A new property tax relief program will almost triple in size next year, based on upbeat state revenue projections issued Thursday.
The projections, issued by the Nebraska Economic Forecasting Advisory Board, also mean that more money is available for tax cut and spending bills and that more money will go into the state's cash reserve.
Gov. Pete Ricketts hailed the updated forecast and urged lawmakers to put the additional money into easing taxes.
“Nebraska’s economy continues to show significant signs of strength as we emerge from the pandemic,” he said. “Today’s meeting of the forecasting board allows the Legislature to stay the course on delivering additional significant tax relief for the people of Nebraska.”
The board increased its forecast of tax revenue by $90 million for the fiscal year ending June 30, while reducing the forecast for the next two years by $5 million.
After adjusting for requirements of state law, the changes mean about $38 million more than expected for legislative priorities during the two-year budget period ending June 30, 2023.
Senators already passed a $9.7 billion budget covering those years. The new forecast leaves them with $245 million of unobligated revenue, although bills pending before the full Legislature would more than use up that amount.
The updated forecast also means a sizeable boost to the new property tax program, which offers income tax credits to property owners to offset part of their school property taxes. Lawmakers set aside $125 million for the first year of the program, which Nebraskans can claim when they file their 2020 income taxes.
If actual tax revenue meets projections, a law passed last year would earmark $358.7 million for the new credits in each of the next two fiscal years. The law determines the amount of tax credits based on the growth of tax revenue. The credit total remains flat when revenue grows at 3.5% or less.
The new, higher credit amount means that the state would devote more than $1.5 billion to direct property tax relief over the two-year period. Along with the new program, Nebraska has another, long-standing property tax credit program and a homestead exemption program benefiting low-income elderly and disabled homeowners.
Both the governor and the Legislature use revenue projections issued by the forecasting board when setting the budget. The board will meet again in October to update its current numbers.
On Thursday, board members generally expressed optimism on the state's economic future, despite ongoing disruptions from the pandemic and a large number of unknown factors.
"There's some magic, some moxie somewhere in Nebraska that continues to outperform the national models," said John Kuehn of Heartwell.
Some pointed to "cautionary notes," including sharp increases in housing prices and in the cost of various goods and services and shortages of various items. They said workers continue to be in short supply, with about 25,000 people who have yet to return to the labor market since the start of the pandemic.
But they also cited good commodity prices, strong consumer demand and the effects of federal stimulus money in keeping the state's economy strong.