Nebraska Forecasting Board shows optimism with increased projected state revenues
The Nebraska Revenue Forecasting Board met today to discuss the status of the state’s revenue picture. This year the state of Nebraska will be drafting its two-year, or biennial, budget and will need an accurate forecast of state revenues.
Overall, the mood of the meeting was very optimistic. On a national scene, Nebraska is recovering from the pandemic much faster than many other states. All industries are reported to be doing well except for construction. In their discussion, board members mentioned a backlog of construction projects across the state and the need for more construction workers.
Another discussion amongst the board members was to bring in an outside expert to discuss the long-term future for Nebraska. Every meeting there is a presentation given by the Department of Revenue and the Legislative Fiscal Office, but the members felt they needed an outside perspective.
As always, there are many factors that must be taken into consideration when forecasting the state’s revenue picture. This year, the major items impacting the state’s revenue are:
- The extension of the COVID-19 tax filing deadline which moved approximately $280 million from the last fiscal year into this fiscal year,
- Extending the tax filing deadline for those affected by the 2019 historic floods,
- The tax changes in the CARES Act,
- The reduction of taxation on military retirement (LB153 – 2020),
- Legislative enacted transfers from cash funds,
- Tax incentive sales tax refunds, and
- The LB1107-2020 property tax relief credit.
The item that generated the most conversation was the refundable income tax credit for property taxes (LB1107). When originally enacted, the tax credit was only supposed to amount to $125 million. However, according to the Legislative Fiscal office the cost of this credit is projected to be much higher than anticipated, effectively reducing the amount of revenue the state has available to spend on other government programs and services.
The amounts for the LB1107 tax credit are removed from the total projected state revenues below since it is effectively “spent” via the tax credit. This is what is known as “spending through the tax code.”
Note, one of the reasons for the lower projected revenue in fiscal year 2021-22 is because to the more than doubling of the income tax credit for property taxes.
The next step in Nebraska’s budget process is to take this information and incorporate it into the state’s two-year spending plan. The next revenue forecasting meeting is scheduled for April 29. This will be the last and final update before lawmakers vote on the state’s budget.