An updated forecast released Monday puts Minnesota's budget surplus at $17.5 billion, representing an overall improvement in the state's fiscal picture.

While the figure from Minnesota Management and Budget is down slightly from the $17.6 billion that the agency projected in November, the forecast now factors in the impacts of inflation on state spending for the first time in 20 years.

The new figure also accounts for a little over $100 million that the Legislature already has spent since it convened last month, mostly on bringing the state tax code into conformity with federal regulations and deductions, which resulted in a tax cut for many residents.

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And the new projection also reflects how tax revenues continue to run ahead of expectations. Minnesota Management and Budget said individual income and corporate tax revenues are both up.

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The new projection is the forecast that the Legislature will use to set the next two-year budget, which takes effect in July. By law, it must he balanced.

But it means there's still money for priorities laid out by Democrats, who control both chambers of the Legislature and the governor's office for the first time in eight years. Republicans are still pushing for tax cuts.

Gov. Tim Walz's proposed budget includes a combination of spending increases and tax credits to return some of the surplus to taxpayers.