New economic forecast tightens state's budget squeeze

By Fred Knapp , Senior Reporter/Producer Nebraska Public Media

April 25, 2025, 6 p.m. ·

Nebraska Economic Forecasting Advisory Board meeting Friday (Photo by Fred Knapp, Nebraska Public Media News) — Nebraska Economic Forecasting Advisory Board meeting Friday. (Photo by Fred Knapp, Nebraska Public Media News)

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A new economic forecast Friday suggests the Legislature will have to consider further budget cuts or tax increases.

Nebraska’s Economic Forecasting Advisory board reduced its estimate of state revenues for the current and next two fiscal years by nearly $400 million.

The board lowered its estimate for the current fiscal year, which ends June 30, by $190 million, and for the next two fiscal years by a total of another $190 million.

The forecast is used by the Legislature as a target against which to balance the state budget.

Sen. Rob Clements, chair of the budget-writing Appropriations Committee, said the shortfall for the current year would probably come out of the state’s cash reserve, currently about $750 million. But he said the Legislature will have to cut spending or raise taxes to balance the budget for the next two years, even if the forecast proves unduly pessimistic.

“The tariff situation is still undetermined. I think there is some more conservative feeling about what’s going to happen to the economy. I’m hopeful that will not all come true. But we have to deal with the forecast that we have,” he said.

Clements said lawmakers will now meet to figure out how to respond. The Legislature is supposed to adopt the state budget for the next two years by May 15.

Attending the meeting at which the board lowered its forecast, Rebecca Firestone of the Open Sky Policy Institute said senators should be cautious.

“We're particularly concerned about long term sustainability of the budget," she said. "I think that all revenue options should be on the table up right now to think about how to fill in the budget shortfall. And it's important, in fact, critical, to maintain the cash reserve for times of real economic volatility."

Open Sky was among those opposing the corporate and personal income tax cuts the Legislature enacted in recent years. Parts of those cuts have already gone into effect, but one proposal to generate more revenue is to pause those cuts, an idea Clements opposes.

Another observer of Friday’s meeting was Bruce Rieker, a lobbyist for the Nebraska Farm Bureau. Rieker said it’s important for the Legislature to maintain programs that spend state tax dollars to hold down local property taxes.

“There's only two ways to fix a situation like this," he said. "We either cut spending or we increase revenue, and our first preference is for more fiscal restraint, and we're hoping that the Appropriations Committee and the Legislature will be able to deliver on that. We know that they need to deliver a balanced budget. We also know that if the legislature is unable to do it, that the governor will do it for him, because he has the line item veto."

During the meeting, board member Steve Seline contrasted what he said was a steady economy compared to the economic uncertainty about the future.

“We were rocking and rolling along, and we still are. It's way too soon for us to know what the impact of any of the chaos that has happened at the federal level is being,” he said.

In an interview afterwards, Clements echoed concern about that uncertainty.

“The board mentioned the sense of chaos going on economically, and it will take a little while for that to settle down. It’s unfortunate that we had to do this so quickly after these tariffs -- before they’re negotiated and resolved,” he said.

Clements, a Republican as is President Donald Trump, declined to blame anyone for the situation. Asked if he held anyone in particular responsible for the chaos, Clements laughed and paused before saying "No."

In other developments Friday, the Legislature gave first-round approval to a bill designed to give people sentenced to life in prison a chance at being released. The proposal by Sen. Rick Holdcroft would apply to people who have served at least 25 years if they committed the crime when they were younger than 26, or 30 years after that, on the basis that the brain hasn’t fully matured before age 26.

Holdcroft said he made his proposal after visiting every prison in the state and being impressed with some prisoners who are serving life sentences.

“They are mentors to younger inmates. They pose no harm to society. I can unequivocally and without hesitation, say that I would be comfortable having many of them as my next door neighbor, but because of their life sentence, they are condemned to never again breathe air as a free person. After visiting with some of these lifers and breaking bread with them and talking to them, one on one as human beings, I truly believe that the sentences of many of these individuals should be given a second chance,” he said.

Sen. Tony Sorrentino opposed the proposal, which would have the Board of Parole make a recommendation on sentence commutation to the Board of Pardons, which would have the final say.

“Families of murdered victims don't get to put their grief aside and enjoy life again, because 25 years have passed by. Victims who survived a rape or other horrific crime are not suddenly free of the pain, the suffering, the trauma, simply because 25 years has gone by,” he said.

The measure advanced on a vote of 25-14.

Also Friday, the Legislature gave first round approval to a proposal that would put the question of extending the two-term limit for senators to three terms. The proposal aims to ask voters at the primary election next year, which would require it to get 40 votes on final reading. It advanced on a vote of 32-7.