The improved deficit isn't good news, it is just less bad news, Minnesota Management and Budget Commissioner Jim Schowalter said in reviewing the new state economic forecast.

Schowalter said the economic crisis is not over.

Minnesota economist Tom Stinson said the forecast, which predicts a $5 billion deficit rather than the $6.2 billion deficit predicted a few months ago, is still fairly uncertainty. He added that the state economy could be better if job growth increases more quickly than expected. It could also be worse if the unrest in the Middle East causes long-term oil price hikes.

Stinson also said that $3 billion in tax increases, plus $2 billion in cuts -- a rough approximation of Gov. Mark Dayton's budget proposal -- would be slightly less damaging to state's economy than  $5 billion in cuts -- a rough approximation of the potential Republican plan.

In light of the slightly better forecast, Dayton took part of his tax increase proposal -- a 3 percent surcharge on people making over $500,000 a year -- off the table. With the surcharge, his proposal would have place the richest Minnesotans in the highest state tax rate in the county.

Here's the full forecast:

 

Forecast Full Book Feb 2011