Forecasting board proposes confident outlook for Nebraska
Normally the Nebraska Economic Forecasting Advisory Board would not meet in July, but because of the pandemic, the Legislature needed an update to know how to proceed with bills that would impact the budget amid the uncertain times.
The last time the forecasting board met was in February and the revenue picture was very positive. This continued into the month of March. Nebraska did not start seeing less than projected tax revenues until the months of April and May.
The forecasting board had to take two very important circumstances into account, the tax changes from the CARES Act and the move of the tax filing deadline from April 15 to July 15. This is helpful for lawmakers as they will soon be discussing the possibility of not conforming to the CARES Act tax changes as a method to pay for other pieces of legislation.
However, the real story is how the revenue forecasting board decided to update the forecast.
Both the Legislative Fiscal Office and the Department of Revenue use the assumptions in the U.S. macroeconomic baseline forecasts from IHS Economics and Moody’s Analytics. It was explained to the board members by professional staff that no fiscal impact from the Paycheck Protection Program (PPP) loans was included in the baseline calculation. Many of the board members believe since Nebraska was one of the largest recipients of PPP loans that will have a significant impact on the state’s future revenues.
A couple board members, who are bankers and business owners by trade, said they have heard many accountants advising clients of the potential for higher tax bills because of the CARES Act provision that does not allow for the deduction of business expenses. There was significant discussion surrounding the impact of PPP loans on the state’s revenue picture, and ultimately no one had concrete support saying it will or will not have an impact.
It was requested to have more information about the PPP loans and their tax status by next forecasting board meeting in October.
At the end of the meeting the board voted to only reduce the state’s revenue estimates by $196 million, or 2%, for a total estimate of $5.125 billion.
They estimated $55 million less in sales tax revenue, $164 million less individual income tax, $23 million in corporate income tax, and kept miscellaneous tax receipts the same.