Lincoln, Nebraska: Forecasters Put the Next Budget Deficit at About $1.2 Billion

Lincoln, Nebraska: The state forecasting board on Friday, October 30, cut its revenue outlook for the next two year budget cycle by $365.9 million, leaving lawmakers with a projected shortfall of about $1.19 billion for the biennium that runs from July 1, 2027 to June 30, 2029.

The Nebraska Economic Forecasting Advisory Board set projected tax revenue for the current fiscal year, which ends June 30, 2027, at $6.805 billion. That is $23.2 million more than the board projected in February. Legislative Fiscal Analyst Keisha Patent said the extra money will not reduce the current $208.56 million deficit directly. It will go into the state cash reserve, the rainy day fund lawmakers can use later to balance the budget.

The numbers for the next biennium

For fiscal 2027-28, the board now expects $89.6 million less in revenue than before. For fiscal 2028-29, it expects $276.3 million less. Together with the spending already on the books, those cuts produce the roughly $1.19 billion shortfall for the two years.

The figures will move again. The Nebraska Tax Rate Review Committee meets in November, and the forecasting board meets again in February, when lawmakers will be in session and writing the budget.

Governor Jim Pillen said in a statement on Friday that the state must reduce the size of government instead of growing it. He put the task at about $393 million per year to solve for over the next three years, and said the state can balance the budget, live within its means and deliver better government for taxpayers.

Belt tightening, again

Appropriations Committee chairman Rob Clements of Elmwood, who is term limited at the end of 2026, said the update means at least one more year of belt tightening. Senator Brad von Gillern of Elkhorn said the new projections remove the question marks about where the state stands, and that cost cutting, efficiencies and revenue sources will all be on the table.

The board acted after September tax receipts came in above forecast for a second straight month. The Department of Revenue reported net receipts of $683 million for September, 0.2 percent above the February forecast, or about $1.2 million more than expected. Refunds reached $132 million, 1.8 percent above forecast. Net receipts for the fiscal year so far stand at $1.709 billion, 1.2 percent above the same point last year and 0.5 percent above forecast.

In July, Pillen directed state agencies, boards and commissions to cut spending by 5 percent and freeze most hiring to help close the growing deficit. Agencies were told to prepare for downward adjustments in the current fiscal year as well as in the upcoming biennium. The governor will send his budget proposal to the Legislature in January.

Lawmakers know this drill. The 2026 session opened with a $471 million deficit that grew to $646 million after forecasters cut revenue. The Appropriations Committee found about $500 million through cuts and cash transfers, and on April 1 the Legislature approved the two year budget in two 35 to 13 votes, using cash reserves and sweeping idle cash funds, with a projected surplus of about $6 million. The Friday forecast says the next round starts in a deeper hole.