CHICAGO – Minnesota Gov. Mark Dayton announced a supplemental budget that would add about $150 million in new spending – including $100 million for early childhood education -- to his proposed $46 billion two-year budget.

The supplemental spending plan would spend the additional revenue that was added to the state's projected surplus over the next two-and-half years based on the state's February revenue estimates. A $1.65 billion surplus is now expected.

The supplemental plan additional provides smaller funding allocation for flood control, water quality, farmer programs, job training, health-related, and rail service. About $200 million would go to the state's reserves.

"My supplemental budget proposal would continue making the investments our state needs to create opportunity for every Minnesotan, starting with our youngest learners, while protecting the fiscal integrity of our state's budget," Dayton said in a statement on Friday.

Dayton's proposed $46 billion budget already includes an additional $75 million for expanded pre-school programs, so the newly proposed funds would bring to $175 million the hike in spending proposed in the budget that covers fiscal 2018 and 2019.

Dayton, a member of the state's Democratic-Farmer-Labor Party, faces a fight with Republicans who control the Legislature over the budget and how to spend the surplus.

Senate Republicans want to use $900 million tax relief and increased spending on transportation, education and human services, according to a statement released last week.

While the latest estimates show no slowdown in the state's economic momentum, it was tempered with caution that federal policy unknowns create significant risk, the report warns.

"The uncertainty surrounding this budget forecast demands extreme caution and restraint from my administration, the legislature and various affected interest groups," Dayton said. "We worked hard to achieve these budget surpluses, and they must be preserved."

The long-term view of state coffers also remains positive with a $2.1 billion surplus expected in the fiscal 2020-2021 biennium based on current spending patterns.

The state publishes formal revenue forecasts in November and February with the first used to help craft a state operating budget in odd years and a major capital budget in even years. The second offers updated estimates of anticipated revenues and expenditures to complete work on budgets.

The state's cash flow and budget reserve accounts hold $2 billion.

Dayton is also pressing lawmakers for action on increased transportation funding to address what's estimated as a $6 billion shortfall over the next decade. He wants lawmakers to support a 6.5% increase in the state's gasoline tax. He also has pitched a $1.5 billion capital budget known as the "bonding bill." Political differences killed a capital program and transportation package last year.

Minnesota won back one of its triple-A ratings last year when Fitch Ratings raised its rating to AAA from AA-plus. Moody's Investors Service and S&P Global Ratings rate it at the Aa1/AA-plus level.

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