Speaker of the Legislature expects state budget picture to brighten

Nebraska’s budget woes may not be as bad as they seem now, at least in the long run, the speaker of the Legislature said Wednesday.

The state of Nebraska is currently projected to fall $472 million short of its required budget reserve at the end of the current two year budget period, and $690 million short in the next biennium. But Speaker John Arch said that should turn around, after all of the currently scheduled income tax cuts are implemented.

“Some of what we’re obviously facing with our deficit is a temporary issue because of those declining rates on income taxes. We’re experiencing that, at the same time we may not be experiencing a robust economy. But I say temporary because that’ll flatten out and then we should find natural growth in the economy,” Arch said at a meeting of the Tax Rate Review Committee.

Nebraska’s top personal income tax rate was nearly 7% in 2022, but the Legislature voted to reduce that in a series of cuts that will bring it to just under 4% by 2027.

Meanwhile, in actions that could affect the currently projected budget shortfall, state agencies have proposed budget reductions of $170 million so far, and Gov. Jim Pillen is expected to increase those proposed cuts to $500 million in January.