By Dana Ferguson, Minnesota Public Radio News

Minnesota’s budget picture has brightened in the near term but remains on shakier ground down the road.

The Department of Minnesota Management and Budget on Thursday announced that the state has a $3.7 billion budget surplus projected for the two-year budget that ends in 2025, up about $1.3 billion from the last projection in December.

The agency reports the boost came as a result of higher-than-expected consumer spending and corporate profit growth. But it also predicted that rougher financial waters are on the horizon. State spending projections remained mostly static.

For the current budget, the foundation is strong. But spending obligations would mean pressure on the next two-year budget — with the potential for a shortfall approaching $1.5 billion by 2027 — so officials have urged restraint.

“Caution should still be exercised this legislative session with regards to ongoing spending,” said MMB Commissioner Erin Campbell.

The forecast figure sets the tone for discussions during the remaining months of the legislative session, although leaders have already been trying to contain expectations on how much they’ll do between now and May’s adjournment.

In the 2023 session, the DFL-led Legislature passed a $72 billion two-year budget. DFL lawmakers said they’ll take a more modest approach this year and are expected to pass a supplemental budget bill and construction projects bill in 2024.

Republicans, meanwhile, have said the DFL-led Legislature went too far last year. And they called for new tax rebates and state spending cuts to mitigate the impact.

The state’s rainy day reserves are fuller than they’ve ever been and now approach $3 billion.

State budget experts presented the report earlier Thursday to legislative leaders. They and Gov. Tim Walz planned news conferences to discuss how the revised estimates could reshape expectations for the legislative session.

House Republican Minority Leader Lisa Demuth didn’t wait until the report’s formal release to offer her reaction, saying the majority party was irresponsible last year.

“We should be looking for ways to scale back wasteful spending, exercise restraint this year, and budget responsibly instead of continuing the reckless spending spree from last session,” Demuth said in a written statement.