Minnesota's surplus for the next two-year budget has plummeted by $160 million, according to the latest forecast, which cites federal policy changes and inflation as reasons for the decline.

Minnesota finance officials reported worsening in the state’s budget picture in the near term and down the road, saying a small fiscal cushion had shrunk and a future potential deficit has grown.

The revenue forecast will be the Legislature’s fiscal guide in coming up with a two-year balanced budget this session.