ST. PAUL, Minn. (AP) — The state of Minnesota’s economic outlook improved by $323 million on Wednesday, but the new money came with a warning for elected leaders: you can look, but you can’t touch.

The Minnesota Management and Budget office forecasted a spike in the state’s budget surplus, the second consecutive such report predicting that more money is being collected by the state than is being spent. It’s a signal that the state’s economy is slowly but steadily improving. But the new surplus can’t be spent on wish-list items or to offset tax cuts; rather, state law requires it be used to restore depleted rainy-day accounts and to settle debts with public schools owed billions in aid payments delayed as the state struggled to come back from recession.

“It’s further proof that Minnesota’s economic recovery is under way, slowly but surely,” said Gov. Mark Dayton, a Democrat. “We’re still, however, a long way from getting out of our financial hole.”

The modest size of the surplus, and the fact that it’s already spoken for, means the new forecast is unlikely to noticeably alter the course of the current legislative session. The state government’s increasing financial stability could give ammunition to supporters of more state borrowing to pay for new construction projects and to backers of state aid to build a new Minnesota Vikings stadium.

But even those who hailed the happy budget news were quick to note that “the state is a long way from being solvent,” in Dayton’s words. Of the $323 million, $5 million is earmarked for the state’s budget reserve; the rest, $318 million, goes to repaying schools for the delayed state aid. But that leaves about $2.4 billion still owed to school districts before they are whole again.

Lawmakers and former Gov. Tim Pawlenty, a Republican, started delaying aid payments to schools almost a decade ago, as a way to maintain a positive balance in the state general fund in a time of chronic budget deficits. Last year, Dayton and Republican lawmakers agreed to increase the size of the delays as a way to help erase a budget deficit of more than $5 billion. Since then, both Dayton and GOP leaders have decried their own compromise, as some school districts have been forced to borrow money as they wait for their delayed aid.

Still, Dayton said Wednesday he did not see a way to fully restore the remaining $2.4 billion owed to schools except for the continued, automatic diverting of future surpluses.

Republican and Democratic legislative leaders were in rare agreement that starting to pay back money owed to schools was welcome and should not be tampered with. “We really shifted our budget problem over onto public schools,” said Senate Minority Leader Tom Bakk, DFL-Cook.

Republican legislative leaders seized on news of the surplus as evidence that their attempts to instill frugality in state finances had paid off. “This says our fiscal discipline measures are working at the Capitol,” said Sen. Julianne Ortman, R-Chanhassen.

A previous surplus of $876 million, forecast in December, was used to replenish depleted state reserve funds.

State budget experts cited a handful of factors as responsible for the state’s economic turnaround. More than two-thirds of the $323 million, according to Minnesota Management and Budget, is attributable to lower-than-expected enrollment in the state’s Medical Assistance program for adults without children which resulted in $230 million in savings. At the same time, state revenues rose $93 million more than expected — largely from growth in income and sales tax collections.

“Generally, things look good,” said State Economist Tom Stinson. “The economy appears to be strengthening.”

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments (32)
  1. luvs says:

    They should repay education with it. I am sure it will be leverage for the worthless Vikings stadium plan instead though.

    1. stands with a dollar says:

      I wonder if it will give the tax payers a tax break or be subsidized.

      1. Quick, spend it says:

        … The motto of the liberal dems. We’ve gotta spend it and then ask (take) for more.

    2. Frank the Tank says:

      My thought exactly. How about we pay back the million dollar loan we took from public education so a few millionaires could eek by without paying their share. For the record, I’m also in favor of cutting spending, but not at the expense of public education. Don’t we have enough stupid people wandering around?

      1. Hal says:

        By the commentss thusfar on the board do you really think our education system is doing aa good job. Send more money after a system that obviouly does not teach people how to critically think.

  2. Deanna says:

    @luvs… Agreed. Pretty sad day when sports is seen as more valuable than educating our children.

    1. jackactionhero says:

      What an absurd comment. This is a PROJECTED surplus. That money CAN’T go to the Vikings, so what the he77 are you even talking about, Deanna? Do you even know? Or did you just feel like lashing out at people who like sports?

