Forecast shows smaller budget deficit

State finance officials say Minnesota’s projected budget deficit has shrunk to $627 million.

The new February economic forecast from Minnesota Management and Budget shows a $463 million improvement from November, when the projected deficit for 2014 and 2015 was at $1.1 billion.

Better than expected revenues also mean a projected positive balance of $295 million in the current biennium. Under law, $290 million of that balance will go to pay back some of the delayed payments to school districts that were part of previous budget deals. The remaining $5 million in will go into the state’s budget reserve. The state will still have $810 million in school shifts to pay back.

DFL Gov. Mark Dayton crafted his two-year tax and spending proposal based on the earlier forecast. He can now make adjustments to reflect the new numbers. House and Senate leaders will also use the latest forecast to set their budget targets. A final budget is expected by mid-May.