Minnesota faces a budget shortfall of $1.1 billion for the next two years as Democrats prepare to take over the Legislature next month.
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.
Full details of the forecast were to be given in a briefing later Wednesday.
State officials have said the forecast could be quickly obsolete if federal debt talks don't head off the so-called fiscal cliff.
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.