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LINCOLN — Nebraska tax revenues came in below expectations for the second month in a row, moving the goalposts further out for the budget hole lawmakers will have to close in 2027.
The state Department of Revenue’s report on April’s tax receipts — the month when many Nebraskans pay their income taxes — showed a net loss of 8.2% compared to what Nebraska’s Economic Forecasting Advisory Board had predicted in late February. That difference equates to about $57 million less in revenue headed to the state’s coffers.
Combined with March’s tax receipts, which also fell below forecasts by $72 million, Nebraska’s budget shortfall grew to around $129 million.
The biggest factor in April’s lower receipts was individual income taxes, which came in more than 45% below forecasts, equating to a $140 million loss. This is likely because of tax refunds issued in April, which the same report noted were over 98% higher than forecasts —netting out to a $162 million difference.
Gov. Jim Pillen celebrated the higher-than-expected refunds in a press release about the latest tax receipts. He said the refunds means more dollars are going back to Nebraska taxpayers and reiterated his promise to push for reduced government spending to make up the difference.
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“Nebraskans are keeping more of their pay instead of giving it to government,” Pillen said in the press release. “That’s the objective we want to achieve for hard-working Nebraskans. At the same time, we need to relentlessly cut spending to ensure that the state is living within its means.”
Pillen noted that the state’s phased reductions to income tax rates, along with additional tax cuts brought through the “One Big Beautiful Bill” contributed to the lower receipts. State Sen. Rob Clements of Elmwood, the term-limited chair of the Legislature’s Appropriations Committee, estimated the federal bill is reducing Nebraska’s income tax collections by about $100 million per year.
Clements also noted that Nebraska’s pass-through entity tax (PTET) could have impacted April’s receipts. Legislative Fiscal Analyst Keisha Patent said there is evidence that more businesses are claiming PTET credits earlier in the year than in previous years that it has been in effect.
Clements said he was happy to see Nebraska’s sales and use tax revenues came in about 11% above forecasts, equating to a $23 million boost. Pillen said the increase signals higher consumer spending and market activity.
However, with the overall revenues being down, Clements said he expects “everything is going to be on the table” when Pillen and other lawmakers work to balance the budget.
“It’s not time to panic, but it’s time to take a look at what’s going on,” Clements said.
If Nebraska remains in a projected deficit when the 2027 legislative session begins, Patent said lawmakers would be tasked with balancing the current budget before the biennium ends on June 30, 2027, and also setting the next biennial budget that spans July 1, 2027 through June 30, 2029.
This would be the third consecutive session that lawmakers have had to address a projected deficit.
Fiscal analysts have projected a deficit for the state’s next two-year budget cycle that currently stands at $631 million, and Patent said tax receipts that fall below forecasts compound that figure. However, she said the true number lawmakers will have to deal with won’t be known until the forecasting board makes new projections in October.
“The Legislature still has hard decisions to make,” Pillen said in the press release. “We must run government like a business so that we are reducing waste, focusing on work that truly matters and reinvesting in the people of Nebraska. That’s what taxpayers expect of us.”
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