State revenue projections issued Friday would give the next governor more than $13 billion for state needs and tax cuts, while taking the cash reserve to record-breaking levels.
The Nebraska Economic Forecasting Advisory Board increased the revenue forecast for the two fiscal years ending June 30, 2025, by roughly $1.8 billion. The total projected revenue for both years is now just more than $13 billion.
The projections would add more than $620 million to the state’s cash reserve, according to Legislative Fiscal Analyst Keisha Patent. This would bring the reserve to the highest amount it’s ever been — more than $2.3 billion. Nebraska ended fiscal year 2021-22 with a cash reserve of $927 million.
“In Nebraska, we’ve built a record-high rainy day fund, and state revenues continue to exceed expectations,†Gov. Pete Ricketts said in a statement Friday. “The state’s financial strength puts the 2023 Legislature in a great position to build on the historic tax relief we delivered to Nebraskans earlier this year.â€
The board will review the projections twice more before the final budget is set next year.
Sen. Lou Ann Linehan of Elkhorn, who chairs the Legislature’s Revenue Committee, echoed Ricketts’ call for additional tax cuts in light of the new numbers.
“If we’re taking in more revenue than we need, we should give it back to taxpayers,†she said.
Linehan said lawmakers also should look at increasing state school aid and revamping the distribution formula with an eye to reducing property taxes.
Sens. Myron Dorn of Adams and Rob Clements of Elmwood, who are members of the Appropriations Committee, called the forecast “conservative.â€
While the board substantially increased its revenue projections for the current year, members anticipate slow growth for the next two years. The board predicted that revenues would increase 0.4% for the year ending June 30, 2024, compared with the current year. Revenue for the 2024-25 fiscal year was projected to increase 1.2% from the previous year.
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“That will mean the state budget won’t be able to increase much,†Clements said.
Rebecca Firestone, executive director of the OpenSky Policy Institute, encouraged lawmakers to use the higher projections to address affordable housing, child care, mental health care, transportation and workforce challenges.
“Tackling these concerns head-on is likely to build a stronger, more resilient Nebraska economy,†Firestone said in an statement Friday.
For the current fiscal year, which ends June 30, 2023, the board set revenue projections at $6.44 billion. That is roughly $620 million higher than the previous projection of $5.82 billion.
The board’s projections for all three fiscal years were higher than the average projections made by the Nebraska Department of Revenue and the Legislative Fiscal Office by about $250 million overall.
The revenue projections by both offices were already higher than the projections the board made in February. Patent said continued inflation and increasing corporate profits and personal income rates played key roles in the higher estimates.
Ricketts noted in his statement that the federal Bureau of Economic Analysis reported that personal income in Nebraska increased by an annual rate of 8.5% through the second quarter of 2022.
Patent said the projections were tempered by the possibility of an oncoming recession, although she said her office was more “optimistic†about the impacts a recession would have on Nebraska.
“It may not even be a true recession,†she said.
Board members were concerned about how the ongoing inflation, labor shortages and drought would impact Nebraska’s economy. In general, however, the board had a positive outlook on the state’s economic future.
“We’re just better off than everybody in the world right now,†said board member Steven Seline.