Minnesota budget surplus grows to $1.65 billion

Minnesota's projected budget surplus has jumped from $1.4 billion last year to $1.65 billion, state officials said Tuesday.
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A final readout on the size of Minnesota's expected budget surplus will be released Tuesday, shaping the rest of the legislative session as lawmakers begin to assemble a new, two-year budget.

Lawmakers have been waiting for the February forecast to begin divvying up funds between school funding, health care programs, tax cuts and other priorities across the state. Democratic Gov. Mark Dayton said he expects the final estimate will be similar to the $1.4 billion surplus projected in November's forecast.

No matter the size of the surplus, Republicans and Democrats face a stark divide on how to handle the state's extra cash, with Republican's favoring tax relief and some spending cuts while Dayton has signaled that he would like to boost spending in a number of areas that Republicans may resist, like extra funding for a new preschool program.

The governor said last week that while the state is collecting more tax revenue than expected, a rocky national economy makes it hard to know exactly how the forecast will turn out.

"I think, in my own mind, it's probably a wash. We'll probably come out basically the same as we are now," Dayton said.

During his State of the State address last month, Dayton said he will continue to focus on funding early childhood care and preparing the state for possible future economic downturns. His $45.8 billion, two-year budget proposal is also heavily focused on health care and transportation.

But the Republican-led Legislature has different plans for the expected surplus, including a far smaller final budget. GOP lawmakers have made it clear that cutting taxes will be a top priority, but have shied away from specifics, saying they want to see the forecast before committing to a plan.

Republicans have also signaled they'll tap surplus dollars for a transportation funding package, while Dayton prefers raising the state's gasoline tax to fund road and bridge repairs.