LINCOLN - Nebraska policymakers got sunny news from the state’s economic forecasting board — $902 million worth of sunny news, to be exact.
That’s how much the board raised its projections of state tax revenues for the two-year budget period that ends June 30, 2023.
The new projected increase means that $313 million will be available for spending or tax cuts in the second year of the budget period, as opposed to the previously predicted shortcoming. The increase is also significant because $475 million will be put towards the state's rainy day fund, making the projected total $1.47 billion, a record-high.
Governor Ricketts commented on the new projection, saying "Nebraska's big economic momentum continues to translate into stronger and stronger tax receipts. Today's news means that there is even more room to work on tax relief and important projects, including replacing the aging Nebraska State Penitentiary."
The Nebraska State Penitentiary referenced is a 1,512 bed facility that Ricketts has been pushing for. In 2020, it was estimated to cost $230 million. Lawmakers approved nearly $15 million to design the facility but made no commitments to building the prison.
State Senator Lou Ann Linehan of Elkhorn, chair of the Legislature's Revenue Committee, said “Now we are in a position to make our income taxes more competitive with neighboring states while we continue to provide significant property tax relief to all Nebraskans. We are in a fortunate fiscal position compared to most states. We need to continue to reduce the tax burden on Nebraska’s taxpayers.”
If tax revenues match the latest predictions, school property taxes could be offset by a state program that offers income tax credits. Legislative Bill 1107 established that $548 million would be set aside for credits in 2022 and 2023. In the program's first year, $125 million was set aside and future amounts are based on the growth of state tax revenue.
Despite the optimistic projections, OpenSky Policy Institute Executive Director, Renee Fry, urged lawmakers to proceed with caution. “While today’s increased revenue forecast is encouraging, the fact is federal dollars are propping up our economy considerably,” Fry said. “Eventually those funds will stop flowing and our economy will have to stand on its own. For this reason, we urge caution because enacting ongoing tax or spending proposals will force tough choices in the future when revenues fail to keep up with our state’s obligations.”
Senator John Stinner echoed Fry's comments, saying "We have to make sure we don't make long-term decisions with short-term increases in tax revenue."
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