State budget surplus pegged at $88 million

02/28/2006

Patricia Lopez,
Star Tribune
Last update: February 28, 2006 – 10:36 AM

Minnesota will have an extra $181 million in state revenues during the 2006-07 budget period, according to the latest economic forecast, released this morning.

That’s pretty minuscule, given the state’s $31 billion, two-year budget, but consider this: Of the $181 million, $93 million must go to repay school districts for money the state borrowed in accounting shifts to help deal with previous budget deficits.

That leaves legislators with an actual projected surplus of $88 million as they head into the legislative session, which starts Wednesday, and another $317 million that has been parked in a tax-relief account.

At a time when a number of other states are posting healthy gains, Minnesota’s economy continues to be a bit sluggish, with revenues flat or lagging slightly in nearly every major tax category except corporate income taxes, which are expected to rise by 9.6 percent in 2006-07.

Projected revenues from the Health Impact Fee, which adds 75 cents to the price of cigarettes, are being held in escrow, pending the outcome of a Supreme Court appeal. The fee, projected to generate $400 million in 2006-07, was struck down recently by a district court.

The forecast is a closely watched report on state tax collections and spending. Two are done each year.

Technically, it’s not the year for lawmakers to make budget decisions. But with the fall campaign season looming, some legislators are anxious to direct more money to priority programs and send relief to homeowners hit with sharply rising tax bills.

According to the document, which was prepared by the Department of Finance, the surplus is the result of higher-than-expected tax payments and lower-than-expected spending.

Corporate taxes were the biggest driver, with new estimates coming in nearly 10 percent ahead of earlier projections. Income and sales tax collections are expected to dip slightly, and motor vehicle taxes were off by roughly 4 percent.

This article includes material from the Associated Press.