ST. PAUL (AP) — Money flowed into the state treasury this summer faster than officials predicted last spring, according to a report issued by the Minnesota Department of Finance on Monday.
Most of the extra revenue, $240 million, comes from the first payment in the settlement of a lawsuit against the tobacco industry. The May settlement was unanticipated when the state put together its latest budget forecast in February.
Anticipated revenues were $22.9 million higher than expected from July through September in an annual budget of about $23 billion.
“That’s just about as close as we can be,” said state economist Tom Stinson.
The black ink did not diminish concerns state officials have had all year about the potential for a recession caused by unstable world financial markets.
“We are cautiously optimistic about this news,” Gov. Arne Carlson said. “Minnesota’s financial position continues to be very strong, despite a difficult summer for financial markets throughout the world.”
Minnesota is well-prepared for an economic downturn with a record $622 million budget reserve, Stinson said.
“You can’t ever put enough away,” he said. “But we’ve done the prudent thing here in putting away reserves, so if an unfavorable scenario comes about the state will still be in good shape.”
A hint of possible trouble was visible in quarterly revenue report. Corporate income taxes were down about 10 percent below expectations, “consistent with widespread reports of lower corporate profits,” the report said.
Stinson expects corporate income tax estimates will be revised downward when the fall budget forecast comes out next month.
Most of the increase in anticipated revenue came from motor vehicle taxes, which appears related to auto industry discounts and promotions.
The Legislature will decide what to do with excess revenue, which also includes $317 million on hand when fiscal 1998 ended in July, if it remains on the books when the November forecast comes out.
Lawmakers already laid out general plans for any surplus last spring.
The first $200 million will go into a special tax reduction account. Lawmakers would decide next year precisely how to pass the money on to taxpayers.
In all, lawmakers allocated $609 million of anticipated surpluses before adjourning in April. The money will mostly pay cash for public works projects the state would otherwise borrow money to build.