‘It’s a belt tightening time again’ Nebraska legislative leadership looks ahead to 2026 session

State senators previewed a legislative session of “belt tightening” at the Platte Institute’s Annual Legislative Summit on Thursday.

Much of the discussion was centered around how best to balance the budget and lower property taxes while facing a loss in federal revenue and lower tax receipts.

In the 2026 State Tax Competitiveness Index from the Tax Foundation, released Thursday, Nebraska ranked 46th in property taxes, but its higher rankings for corporate and sales tax place it at 22nd overall. Neighboring Wyoming and South Dakota hold the top two overall spots, respectively.

Speaker of the Legislature John Arch used an analogy from his health care background to describe the status of property taxpayers in the state, amid state attempts to reduce the tax burden through credits and education funding.

“The patient continues to bleed faster than we’re able to put blood into the patient, and that’s where we are,” he said. “We have put lots into our tax relief, but the patient continues to bleed faster.”

Arch said the state would need to raise an additional $250 million in revenue each year just to keep property taxes flat, let alone reduce them.

While talk of another tight budget year for the state has dominated much of the conversation leading up to the legislative session, Arch said the state is in better fiscal health than it may appear.

“The state of Nebraska is not broke,” he said. “I think sometimes there's this, ‘Oh my word, we have this terrible deficit and all that,’ but we're trying to cover our reserve, and then we have a rainy-day fund as well.”

The Nebraska Department of Revenue released a report in September indicating that the One Big Beautiful Bill Act will cost the state nearly $217 million in revenue over the next two years.

Appropriations Committee Chair Rob Clements, who is about to begin his 10th year of service on the committee, said balancing the budget without tax increases is his first priority for the upcoming session.

“We’re going to need to continue to watch our spending and find cost savings and efficiencies to balance the budget, so that we can have a big, beautiful budget,” he said, eliciting a chuckle from the audience. “It's a belt tightening time again. But the future, I think, looks bright.”

His long-term optimism is due in part to the Federal Medical Assistance Percentage (FMAP) that the federal government gives states to offset medical costs. The FMAP for Nebraska has declined each of the last three years, meaning the state has had to pay more money from its coffers. Clements said he expects that decline to level off and state revenues to go up in 2027.

Clements also said he plans to continue to work on his longtime priority of ending the inheritance tax, legislation that failed to make it over the finish line in 2025 session.

Revenue Committee Chair Brad von Gillern said the Legislature needs to be careful not to hurt economic growth when looking at raising revenues or cutting spending.

“We got to make sure that we don't just take out a machete and start cutting through things, just because they're the easy things to do,” he said. “We have to have an eye on which of these items have a return on investment.”

He said he would oppose efforts to reverse the income tax cuts passed in 2022 that will eventually bring the highest personal income tax rate in the state down from 6.84% to 3.99% in 2027.

“That would stifle the growth in our economy,” he said. “It would cause people, give people more reason to leave the state and to not have people come in.”

Von Gillern also advocated against cutting business incentives to ensure competitiveness with other states.

The Nebraska Forecasting Advisory Board is scheduled to meet Friday to project future state tax revenue, which the Legislature will use to balance the budget.