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State budget forecast shows mixed results: small surplus now, but $6.2 billion deficit in 2012-13

Minnesota’s new economic forecast says the state will have a small surplus — about $400 million — for the fiscal year ending in June.

But for the next biennium — 2012-2013 — the report projects a $6.2 billion deficit.

That gives the state some breathing room in the next few months — at the end of the legislative session in the spring it looked like there’d be only be about $6 million at the end of the year. But budget officials are assuming that the surplus will not be spent in the coming session; if it is, the looming later deficit is projected to be that much higher.

And the long-term deficit assumes that a new governor will opt in to a new federal Medical Assistance program. That would require a $384 million state match, said brand-new Minnesota Management and Budget Commissioner Steve Sviggum. If the new governor would decide not to take part in the federal program — unlikely if Mark Dayton wins the recount — the projected deficit would actually fall to about $5.8 billion.

Spending costs in the current biennium were kept down by many one-time items, including federal subsidies and the K-12 payment shifts. Without those, the 2012-13 budget has many structural problems, which can’t be outgrown, officials said.

“In the short term, the state is taking care of business; in the long term, we’ve got very significant problems,” Sviggum said.

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