The Nebraska Economic Forecasting Advisory Board says it looks like the state will take in $161 million more tax revenue than anticipated. The Governor and a handful of state senators say they want it to be used for property tax relief.
The director of at least one think tank says it’s a good time to build up the state’s cash reserve, which has been drawn down well below recommended levels. I like that idea. I’m sure that the late Sen. Jerome Warner of Waverly, who created the “rainy day” fund, would concur.
Having a mandatory cash reserve has served the state well through the decades since it was constitutionally mandated. It got Nebraska through the farm crisis of the early 80s and a number of other economic downturns since. Of late, it has been tapped for the purpose of bolstering the Governor’s oft-discussed property tax relief.
Governor Pete Ricketts characterized the report as good news and said it means property tax relief plans will proceed next session “full steam ahead.”
The board, which meets again in February, said total projected revenue receipts for FY2019-20 were raised to $5.09 billion, an increase of $161 million. The forecast for projected total revenue receipts for FY2020-21 is $5.15 billion, an increase of $105 million.
Eight members of the board said collections would be enough in the rest of this fiscal year to add $161 million to the state's rainy day fund. And in 2020-21, lawmakers would get an added $102 million for the state budget, after accounting adjustments and if the predictions come to pass.
OpenSky Policy Institute Executive Director Renee Fry said, “The increased forecast presents a good opportunity for lawmakers to build up our cash reserve, which was drawn down well below recommended levels to weather recent state revenue struggles.”
She added, “It would be extremely risky to use what could be a temporary uptick in revenue to fund ongoing spending obligations or tax cuts.” The projected $161 million influx would bring the cash reserve to $616 million.
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In my humble opinion, that’s where it should go as the Legislature’s Revenue Committee looks for a possible tax restructuring to solve the states lingering property tax problem.
But Revenue Committee Chairwoman Lou Ann Linehan echoed the governor's call for using any extra money for tax cuts. The form of a bill to do that is still under discussion, she said, but she favors doing "as much as we can do." Last year’s budget was meant to make up for previous tough years, she said, so any available funds over what has been budgeted should be used for those tax cuts.
The Legislature increased Medicaid provider rates, fully funded K-12 state aid to schools, and gave the University of Nebraska money for salary increases and for increases in utility costs. It also sent an additional $51 million a year to the state's property tax credit fund, which is used to reduce the amount owed on property tax bills. Linehan said the added projected revenue makes it easier to go about reducing the tax load on Nebraskans even more.
Appropriations Chairman Senator John Stinner of Gering said his committee will work with the governor and Legislature on a fair and balanced approach to spending. But, he added, they still need to increase the rainy day fund and also provide funding for the effects of flooding.
He also expressed concerns about budget revisions that may be needed because of the circumstances surrounding Nebraska agriculture in the wake of
the March weather event, flooding, property loss and subsequent delays or cancellation of planting.
If they can do both, lawmakers should use the windfall to bolster the cash reserve and property tax relief. But the emphasis should be on that rainy day fund.
J.L. Schmidt has been covering Nebraska government and politics since 1979. He has been a registered Independent for 20 years.