Governor Tim Pawlenty said today that news of a projected $2.2 billion surplus shows his past policies have worked and the state is on track for an even brighter future.

“This is great news for Minnesota and it continues the biggest financial turnaround in state history,” Governor Pawlenty said. “We successfully tackled an epic state budget deficit by setting priorities, spending smarter and holding government accountable. That hard work put us in position for the surplus we have today.”

The Governor also offered words of caution as legislators eye the surplus heading into the 2007 legislative session.

“We just climbed out of a big hole, and I am going to make sure Minnesota doesn’t get thrown back in by overspending,” Governor Pawlenty said.

“As we look ahead, our priorities will continue to be education reform, health care reform, energy independence and tax relief. We should take advantage of our strong budget situation to invest in key areas, but we should also demand results and reform and not just add money to systems that aren’t working as efficiently as they should.”

When Pawlenty took office in January 2003 he inherited a mammoth $4.5 billion budget deficit, the largest in state history and one of the largest state deficits in the nation. That deficit was projected for the two-year budget cycle (FY 2004-05) that ended on June 30, 2005. The state finished that budget period with a positive balance and cash flow and reserve accounts restored to all-time highs.

For the current two-year budget cycle (FY 2006-07), the state now has a projected budget surplus of $1.038 billion. For the upcoming budget cycle (FY 2008-09) the projected surplus is $1.132 billion. The combined amount is $2.17 billion.

Inflation on existing state government programs is about $990 million during FY 08-09.

The Governor noted that even during lean times, key investments were made. “Last year we increased K-12 education spending by $800 million, one of the largest boosts for schools in state history, while improving school standards and beginning a nation-leading teacher performance pay program. We enhanced funding to battle meth and lock up sex offenders. We slowed the explosive growth in health care programs while maintaining services for the most vulnerable and needy. We passed the state’s largest transportation package ever, more than $900 million over and above the current construction program, and made great progress in other areas.”

The state’s fiscal safeguards are now at all-time high levels, with budget reserves at $653 million and the cash flow account at $350 million.