ST. PAUL, Minn. (KTTC) - Some encouraging news out of the Capitol Thursday: While Minnesota still has a sizeable budget deficit, it has shrunk by more than 40 percent from the last estimate.
In November, economists thought that the state would be dealing with a more than one-billion dollar deficit over the next two years, but today an estimated release shows that the state will have $295 million more than it will spend.
Beginning in July and going through 2015, the state's deficit is predicted to be at $627 million-- which is a big improvement over last years estimated $1.1 billion dollars.
The better news could prompt Gov. Mark Dayton to scale back his proposed tax increases and the extra money may go toward Minnesota's debt to schools.
"I expect to propose that most of the money be returned to the Minnesota taxpayers in additional tax reductions. An up front exemption from sales taxes on capital investments by businesses," Dayton said. "We'll encourage new business projects and other business investments which will continue our job growth."
But the political divide remains over how to shore up the state's finances.
Republicans say the report validated their hold-the-line approach to spending while in power. Democrats who are now in charge maintain higher taxes are still needed to improve the economy.
House Speaker Paul Thissen says Governor Mark Dayton's proposed tax hike on the top 2 percent of income earners remains likely.
Republican House Leader Kurt Daudt says his party's refusal to increase state taxes over the prior two years worked and he warns against changing course now.
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