Nebraska’s projected deficit for 2028-29 budget worsens to $1.2 billion

LINCOLN — Nebraska lawmakers will likely enter the 2027 session looking to fill a projected budget deficit around $200 million, but a larger problem emerged for the next two-year budget after new economic forecasts dropped Friday.

Nebraska’s Economic Forecasting Advisory Board met Friday to update state revenue projections for the ongoing budget cycle and make new predictions for the next biennium. Their predictions kept the current projected deficit flat, but lowered expected revenues in the next cycle by about $355 million, according to legislative fiscal analyst Keisha Patent.

Before Friday, Nebraska’s projected budget deficit stood at $208 million by the end of the current budget period ending June 30, 2027, and $846 million at the end of the next biennium.

The board projected revenues would increase by about $23 million by the end of fiscal year 2027. However, Patent said, those additional dollars will automatically go into the state’s cash reserve under existing law.

Projections for the next biennium spanning fiscal years 2028 and 2029 told a different story, lowering expected revenues by about $355 million, according to Patent’s estimates. This would bring the projected deficit for Nebraska’s next budget to about $1.2 billion.

These are not the final numbers lawmakers will be working with come January. Patent said the projections will change again after the next Tax Rate Review Committee meeting in November, and the forecasting board will have another chance to update their projections in February.

This puts 2027 on track to be the third consecutive legislative session to deal with a projected deficit.

State Sen. Rob Clements of Elmwood, the term-limited chair of the Appropriations Committee, said the board’s projections for the next biennium were more extreme than he expected. However, he anticipates that Gov. Jim Pillen’s ongoing initiative to cut state spending will aid the budget-balancing effort.

“It’s still going to be a belt-tightening year,” Clements said.

In a press release, Pillen estimated the latest forecast means that lawmakers have to find about $393 million each year for the next three years to balance the budget. He said accomplishing this will require “tough decisions” and continued advocating for his plan to shrink government.

“The foundations of Nebraska’s economy are stable and resilient,” Pillen said. “We must have the courage to reduce the size of government instead of growing it. Just like ordinary Nebraskans, state government must live within its means.”

In September, Pillen drew criticism over two new appointments he made to the board — former state Sens. Tom Briese of Albion and Lou Ann Linehan of Elkhorn. Both were key allies who helped pass several of Pillen’s tax proposals. Pillen elevated Briese to state treasurer in 2023, a position he held for two years, and appointed both Briese and Linehan to the new School Financing Review Commission last year.

Clements said he doubted that the board’s new members had any impact on the latest projections. State Sen. Brad von Gillern of the Elkhorn area, chair of the Revenue Committee, agreed and said Friday’s meeting was conducted the same as previous meetings he has attended.

Though she acknowledged she was a Pillen ally, Linehan attributed the suspicions to the proximity of the midterm elections, and claimed people were “making things up that aren’t true.”

“Who else would you appoint?” Linehan said. “It’s just a silly season.”

Most of the forecasting board referred to the growing development of data centers as one of the biggest factors impacting Nebraska’s economy, but members had different takes on it.

Board member Steve Seline said data centers are good for contributing to property tax revenues, but they also drag capital away from other industries.

Richard McGinnis, who chairs the forecasting board, said the amount of money being invested into data centers could provide an incredible economic development opportunity for Nebraska communities.

The board also had differing opinions on Nebraska’s agricultural economy. Board member Tim Wilson said he was less optimistic than other members, saying he expected Nebraska cattle feeders to lose money this year.

Briese said although there are challenges facing Nebraska farmers and ranchers, he believes there are also plenty of positive factors on the way. He pointed to oil-generated inflation — largely driven by the Iran war — being a good sign for ag, and he predicted the ongoing beef shortage would continue to raise prices on beef.

“Ag has plenty of headwinds, but there are some tailwinds out there as well,” Briese said.