Nebraska lawmakers could face $232M projected shortfall
LINCOLN, Neb. (AP) – Nebraska lawmakers may have to fill a projected $232.6 million budget shortfall when they craft a new two-year state budget next year, based on new estimates approved Friday.
The Nebraska Economic Forecasting Advisory Board predicted that the state will collect $4.89 billion in tax revenue in the upcoming fiscal year and $5 billion the year after that, for a total of $9.89 billion.
Those estimates fall short of the projected spending during the two-year budget cycle, and even though tax revenues are growing, the increases are less than what the state has historically collected. The board also predicted the state will collect an additional $69 million in the current fiscal year that ends on June 30, but state law requires that money to go directly to Nebraska’s cash reserve.
Forecasting board members said the national economy appears to be slowing after years of strong growth, and in Nebraska, businesses are struggling to fill jobs because of a skilled worker shortage.
“I think the economy has probably peaked,” said Tonn Ostergard of Lincoln. “We’re seeing some continued decline, but (the economy) is still historically strong. It’s inevitable that we’ll have an economic downturn.”
For lawmakers, the predictions suggest another tight budget year that will prevent any large new spending bills from passing. Adding to the concern is a sluggish farm economy and tariffs that are slated to go into effect as a result of President Donald Trump’s trade war with China.
Another unknown is the upcoming ballot measure to expand Medicaid under the federal health care law, which would bring an influx of federal money into Nebraska but also increase costs for state government if voters approve it.
“There are a whole lot of challenges out there that this economy has got to work through,” said state Sen. John Stinner, who chairs the budget-writing Appropriations Committee.
Nebraska Gov. Pete Ricketts said the $69 million increase this fiscal year shows that the economy is still growing, but he warned that Medicaid expansion would create new budget challenges. Ricketts, a Republican, opposes the expansion measure.
“Medicaid expansion for able-bodied adults would make property tax relief nearly impossible,” he said.
Stinner said he will push lawmakers to rebuild the state’s cash reserve as much as they can and give priority to K-12 school funding. Lawmakers have relied on the state’s cash reserve to balance budget shortfall over the last several years.
The estimates are likely to change before the new session begins on Jan. 9, but the current forecast suggests that lawmakers will begin the year “with not a lot of money,” said Legislative Fiscal Analyst Tom Bergquist.
One tax-policy think tank argued that the lower-than-expected revenues are a result of previous state tax cuts.
“This highlights the importance of bolstering the cash reserve and examining our revenue system to make sure we can sustain investments in education, health care and other services essential to a strong economy,” said Renee Fry, executive director of the OpenSky Policy Institute.