Rachel E. Stassen-Berger and Jim Ragsdale

State officials announced a $323 million surplus today, but the money was automatically committed to paying the state's debt to public schools and replenishing budget reserves.

The budget forecast was the second-straight positive forecast after years of depressing news. State Economist Tom Stinson and Minnesota Management and Budget Commissioner Jim Schowalter said it showed the state's finances are basically in a holding pattern. They said, however, that the state's economy has picked up, and Minnesota's December unemployment rate was 2.8 percentage points lower than the national average -- 5.7 percent in Minnesota compared to 8.5 percent nationally.

The new forecast is unlikely to change the dynamic at the Capitol this year. Minnesota has significant debts to repay in the coming budget cycles and a budget in place for the next year, meaning that lawmakers and the governor aren't going to wage war over new spending.

"The entire forecast balance is automatically allocated under current law," according to the forecast document.

In November, state leaders announced that an improving economy created a surplus of almost $900 million, money that was used to begin refilling reserves. That process will continue now, and the state will begin paying down $2.7 billion in the school shift -- money that was essentially borrowed from public education to bring the state budget into balance.

The forecast document says that the first $5 million of the new surplus will refill the reserves to build them back up to $653 million and the remaining money will reduce the school payment shift put in place to close last year's budget deficit.

"After this action, $2.4 billion in school payment shifts remain to be bought back," the forecast says.

Although a shortfall will remain for the next budget cycle, the state's economic consultant firm, Global Insight, predicts only a 25 percent chance of recession this year, down from 40 percent chance the firm predicted in November. It also predicts a 20 percent chance that Minnesota will do better than predicted, up from a 10 percent chance.

The forecast projects a $1.1 billion shortfall for the 2014-2015 budget cycle, down from $1.3 November estimate, according to the forecast document.

"The state is continuing to go in a holding pattern," Schowalter said. Stinson said the chance of another recession has decreased, although the state will closely watch for oil shocks from the situation in Iran and tax and spending decisions the federal government must make this year.

February 2012 Economic Forecast Summary 022912