Nebraska’s fiscal outlook took a chilling turn on Halloween as state officials wrestled with a substantial dip in revenue projections. Yet, the news was not unexpected for those at the helm of the fiscal committee.
Revised Revenue Forecasts
The Nebraska Economic Forecasting Advisory Board adjusted its earlier revenue projections from April, predicting a decrease of approximately $120 million for the fiscal year 2025-26 and $247 million for 2026-27. This adjustment has considerably widened the state’s budget gap, which had already reached $95 million after the latest legislative session, to an excess of $450 million over the current biennium.
The revised forecast plays a crucial role in guiding the state Legislature, which is constitutionally mandated to maintain a balanced budget. Additionally, state law requires a 3% reserve to be part of this financial balance.
Impact of Policy Changes
Much of the revenue decrease is attributed to policy changes introduced by the “One, Big Beautiful Bill Act” (OBBBA). According to a report from the Nebraska Department of Revenue published in September, the OBBBA is expected to reduce state revenue by nearly $217 million over the upcoming two years.
However, there was a silver lining in the form of projected sales tax receipts, which are anticipated to increase by $60 million for FY2025-26 compared to the April forecast.
Economic Insights
Board member Matt Miltenberger emphasized that the adjustments were driven by policy rather than economic factors. “Really all the changes we’re talking about here in the forecast is policy, not the economy in Nebraska,” he noted. He also suggested that the uptick in sales tax receipts indicates ongoing investments in the state.
Revenue Committee Chair Brad von Gillern echoed this sentiment, pointing to sales tax as a key indicator of consumer confidence. “The one that I look at more than anything, is the sales tax, as far as a trend for consumer confidence and spending, and out of the last four months, three of them have exceeded the forecast,” he stated, viewing these figures as positive signs for Nebraska’s economic health.
Governor’s Response
Governor Jim Pillen responded to the new revenue forecasts with a statement underlining his commitment to managing the government efficiently. “The forecasting board’s projections underpin the critical work of cutting government spending and identifying efficiencies while we improve services,” he explained. He reiterated his goal to implement $500 million in annual cuts to better serve Nebraska residents, aiming to reform property tax systems, eliminate special interest advantages, and maintain fiscal balance.
The Nebraska Legislative session for 2026 is scheduled to commence on January 7, with the next meeting of the Nebraska Economic Forecasting Advisory Board planned for February 27.
