Early forecast: Partly cloudy with possibility of scattered thunderstorms.

Last week's joint meeting of the Legislature's Appropriations and Revenue Committee members to consider the latest revenue report from the state tax commissioner sparked some lightning.

Early signals of what may be a stormy legislative session ahead.

The no-brainer forecast for the 2018 session casts an early spotlight on taxes; a state budget under duress not only from an anemic revenue flow, but also a generally pessimistic state economic forecasting advisory board; and Nebraska's troubled prison system.

All three interrelate with lots of factors to consider, beginning with big-picture elements of policy and priorities along with one's basic perspective about government.

Do you determine essential needs and then try to fund them? Or do you first draw a line on spending and taxes and then squeeze needs and shape funding within that predetermined box?

Last week's discussion among senators drifted rather swiftly into Nebraska's large array of sales tax exemptions, some of which always have had marginal or questionable justification, and the revenue that could be raised by eliminating some of them without increasing any tax rates.

Along with that came some discussion about collecting the state sales taxes that already are legally owed for online purchases on the Internet.  

Sen. Burke Harr of Omaha engaged State Tax Commissioner Tony Fulton in some lively discussion about all of the above.

At one point, Fulton agreed that "we do exempt an awfully lot of things" from sales tax collections. And he acknowledged that the online sales tax is "a hot issue now."

But, Harr said, when Gov. Pete Ricketts views elimination of a tax exemption as a tax increase and opposes a bill that would mandate collection of the sales tax on Internet purchases that already is in place, that makes it difficult for the Legislature to act. Vetoes are not easy to override.

The Ricketts administration opposed Sen. Dan Watermeier's bill to provide for collection of legally-owed Internet sales taxes, Harr said, even though that would not represent a tax increase, but merely collection of revenue from a tax requirement already in effect.

The revenue stream envisioned in that legislation has been estimated at $30 million to $40 million a year.

Fulton said it is the administration's position that the U.S. Supreme Court needs to ultimately determine the question of whether states can decide to impose and collect sales taxes on Internet transactions outside of their borders, or whether that is a federal issue.

"The Supreme Court will resolve this issue," Fulton said.

"Policy should be made by the Legislature," Harr responded.

Sales tax exemptions not only are being eyed by some senators as a means of nourishing the revenue stream and providing funding for vital state programs, but they're also being targeted now by other senators as a means of funding substantial local property tax reductions through state income tax rebates.

Clearly, sales tax exemptions are moving into the crosshairs now.

It all begins with preliminary sparring and positioning, with senators not yet committed to a specific pathway and lobbyists on high alert.

* * *

And now comes a new state fiscal forecast just in time for Halloween.

That could push discussion about sales tax exemptions front and center in the 2018 legislative session, which begins in January.

In stark terms, the emerging choice is whether to continue to slash away at the University of Nebraska and most other state agency budgets, with an exception for the Department of Correctional Services, or consider adding some revenue to the equation.

All of that in an election year. 

This looks like it's going to be a challenging moment of truth for the university, which went along to get along this year.

Finishing up:

* Here's the lede paragraph in a USA Today story following an interview with Chuck Hagel: "President Trump's treatment of families of fallen troops 'sickens' former Defense Secretary Chuck Hagel, who labeled his recent calls and other statements 'beneath the dignity of the presidency.'"

* Daniel Kritenbrink, a career foreign service officer who was confirmed last week as the new U.S. ambassador to Vietnam, grew up on a farm near Ashland and is a graduate of the University of Nebraska at Kearney. 

* Sen. John Stinner, chairman of the Legislature's Appropriations Committee, offered this observation during last week's revenue discussion: "Our tax base is based on an economy that is changing."

* Joseph Young, who oversees the Nebraska Chamber of Commerce's Vision Nebraska campaign, suggested at a legislative breakfast briefing in Lincoln last week that "state senators and staff would benefit from another term" for senators who now are limited to two four-year terms. 

* Sen. Adam Morfeld told the Chamber audience he will continue to propose Medicaid expansion legislation. 

* Hot Air, a national conservative blog, asks in a lengthy article: "So, when does Ben Sasse announce that he's not running for re-election either?"  Sasse's re-election bid would be in 2020.

* A recent Sasse tweet on his lively Twitter site: "To whoever spent your Sunday signing me up for dating websites: Thanks, but no thx (I checked with my wife, and she says we're still good)."

* Just as the young and retooled New York Yankees and their talented farm system appear poised to make a multi-year run, they dump Joe Girardi. Life definitely ain't fair.

Reach the writer at 402-473-7248 or dwalton@journalstar.com.

On Twitter @LJSDon.

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Political reporter

Don Walton, a Husker and Yankee fan, is a longtime Journal Star political and government reporter.

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