MINNEAPOLIS (WCCO)— Minnesota has a $1 billion budget surplus, according to state finance officials.

They say the state’s economy is finally stable after years of recession. Now the big question is what to do with all that extra money?

More people are working, and tax revenues are up. Health care spending is unexpectedly down. And low gas prices are helping family pocketbooks.

For the first time in nearly a decade, the state isn’t starting the year in a budget hole. Gov. Mark Dayton welcomed the news, signaling he’d like to use some of the surplus for child care tax credits for working families, broadband access in rural Minnesota and early childhood education scholarships.

“I’ve said all along that I think the people of Minnesota deserve the credit for our economic performance. For the fact that it’s one of the leading states in the nation,” Dayton said.

But much of the surplus will simply cover the cost of inflation for current state programs. That’s why other top Democrats, like Majority Leader Rep. Tom Bakk, are urging caution.

“I think everybody who has ideas to spend what seems like an incredible amount of money should maybe temper their expectations a little bit,” Bakk said.

Meanwhile, Republicans in the House say the surplus means Minnesotans are over-taxed, and that the apparent recovery is fragile.

“And we know that Minnesota families really haven’t seen the sort of economic benefit or surplus in their own family budgets,” said GOP House Speaker Rep. Kurt Daudt. “And this is something that really is concerning. And we know that that’s what drives Minnesota’s economy.”

Republicans and Democrats agree in principle that some of this surplus could be used for a tax cut of some kind, not the rebate checks many Minnesotans got 15 years ago. There could possibly be tax credits, or income tax fixes that might mean a lower tax bill.

It took many years for the state to dig out of the recession mess, with deep cuts, tax hikes, massive borrowing — some of that came after the state mailed back billions of dollars in tax rebates.

There is still a lot of caution here. The economy is recovering, but it’s not yet recovered.

The legislature meets about a month from now, and we’re going to see how this divided government works.

Democrats control the Senate and the Governor’s office, while Republicans have the House.

Pat Kessler

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