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Projected state surplus already spent

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ST. PAUL -- A bit more money is coming in and Minnesota government is saving some, but like a family that has used credit cards, that "surplus" already has been spent.

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"The state has gone into a holding pattern," Commissioner Jim Schowalter of Minnesota Management and Budget said today in announcing the state's newest budget forecast shows $323 million more than was expected last November.

The projected surplus in the current two-year budget, on top of an $876 million surplus predicted in November, does not mean Minnesota's budget outlook has improved a lot, the commissioner added.

"The fiscal issues in front of the state are not resolved in this forecast," Schowalter said.

Minnesota faces a $1.1 billion deficit in the next two-year budget, beginning July 1, 2013.

The surplus announced today is already spent, Schowalter said.

Current law requires the first $5 million to be used to replenish the state's reserve fund. The remaining $318 million is committed to paying down more than $2 billion the state owes school districts after delaying payments promised to schools.

However, Schowalter said, state legislators could change the law in the next "couple of weeks" and do something else with $300 million scheduled to be paid to schools in mid-March.

Senate Majority Leader Dave Senjem, R-Rochester, indicated Republicans favor repaying the schools and gave no indication the money would be funneled off for other uses.

Three-fourths of the budget improvement is credited to lower than planned state spending. Much of that savings came in health-care programs for the poor, which enrolled fewer than expected people and reduced spending.

State revenues now are expected to rise 0.3 percent above earlier estimates, $93 million.

State Economist Tom Stinson said the state economy remains slightly ahead of the national numbers.

The Minnesota construction industry remains in the worst shape of any part of the economy, Stinson said.

Today's announcement relieved state policy makers, who last summer struggled through a 20-day government shutdown before plugging a $5 billion budget deficit.

"This is very good news and this is a very positive sign," House Speaker Kurt Zellers, R-Maple Grove, said.

Zellers said the news is good because both budget forecasts in the last year were positive.

Don Davis reports for Forum Communications Co.

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