  3. Bill Clintons Cigar says:

    No kidding! Pay back the “worker” for once! Instead of immigrants or unions!

    1. ME says:

      Immigrants come here to work, unions take all our money.

      1. Bill Clintons Cigar says:

        Your a moron! There are over 300,000 Somali in MN. How many do you see working? The list goes on and on.

        1. KEVIN says:

          They drive the taxi cabs ya stoopid!

  4. ME says:

    $323 million surplus for the Vikings, under budget for everything else.

    1. jackactionhero says:

      Stupid comment. That money is fictional. It’s projected. On top of that, the money for the Stadium (not for the Vikings) is coming from pull tabs. No General Fund tax money.

      Now your comment seems even dumber than it did before…

  5. you'll see says:

    Oh boy. The very word “surplus” will have all those politicians scrambling for ways to spend it. And, after it’s been spent a couple dozen times over, an “accounting error” will be discovered showing a $3 billion deficit instead and … once again … the taxpayers will take it in the shorts.

  6. Earl says:

    Is this where all the liberals who blame Bush for everything now thank Tim Pawlenty?


  7. Bubba says:

    The reason there’s a surplus is T-Paw and crew kicked the can down the road. Borrowed and made it look like he balanced the budget. What a crock. You people always wanting your tax money back won’t be happy unless there are no taxes and chaos reigns. Selfish S.O.B.s.

  8. KEVIN says:

    I am the real kevin ridiclue me

  9. questioning says:

    So we had a Republican Governor and a huge deficit. Then we get a Democrat for Governor and we have a surplus. God praise Governor Dayton.

    1. Citizen says:

      So we had a Democratic legislation and a huge deficit. Then we get a Republican legislation and we have a surplus. God praise the Republican legislation that didn’t back down to Dayton.

      Funny how easy it is to change a few words to fit one’s agenda . . .

      I agree with a lot of the above postings. Pay back education!

    2. Clem H says:

      Give me one thing Dayton has done that created this money, that’s right, nothing. The fact is that the House and senate spends the money, the Gov only can sign or veto it.

  10. MrC says:

    Alright…lets build the stadium!

  11. Kman says:

    surplus? were Behind 2 Billion in payment to our Schools only the Republicans can consider this a surplus

    1. Janet says:

      Mark Dayton is a Democrat. He is the one that wants to give hundreds of millions to the Piggy Wilf.

      You are right though. There is no surplus, the state owes more than it has.

  12. R U Joking says:

    Its all fuzzy math friends!

  13. Randy says:

    Do whatever you want with the surplus. Build a casino or racino and then a Vikings stadium.

  14. Hank Rearden says:

    Pay back to taxpayers. However liberals/dems don’t look at it that way. It is “loot” to them. Pay it back to those who pay taxes.

  15. Tom says:

    While a $323 million dollar surplus is good news it isn’t great news. While the GOP wants to give itself a pat on the back for being tight wads roads and bridges are still falling apart and they still owe schools money, and if they can be proud of themselves by withholding money from schools so that they can protect a certain income bracket that they call “job creators” that is pretty sad. And being a tight wad has nothing to do with companies hiring as demand is slowly coming back. We can do much better if tough decisions are made and not just decisions that are poular with the base.

  16. Redneck Purist says:

    Surplus? Me thinks not.

  17. Kevin D says:

    How long before the Republicans start taking credit for this? You know – all the jobs they say they’ve been creating? I bet by the end of the day at the latest.

  18. Milorad says:

    Mark Dayton did not “made” this “surplus” its a result of fake mathematics. How can we be in surplus when $2.4 billion is still owed to school districts? By real mathematics we are in RED for $2.077 billion which “T-Paw” took from our schools. I feel sorry for people that call this a surplus.

  19. morak says:

    How about giving back the Homestead Property Tax Credit that the “no new taxes” (only for the rich) Republicians took from the property owners in the state to a tune of 260 million in new taxes last year? Seems as if the property tax increase is being sweep under the rhetorical rug of “we don’t levy local property taxes” while Republican actions lead to largest increase in years for those who can least afford it. Property taxes are the most regressive tax there is!! Stop increasing taxes on the property we live on!

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