LINCOLN, Neb.—Nebraska’s economy may not be in a free-fall like some states’, but there is new evidence it is taking something of a dive.
On Tuesday, state officials said gross tax revenue in January was down 8 percent, or $29 million, below projections made early last year. All categories of taxes were down.
But the largest drop was in individual income taxes, which fell below projections by more than 15 percent for the month.
The bad news for the month comes as the Legislature crafts a two-year budget. Later this month, a state revenue forecasting board will revise revenue projections. The Legislature uses the board’s official projections to craft the state budget.
“As you look at the national economy unfolding and the fact it’s definitely starting to affect Nebraska…you would think the forecast board would pick up on that, and it will make our job more difficult,” crafting a budget for the next two fiscal years, said state Sen. Lavon Heidemann of Elk Creek. He is chairman of the Legislature’s budget-writing Appropriations Committee.
A requirement that the state have a budget cushion equal to at least 3 percent of total planned spending during a budget cycle could end up saving the state from a crisis this fiscal year, which ends in late June, Heidemann said.
“It will have to get really ugly before it affects our cash flow,” for the current fiscal year, he said.
For the current fiscal year, net tax revenue for the state is .5 percent, or $11 million, below the forecast made in February 2008. Revenue has been below projections for four of the seven months during the current fiscal year, and January was the second month in a row that revenue dipped below projections, according to the state Department of Revenue.
Still, Nebraska is considered one of just a handful of states in the country not currently in a budget crisis. Some states are counting on money from the federal stimulus package working its way through Congress to help close their budget gaps.
Gov. Dave Heineman has said he will not change his budget proposal should extra money for the state be approved in the stimulus package, a version of which was approved by the U.S. Senate on Tuesday.
His proposed budget also assumes the state won’t bring in any extra money in tax receipts during the next fiscal year, despite estimates in October from the forecasting board that tax revenues would bring in an additional $49 million.
State spending would increase by an average of just 1.8 percent each of the next two years under his proposed budget, versus an average of 7 percent per year over the past two decades. His budget plan also calls dipping into the state’s cash reserve, which is expected to hold a record $593 million at the end of this fiscal year.
Heineman proposes using $40 million each of the next two years and holding $200 million for contingencies, most of that because of the possibility that the falling stock market will deflate the state’s pension plan.
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