Jim Vokal’s Weekly Email: forecasting update

Last week, Nebraska’s forecasting board revised its projections, and the news wasn’t good. State revenues continue to fall short of expectations, and lawmakers now face an even larger budget gap than they did just weeks ago. 

If you caught my email last week, you’ll remember we cautioned against oversteering. That message remains just as relevant now. In fact, it’s even more important. 

There’s a narrative circulating in the media and around the state capitol that the income tax cuts passed in 2023 are to blame for this budget shortfall or that pausing them could be a solution. Let’s be clear: that couldn’t be further from the truth. 

Those reforms were pro-growth and essential to making Nebraska more competitive. They were passed with strong fiscal projections in hand, with broad support, and have already begun sending a signal that Nebraska is serious about attracting jobs, investment, and new residents. Pulling back now wouldn’t just stall our momentum; it would amount to a tax increase on hardworking Nebraskans and a retreat from long-overdue progress. 

Instead of fixating on the wrong target, lawmakers should take a closer look at recent spending trends. While the 2023 income tax package was a landmark achievement – recognized nationally as one of the best tax reforms in the country – it wasn’t the only major policy that passed. At the same time, the state also layered on new property tax credits and expanded education funding streams that fueled greater local spending without delivering the corresponding property tax relief that was promised. 

To put this in perspective, state aid to local subdivisions for fiscal year 2023–2024 totaled more than $2.8 billion. That’s a substantial investment of taxpayer dollars, one that deserves scrutiny. Local governments and schools play an important role. But we are saying it’s time to reexamine whether these newer, fast-growing aid programs are producing the results Nebraskans were promised. 

If we’re subsidizing local governments but still seeing little progress on property tax relief, it’s fair to ask whether that’s a good return on investment. These programs should be frozen or restructured until we get better outcomes for taxpayers. Lawmakers should also revisit the perpetuity language passed during last year’s special session that locks in state revenue growth over 3% for local governments, making it harder for future legislatures to respond to fiscal challenges. 

The good news is Nebraska still has options. We have a healthy cash reserve that was built for moments like this. If the shortfall proves temporary – as many believe – then a combination of disciplined spending and strategic reserve use can bridge the gap without derailing long-term reforms. 

Raising taxes, especially in the name of short-term fixes, would only make things worse and continue the tax-and-spend cycle we’re currently stuck in, harming families, reducing economic competitiveness, and fueling future volatility. 

Budget Planning is about long-term thinking, steady leadership, and reexamination when necessary. It’s time to look at significant spending initiatives and consider whether they’re giving Nebraskans the return they deserve. At a minimum, we should look to the interim and begin the deep dive. In the short term, these spending programs, along with other fiscal restraints, could be part of the budget solution. 

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