ST. PAUL — Minnesota will have a $1.5 billion surplus for the next two-year budget period, state officials announced Thursday, setting the stage for a spirited debate over taxes and spending in the legislative session that starts in January.

The healthy surplus gives Democratic Gov.-elect Tim Walz and the Legislature more room for new spending initiatives, tax cuts or some combination of both.

Minnesota Management and Budget projected the surplus for the fiscal period that starts July 1. MMB also said the state’s budget reserve has grown to $2 billion, though legislators would have to change current laws to tap any of that.

Walz is due to release his budget outline by Feb. 19. He planned to respond to the forecast later Thursday. Democratic and Republican legislative leaders and Gov. Mark Dayton also were commenting later on the projections.

The governor and lawmakers will get an updated budget forecast in February that will guide them through the end of the legislative session in May. Democrats took control of the Minnesota House in last month’s elections, while Senate Republicans maintained their one-seat majority. The partisan split likely will force lawmakers and the governor to make compromises.

MMB said Minnesota’s budget outlook remains sound despite slower growth expected through the budget period, which begins July 1. It said slower economic growth is projected to continue into 2023, resulting in a slowdown in revenue growth, lowering the projected surplus for that period to only $456 million.