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Minnesota’s projected budget deficit shrinks to $627 million, forecast shows

That’s down significantly from the earlier estimate of a $1.1 billion deficit for the 2014-15 biennium.

Minnesota’s budget outlook continues to improve with each forecast.

The latest projection, released Thursday, shows the state’s shortfall has shrunk by nearly $500 million for the state’s 2014-2015 budget cycle.

That brings the total that Gov. Mark Dayton and the DFL Legislature must fill to $627 million, down from the earlier estimate of $1.1 billion.

 It’s unclear how Dayton will revise his $37.9 billion budget to reflect the reduced deficit or whether the governor will slash his proposed $2.1 billion overall revenue increase.

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About $290 million of the current budget cycle’s balance will go to pay back funds borrowed from the state’s school system to plug previous budget shortfalls. Those funds bring the total still owed to the schools down to $801 million. That number was more than $2 billion in 2011.

Minnesota’s structural budget outlook — a key area of focus for Democrats — also improved significantly since the last forecast. The state is expected to have a $782 million surplus during the 2016-2017 biennium, up from $263 million.

Dayton and legislative leaders will react to the improved outlook Thursday afternoon, so check back later for additional coverage.

Republicans have credited the “pro-growth” policies their legislative majorities enacted over the last budget cycle with jump-starting the state’s economy. 

Democrats campaigned by attacking the use of temporary budget gimmicks over the last two years – borrowing from the state’s schools and frontloading tobacco settlement revenues – as poor policy for the state.