Solid revenue growth predicted for state

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By NANCY HICKS / Lincoln Journal Star

The state’s forecasting board made it official:  There will be plenty of state tax revenue for the governor’s meat and potatoes budget plan and his rich dessert of tax cuts.

The advisory board on Friday predicted the state will bring in about $7.054 billion during the next two-year budget cycle, or about $53 million more than previous forecasts.

That’s $53 million more senators can spend on state agencies like the University of Nebraska. Or it’s $53 million more they can send back to Nebraskans as tax cuts.

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Here are some details from the February forecast:

* It raises the current year forecasts by $30 million. That money will automatically go into the cash reserve (rainy day) fund when the fiscal year ends June 30, bringing the reserve fund to $526 million. Under that forecast, net state tax revenues would be 5.3 percent above last year’s revenue.

* It raises forecasts for the next two fiscal years by $27 million and $26 million. Net state tax revenue would rise 3.9 percent next fiscal year and 5.1 percent the second fiscal year under this forecast.

Gov. Dave Heineman offered some simple advice:  Don’t spend it.

“The actions taken today by the forecasting board show the continued strength of state receipts. However, they should not be viewed as a call for additional spending,” said in his e-mail response to the Friday forecast.

 This mid-session forecast is an important number for legislators.

The Appropriations Committee will use it as members make budget recommendations. And the Revenue Committee has been waiting for the forecast number before sorting through tax-cut proposals.

“Our job probably gets tougher after today’s news,” said Appropriations Committee Chairman Lavon Heidemann of Elk Creek. The higher forecast puts pressure on the committee to give more money to state agencies, he said. “It will be tougher to be prudent.”

The committee agreed to hold spending growth to 4.2 percent in its initial budget plan that will be used in public hearings over the next month.  The committee already decided on a low-growth budget even though there appeared to be plenty of revenue, Heidemann pointed out.

The Appropriations and Revenue committees will work together to determine how much money might be available for tax cuts, he said.

Now that they have a new forecast, Revenue Committee members will begin sorting through almost two dozen tax-cut plans, including the governor’s proposal to cut taxes for middle- and lower-income Nebraskans this year and income taxes for the wealthy over the following three years.

Other plans include several methods for reducing property taxes and a one-half cent cut in the state sales tax. The total cost for all the proposals is about $1.4 billion during the second year of the two-year budget, far more than has been estimated will be available. Senators expect they may have about $200 million each year for tax cuts or additional spending.

“It’s getting to be crunch time,” said Revenue Committee Chairman Ray Janssen of Nickerson, referring to the work ahead.

The February forecast, slightly higher than the October prediction, reflects the board’s belief that current solid economic growth will continue over the next two and a half years.

The nine appointed board members — citizens with backgrounds in business or economics — use information from national economic models, advice from the Department of Revenue and the Legislature’s fiscal office and their own experiences to make their best guesses.

Members pointed to the $4-a-bushel price for corn as a positive sign and the oversupply of new homes in the Omaha area as a concern for the future.

The forecasting board will meet again April 24 to make a final forecast that will be used as the Legislature and governor make final tax cut and spending decisions this spring.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.