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State deficit at $627 million

ST. PAUL - Minnesota's projected budget deficit for the next two years is lower than expected at $627 million, the Minnesota Management and Budget reported this morning.

Legislators and Gov. Mark Dayton will use this information to set the state's budget over the next three months. Lawmakers have discussed the budget, but have been waiting for the updated number to dig into debate.

The projection also shows a surplus of $295 million for this year, most of which will go to repay money the state borrowed from schools.

Today's forecast comes after a Dec. 5 prediction of a $1.1 billion state deficit.

Dayton's proposed plan would spend $38 billion over the next two years. He will provide an updated budget in the coming weeks using the new figures.

State economists said in December this forecast would be more stable because federal issues would be clearer. But the state could be affected by automatic federal budget cuts set to begin Friday if President Barack Obama and Congress do not come to an agreement.

A budget must be set by July 1 to avoid a state government shutdown.

Democrats, who hold the majority in the House and Senate, have said they will not let that happen.

The state technically is not allowed to have a deficit, so would have to offset that by raising taxes, cutting spending or a combination.