LINCOLN, Neb. (AP) - Nebraska lawmakers who have worked to erase a nearly $900 million projected revenue shortfall could face a new challenge when a state board estimates again how much money the state will collect.
The projections slated for release Wednesday could force senators to make last-minute tweaks to the $8.9 billion, two-year budget package. Debate on budget legislation begins Monday.
Lawmakers faced an unusually large projected shortfall this year in part because of falling commodity prices that hurt agriculture, the state’s largest industry. Because of the slowdown, state spending is projected to outpace revenue.
Another revenue decline could force lawmakers to cut more or draw additional millions from the state’s rainy-day fund, said Sen. John Stinner of Gering. The rainy-day fund had been projected to reach a record high $729 million in June 2016, but is now expected to slip to $379 million by June 2019 because senators have repeatedly used it.
Stinner, the chairman of the Appropriations Committee, said he was leery about cutting from state services. The biggest recipients in the state budget are K-12 public schools, Medicaid services and the University of Nebraska.
“You can only cut so far before you start to do long-term damage,” Stinner said.
Senators could also pass a law that would temporarily reduce the amount of money the state needs in its reserves. Current state law requires senators to maintain a minimum reserve equal to at least 3 percent of the total general fund, or roughly $240 million. Reducing the threshold to 2 percent would free up about $80 million, Stinner said.
The proposed budget would increase spending by an average of 1.1 percent annually over the next two-year cycle - far less than the average growth rate. It would cover state expenses from July 1, 2017 to June 30, 2019.
The plan crafted by the budget-writing Appropriations Committee would draw $180 million from the cash reserve, commonly known as the rainy-day fund, and pull about $400 million from various cash accounts to make up for lagging revenue. It also would cut $13 million from the University of Nebraska and $42 million from other state agencies. Some of the reductions were made for what remains of the current fiscal year, which ends June 30.
Members of the Nebraska Economic Forecasting Advisory Board will set new revenue estimates Wednesday based on economic reports and their own observations of the state economy.
Crafting the new budget was “a long, painful process,” and a downturn in the revenue forecast would force lawmakers to make even more tough choices, said Sen. Mike McDonnell, an Appropriations Committee member from Omaha.
“We’re just sitting here blind right now, waiting for the forecast,” he said.
Another committee member, Sen. Dan Watermeier of Syracuse, said he was “not happy” to see the cash reserve tapped so aggressively, because he fears the agricultural economy will continue to struggle. Watermeier, a farmer, said he would prefer to see more cuts if the revenue outlook worsens.
“It’s something we’re going to have to look at,” he said.
If the revenue forecast improves, Watermeier said he would want to put money back in the rainy-day fund.
Sen. Kate Bolz of Lincoln said it was too early to know how the budget committee might respond if the board lowers its revenue estimates, but she stressed the importance of protecting K-12 schools, higher education and health care services.
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