Minnesota's budget shortfall shrank by a billion dollars thanks to what State Economist Tom Stinson called a "stealth stimulus package" from the federal government.  Congress and President Obama's December agreement to cut capital gains and payroll taxes created more taxable income for the state.  But the new budget outlook warns that money from capitol gains is "notoriously volatile and extremely difficult to forecast."

But with a $5 billion budget deficit, Budget Commissioner Jim Schowalter said "This improvement does not mean the budget crisis is over."  Job growth is still dismal. Stinson said corporate profits are increasing and to increase productivity they have to add workers at some point, but he's not sure "who rings that bell or what rings that bell."  The state economist did say that the Republican all cuts budget would be "slightly more of a problem" for Minnesota's economy than the Democratic governor's mix of tax increases and cuts.

In response to the improved budget forecast Gov. Mark Dayton said he would eliminate his proposed income tax surcharge on people making more than $500,000 “fulfilling his promise to keep Minnesota’s tax rate below the nation’s highest, while improving progressivity.”  Dayton will also back off on cuts to nursing homes, transit and research credits.  He returns from Washington D.C. later today and will talk to the media then.