Minnesota's finance officials said Thursday a projected budget deficit has shrunk from $1.1 billion to $627 million, a 42 percent improvement.
Gov. Mark Dayton said he recognizes the progress and that Minnesota taxpayers will benefit the new projected budget deficit; however, he warned lawmakers not to expect a drastic deviation from his original plan.
Minnesota is, however, outperforming most other states and the national average in its economic recovery, with the 12th best job growth in the country in 2012, Dayton said.
Dayton said he expected to propose that most of the money be returned to Minnesota taxpayers in additional tax reductions, with a nod to tax credits for Minnesota homeowners.
Dayton's revised budget is expected to be released in the next two weeks.
The original $1.1 billion deficit forecasted in November was used to create Gov. Mark Dayton's budget, and he will release a supplemental budget in March to account for the changes. This updated projection will go on to influence a legislative debate over a two-year budget that starts July 1 and runs through June 2015.
Fiscal year 2012-2013 is projected to have a positive balance of $295 million, with almost all ($290 million) directed by law to pay back Minnesota schools. This leaves $801 million remaining in deferred payments. The residual $5 million will go toward the state's budget reserve, bringing that balance to $649 million.