way.

The surplus projected in December was much bigger, but all of that was used to replenish rainy-day accounts exhausted during recent budget fixes.

State economist Tom Stinson said there are reasons to be optimistic: Minnesota's unemployment rate is falling faster than the national average, wages are climbing more quickly and the economy is generally performing better than the U.S. at large.

School leaders say they wouldn't look kindly on efforts to redirect money they had expected to come their way. More than $2 billion in state aid payments to school districts has been delayed as part of recent budgets, including a compromise last year between Dayton and GOP legislative leaders.

Still, the report is 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.

According to the forecast materials, 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.

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Associated Press reporter Brian Bakst contributed to this report.

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