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Better Minn. Economic Outlook Eases Budget Stress

House Minority Leader Kurt Daudt, R-Crown, said his party's refusal to increase state taxes over the prior two years worked and he warned against changing course now.

"The only people who think this wouldn't be good news are the ones who want to raise taxes," he said.

State Economist Tom Stinson said Minnesota owes its fiscal progress to a national economy that is gradually healing, strength in the corporate sector, people cashing in on a rising stock market and a housing sector that has genuinely recovered. He said Minnesota is on pace to add 40,000 jobs this year, a figure that will be pinched only slightly if the federal government's budget impasse results in across-the-board spending cuts.

By year's end, Minnesota will have gained back all of the jobs it shed during the Great Recession, according to the budget report.

There is some immediate impact from the forecast before a single budget bill moves through the Legislature. A new projection for the budget year that closes in June shows a surplus of $295 million. Almost all of it is required to be used to pay IOUs to Minnesota schools, reducing a backlog in deferred payments to $801 million.

Minnesota has lurched from deficit to deficit for most of the past decade, and lawmakers have resorted to temporary fixes to get by. They have delayed school aid payments, borrowed against a tobacco lawsuit settlement and plugged in one-time federal stimulus dollars for programs that require ongoing spending.

Dayton tried a new tack this year with a proposal to raise billions of dollars in new taxes. But it has stirred fierce opposition from conservatives and business leaders, who say it would make the state less competitive.

David Olson, the president of the Minnesota Chamber of Commerce business lobby, said the report gives lawmakers reason to abandon the idea of raising taxes.

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