LINCOLN — A special budget-cutting session of the Legislature isn’t likely following the release of a new state report on Nebraska’s tax revenues.
A State Department of Revenue report issued Friday showed that net tax collections for September were 5.3 percent — or about $25 million — less than expected. Gross receipts were 1.6 percent — or $8 million — less than predicted.
Gov. Pete Ricketts said he’s not likely to call a special session, based on the receipts and the state’s healthy cash reserve. Still, he said, circumstances could change depending on a meeting by the Nebraska Economic Forecasting Advisory Board later this month.
The Revenue Department report compares tax receipts with the revenue forecast issued in February by the forecasting board. It meets again this month to review its predictions.
“The downturn in revenue is certainly a significant challenge, but we are working to manage it within state agencies,” Ricketts said. “I have every confidence that the Legislature and I can work together in January to do what needs to be done to meet the challenge.”
Ricketts in July instructed the state budget office to cut quarterly allotments to state agencies by 1 percent every three months.
The governor said Friday he will cut agency allotments by an additional 1 percent for the third quarter, which begins in January. In all, Ricketts plans to withhold at least 4 percent from state agencies for the year.
The fiscal picture will become clearer after the forecasting board’s meeting and when the Legislature starts its budget-making process.
Ricketts this summer also called for agencies to review all hiring and limit travel to essential services. He said he’s now putting a ban on non-essential out-of-state travel and instituting a hiring freeze in state agencies for all positions that aren’t mission critical.
Ricketts has enacted a ban on all non-essential travel for code agencies, and he has asked all other agencies, boards and commissions to follow suit, his spokesman Taylor Gage said. Hiring freezes among nonmission-critical positions, which might include administrative staff, consultants and contractors, will vary by agency, he said.
State Sen. Heath Mello, chairman of the Legislature’s Appropriations Committee, said he doesn’t think a special session is likely to be needed, though he’ll be waiting to see what happens when the forecasting board meets.
Mello applauded the governor for taking steps through the executive branch to prepare agencies, and pointed to the value of maintaining a strong cash reserve fund.
“The state has a healthy cash reserve to prepare us for uncertainty when you see more volatile revenue,” said Mello, who for four years has shepherded the budget-making committee. He is term-limited.
Renee Fry, executive director of the OpenSky Policy Institute, expressed concern that the growing budget shortfall raises a red flag that lawmakers have gone too far with tax cuts in recent years.
“The continued downturn in revenue threatens investments in schools and other vital services and makes it more difficult to address pressing issues like corrections and property taxes,” she said in a statement.
Tax Commissioner Tony Fulton pointed to $70 million in tax refunds that the state paid out in September, which was 31 percent — or $16 million — more than forecast. He called the amount hard to predict and an anomaly.
Fulton called September’s net receipts challenging because it’s a big month for tax collections. “That does present us a challenge going forward, so we’ll be watching things carefully,” he said.