Nebraska budget back in $72M deficit after tax revenues hit below forecast

LINCOLN — Two weeks after Nebraska lawmakers filled a $646 million hole in the state budget, a new round of tax receipts brought the state back into an expected deficit.

The state Department of Revenue released Nebraska’s March tax receipts Wednesday showing a net loss of 14.8% compared to what Nebraska’s Economic Forecasting Advisory Board had predicted in late February. That difference equates to about $78 million less in revenue headed to the state’s coffers.

Lawmakers passed a pair of bills adjusting Nebraska’s two-year budget on April 1, leaving the state with an expected surplus of roughly $6.2 million. The latest receipts means the ending balance of Nebraska’s budget is currently about $72 million in the red.

With only one day left in the shorter 60-day legislative session and the budget bills signed, there is nothing that lawmakers can do about the expected deficit this session, according to Legislative Fiscal Analyst Keisha Patent.

If Nebraska remains in a projected deficit by the time the longer 90-day session begins in 2027, 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.

Nebraska’s structural deficit that began in 2025 continues to add to a projected deficit in the next biennium that’s currently estimated at $631 million.

However, Patent and other state officials are hopeful for a bounceback in revenues in April’s tax receipts. State Sen. Rob Clements of Elmwood, the term-limited chair of the Legislature’s Appropriations Committee, said a major contributor to the lower receipts is that the Revenue Department is processing annual tax refunds at a faster pace.

Gov. Jim Pillen praised the department for its quicker responses to filings in a press release Tuesday.

“The Department of Revenue has made major improvements that are allowing tax returns to be processed faster, which means money is getting back to Nebraska families quicker,” Pillen said.

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Nebraska Tax Commissioner Jim Kamm said in the press release that DOR has processed 40,000 more returns than it had at this point last year. Patent noted that while a higher quantity of returns had been processed, the average amount of tax refunds issued is slightly lower than last year.

The faster processing impacted Nebraska’s individual income tax receipts for March, which came in 56.8% below forecasts — a $121 million difference. Individual income taxes saw the largest difference in actual receipts for March compared to the forecasts.

Corporate income taxes also fell 12.7% below forecasts — equating to a $12.5 million loss — which Patent said could also be attributed to the faster processing, although corporate taxes are typically processed on a different schedule.

Clements said he expects tax payments filed in April will help make up some of the low revenues in March, although it may not offset the losses completely.

State Sen. Brad von Gillern of the Elkhorn area, chair of the Revenue Committee, echoed these comments, noting that often people who expect a refund on their taxes file early, while those expecting to make a payment wait until the April 15 deadline or file an extension.

“We will have a better view of the revenue picture when April numbers come in, which will likely offset March,” von Gillern said.

Pillen spokesperson Laura Strimple agreed with Clements and von Gillern, saying there will be a “clearer picture” of Nebraska’s fiscal status as more tax payments come in this week. In the meantime, she said state agencies have been encouraged to continue looking for efficiencies.

“There is more work that can be done to ensure we are maximizing state dollars for the benefit of state taxpayers,” Strimple said.

Clements said he was encouraged by the state’s sales and use tax receipts for March, which came in 22.4% — or $41.1 million — above forecasts.

Sales taxes have consistently been above or on track with economic forecasts for the past several months, while other tax categories have struggled. Patent attributed the rise to “incentive activity,” while Clements has historically said high sales tax receipts are an indicator that Nebraska’s overall economy is doing well.

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