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Better Minn. Economic Outlook Eases Budget Stress


ST. PAUL, Minn. (AP) â¿¿ Minnesota's budget pressures eased dramatically on Thursday, but not the political rift over how to shore up the state's finances.

The Department of Minnesota Management and Budget slashed an earlier deficit projection by more than 40 percent, leaving legislators with a more manageable $627 million shortfall as they set a budget over the next few months. Republicans said the report validated their hold-the-line approach to spending while in power; the Democrats who are now in charge didn't budge from a stance that higher taxes are still needed to improve the economy for the long haul.

A burst of unanticipated tax collections accounted for most of the improvement, although some is attributable to a smaller than expected increase in school enrollment and reduced health and welfare caseloads.

Democratic Gov. Mark Dayton said he hasn't decided whether to scale back tax increases he proposed when the projected deficit was pegged at $1.1 billion in December. He said he was leaning toward recommending tax credits for renters and giving businesses a tax break for new equipment purchases. Even with those, he would still have room in the budget to play with.

"I'm open to anything right now," Dayton said.

But he and Democrats who control the Legislature said the next two-year budget needs to include strategic new spending on education, economic development and other areas in order to position the state for the future.

House Speaker Paul Thissen said Dayton's proposed tax hike on the top 2 percent of income earners remains likely. Neither Thissen, of Minneapolis, nor Senate Majority Leader Tom Bakk, of Cook, would rule out other new taxes the governor recommended.

"We still have a big chunk we have to deal with just to get back to zero," Thissen said, adding, "It's not just about filling a hole."

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