Minnesota's projected budget hole is now a $1.6 billion surplus

Minnesota is now expected to see a $1.6 billion surplus instead of $1.3 billion deficit over the next two years, according to an updated state budget forecast released today.

Why it matters: The swing is a sign of the strength of the state's pandemic economic recovery — one that could make it easier for Gov. Tim Walz and legislators to strike a deal on a two-year state spending plan by the summer deadline.

• Earlier forecasts predicting a big deficit could have required deep cuts to state programs or revenue hikes to balance the budget.

What they're saying: Higher-than-anticipated state tax revenues, reductions in spending and an "improved U.S. economic outlook that is bolstered by large federal actions," such as the December stimulus package, will help fill the gap, according to the Minnesota Department of Management and Budget.

Yes, but: "Improvements to the economic outlook have not been spread equally as unemployment continues to disproportionately impact lower-wage workers," MMB notes.

The big picture: It's not just Minnesota. Many states and local governments are reporting that COVID-19's hit to their budgets weren't as bad as initially feared, the Wall Street Journal reported.

Go deeper with the full forecast report here.