Minnesota's strengthening economy has left the state with an additional $463 million.
The end of the fiscal year windfall will repay more than half the remaining debt to Minnesota public schools, state officials said.
Gov. Mark Dayton touted the news as a sign Minnesota's economy is on the right track.
"Today's report is great news for all Minnesotans, especially our schools and students," Dayton said in a statement. "Our state's strong economic growth has enabled us to work our way out of previous budget deficits and repay most of what we owed our school districts. More work remains, but we have made important progress."
Republicans said the additional money came from a GOP-led budget that did not raise taxes, instead keeping the money in the private sector.
"Under Republican leadership, Minnesota's economy has seen steady, consistent improvements," said House Minority Leader Kurt Daudt, R-Crown. "Today's news is yet another signal that what we did works."
Tax collections from the state's final fiscal quarter came in $318 million more than expected. Individual and corporate income tax collections all exceeded projections, while sales tax receipts slipped slightly below expectations.
State economists attribute much of the increase in income tax payments coming from high earners choosing to take higher salaries in 2012, in anticipation of higher federal income tax rates and capital gains rates.
Budget officials say the slight decline in sales tax revenue might merely be a timing issue, not a sign of slowed economic activity.
Corporate tax receipts, which are typically more volatile than the other tax revenue streams, exceeded forecast by $124 million, about 10.0 percent.
