ST. PAUL -- Good news to the tune of $1.2 billion changed little about Minnesota's budget debate.
There was little evidence after Monday's news that a projected budget deficit has dropped from $6.2 billion to $5 billion smoothed differences between Democrat Gov. Mark Dayton and Republicans who control the Legislature.
"It is still a matter of serious concern," Dayton said.
Democrats and Republicans could not even agree on who was responsible for the better budget news.
House Speaker Kurt Zellers, R-Maple Grove, thanked employers and employees for paying more taxes to the state. House Minority Leader Paul Thissen, DFL-Minneapolis, thanked President Barack Obama and Dayton for creating a better economic climate.
The extra money produced immediate movement from Dayton. The Democrat governor immediately changed his proposed budget to eliminate an income tax surcharge and restore some funding to health programs such as nursing homes.
Monday's fiscal announcement, known as a budget forecast, lays the groundwork for the 2011 Legislature's major work: building a two-year budget.
If existing law remains in effect, the state would spend $39 billion in the two years beginning July 1, compared to about $30 billion in the current budget. Just $33 billion is due to be collected in taxes and fees, and nearly $1 billion will be left over from the current budget.
The new deficit figure is a "modest and helpful improvement," Commissioner Jim Schowalter of Minnesota Management and Budget said. "This does not mean the crisis is over. ... There are still quite a few budget challenges ahead for the state."
The challenges include questions about the Minnesota and national economy, which could be sent reeling by high oil prices.
Dayton, however, remained hopeful: "I am more optimistic than pessimistic."
Minnesota's deficit improved mostly because of $984 million in higher-than-expected revenues in the next two years. Much of that improvement came from federal government changes that prompted more spending that in turn produced more state taxes, State Economist Tom Stinson said.
Dayton said that the better forecast means he will not pursue his proposed 3 percent income tax surcharge on people earning more than $500,000 a year.
Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.