Nebraska‘s projected budget deficit has been reduced from $432 million to approximately $267 million, following a more optimistic economic forecast.
The Nebraska Economic Forecasting Advisory Board anticipates an additional $165 million in tax revenue through June 30, 2027, covering the next two-year state budget period.
Revised Revenue Projections
The board’s updated forecast includes:
- Current Fiscal Year (2024-2025): An increase of $100 million, bringing total state tax revenues to $6.4 billion.
- Upcoming Budget Cycle (2025-2027): Revenues projected at approximately $7 billion for each year, marking a $65 million increase from previous estimates.
These higher projections are primarily attributed to stronger-than-expected corporate income tax revenues, partially offset by declines in miscellaneous tax revenues. Sales and individual income tax projections remain largely unchanged.
Appropriations Committee’s Preliminary Budget
In response to the updated forecast, the Appropriations Committee released a preliminary budget that reduces the projected shortfall to $262 million.
Despite this improvement, the deficit still requires attention through either increased revenue or budget cuts.
Governor’s Budget Proposal
To address the anticipated deficit, Governor Jim Pillen’s budget proposal includes a 0.5% reduction in state spending over the next two years. The proposal does not introduce new tax relief measures but allocates funds to maintain existing relief approved in previous sessions.
Governor Pillen’s chief operating officer, Lee Will, indicated that if revenue forecasts improve, the governor may advocate for additional funds to support new tax relief rather than further spending cuts.
Legislative Priorities and Challenges
State Senator Rob Clements of Elmwood, Chair of the Appropriations Committee, acknowledged that while the new projections are “better than expected,” they do not fully resolve the budgetary challenges. Balancing the budget remains the primary focus, with tax relief as a secondary priority.
Senator Clements emphasized that some spending cuts will be necessary in the upcoming two-year budget to address the remaining deficit.
Economic Activity and Concerns
Board members reported robust economic activity, particularly in urban areas, with no signs of slowing. However, concerns were raised about rising costs for affordable and workforce housing.
In rural Nebraska, signs of slowing economic growth have emerged, with rising consumer prices and federal interest rates exposing vulnerabilities.
Board member John Kuehn described the rural economy as a “rubberband” stretched tight, where a singular event could cause it to snap.
Uncertainties and Future Projections
Several board members expressed uncertainty about their projections due to federal-level factors, such as potential tariffs and funding freezes. The board anticipates more accurate projections at their next meeting on April 25.
However, by that time, lawmakers will be nearing the completion of the state budget, as the Appropriations Committee must advance a revised proposal by April 29, with a final budget passage deadline of May 15.
Nebraska’s Revised Revenue Projections
| Fiscal Year | Previous Projection | Revised Projection | Change |
|---|---|---|---|
| 2024-2025 | $6.3 billion | $6.4 billion | +$100 million |
| 2025-2026 | $6.935 billion | $7 billion | +$65 million |
| 2026-2027 | $6.935 billion | $7 billion | +$65 million |
Key Takeaways
- Nebraska’s budget deficit has decreased to approximately $267 million, thanks to an improved economic forecast.
- The Appropriations Committee’s preliminary budget further reduces the shortfall to $262 million, though challenges remain.
- Governor Pillen’s proposal includes a 0.5% spending reduction over the next two years, with a focus on sustaining existing tax relief measures.
- Economic activity remains strong in urban areas, but concerns persist regarding housing costs and rural economic vulnerabilities.
FAQs
What led to the reduction in Nebraska’s budget deficit?
An optimistic economic forecast projecting an additional $165 million in tax revenue through June 30, 2027, reduced the deficit from $432 million to approximately $267 million.
How does the Appropriations Committee’s preliminary budget impact the deficit?
The preliminary budget cuts the projected shortfall to $262 million, necessitating further measures to balance the budget.
What measures has Governor Pillen proposed to address the deficit?
Governor Pillen’s budget includes a 0.5% reduction in state spending over the next two years and allocates funds to maintain existing tax relief measures.