ST. PAUL, Minn. (WCCO) — After years of bad economic news, Minnesota has another huge state budget surplus — $1.9 billion.

That’s setting up a showdown at the State Capitol over what to do with it.

It’s the most robust job market since the 1990s — unemployment is low and the dollar is strong. All of it adding up to a finally-out-of-the-woods Minnesota budget forecast.

“We’ve done a darn good job,” Democratic Gov. Mark Dayton said.

Dayton says the state budget will have a $1.9 billion budget surplus. He credits a surge in jobs, not extra money from the income tax hike on Minnesota’s wealthiest earners.

“It’s important to remind Minnesotans that this dramatic improvement in our states finances is due to improvements in our state’s economy,” he said. “More people are working and earning better income.”

Gas prices dropped below $2 a gallon on Thanksgiving for the first time in a decade, saving drivers hundreds of dollars a year.

The state reports higher-than-expected sales and corporate taxes, and lower-than-expected health care costs for the turnaround. Now, the big question: What to do with it?

“This isn’t rocket science,” Minnesota’s Republican House Speaker Kurt Daudt said. “It’s pretty simple.”

Daudt says the surplus is good news, but proof the state “over-collected” taxes. He says Republicans are looking for targeted tax relief mixed with money for roads and bridges, but likely not refund checks.

“I think Minnesotans know that when we have a budget surplus, it means that we have collected more money than state government needs,” Daudt said. “We’ve got an opportunity now to return some of that money to Minnesota families now, and really make a difference in their lives.”

Republicans say the size of the budget surplus means there’s no need to raise the gas tax to fix Minnesota roads and bridges, but Senate Democrats say there’s no way to finance billions of dollars in road repair without raising more money — and a gas tax hike is on the table.

Pat Kessler

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