The latest tax revenue projection for the state of Nebraska was definitely good news. The forecast raised the revenue by $161 million for the current fiscal year and $101 million for the next year.
That good news, though, does present a dilemma for the Legislature. Do they put that added revenue toward property tax relief as Gov. Pete Ricketts and some ag groups have suggested? Or should they let the funds stay in the state’s cash reserve to help protect the state if a downturn in the economy materializes?
Good arguments can be made on both sides. The state’s residents, particularly ag producers, have called for property tax relief as their taxes have ballooned over the past decade.
While the Legislature and the governor have failed to agree on a structural change in Nebraska’s tax system to provide significant property tax relief, they have incrementally increased the amount in the property tax relief fund.
The increased revenue forecast gives them the opportunity to add more to the fund, providing more property tax relief.
On the other hand, others are advising caution. Renee Fry, Open Sky Policy Institute executive director, told The Independent that revenue forecasts are often inaccurate. In fact, the forecasts have been off by more than $100 million in 10 of the past 12 years.
If the added revenue doesn’t materialize, obligating the funds will force the state to take funds from other programs to meet those obligations.
In addition, taking a one-time increase in revenue and committing it for a continuing purpose could create a budget problem in the future if revenue drops.
Like we said, there are good arguments on both sides.
This is a case that definitely calls for a middle ground. The state’s ag producers need to have their tax burden lessened. Putting a portion of the added revenue toward that is another step to accomplishing that goal. However, the state must be cautious about committing all of the funds.
The state’s cash reserve does need to be bolstered. In addition, Nebraska still needs to spend more on the state prison system. Corrections officers’ pay should be raised to get staffing to the right level and raises should be given to retain staff.
The state also may face additional expenses in repairing infrastructure damaged in last year’s floods. The federal government is helping, but the state has a share to pay.
So with a good news revenue forecast comes some decisions. Putting some of the funds toward property tax relief would be welcome, but the Legislature must be cautious about overcommitting the funds and then creating other problems down the road.