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Minn. Shutdown Slowed Fiscal '12 Tax Collections

ST. PAUL, Minn. (AP) -- Minnesota's government shutdown pushed state tax collections below projections for the first two months of the new fiscal year, the state budget office reported Friday, as it sounded a note of warning about the U.S. economic outlook.

The Minnesota Management and Budget Office said net general fund revenues for July and August -- the first two months of the state's 2012 fiscal year -- were $93 million below the February forecast. But that was largely the result of timing problems attributable to July's statewide shutdown.

In addition, the state ended the 2011 fiscal year more than $355 million above the February forecast. That was the result of payments from 2010 tax returns and extensions as well as an earlier-than-anticipated receipt of an income tax reciprocity payment from Wisconsin of $60 million.

Despite the small bits of positive news, MMB's report reflected growing worries about the state of the U.S. and world economy and the potential effect on state tax collections just months after Democratic Gov. Mark Dayton and state lawmakers passed a state budget that erased a $5 billion budget shortfall largely through spending cuts and reductions. The report notes the U.S. economy is in a "weakened state" and unlikely to withstand policy mistakes in Washington or Europe.

"Given the counterproductive political stalemates observed in both Europe and the U.S. in recent months the risk that policy adjustments will not be made quickly enough to avert another economic downturn is high," the Minnesota report said.

The next state budget forecast is due to be released in November, giving Dayton and lawmakers their first sense of whether they'll face another budget deficit when the Legislature resumes in January.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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