State finance officials released an updated forecast on Wednesday, as Democratic Gov. Mark Dayton shapes a two-year budget proposal. Despite the overall deficit forecast, they said the state would be able to repay $1.3 billion in delayed school aid.
Speaker of the House-Designate Paul Thissen said the legislature's priority now is making decisions to benefit the economy.
State officials have said the forecast could be quickly obsolete if federal debt talks don't head off the so-called fiscal cliff. But Thissen says the budget process starting in January needs to arrive at something that is fair.
Minnesota comes under full Democratic control next year for the first time since 1991, giving Democrats latitude to raise taxes after years of Republican resistance.