LINCOLN — Nebraska’s projected budget deficit continues to grow after the fourth consecutive month of state tax receipts falling below economic forecasts.
The state Department of Revenue’s report on June’s tax receipts showed a net loss of 7% compared to what Nebraska’s Economic Forecasting Advisory Board had predicted in late February. That difference equates to about $51 million less revenue headed to the state’s coffers.
Adding to the tax receipts reported for March, April and May, which also came in below projections, that leaves an expected deficit of around $223 million.
Lawmakers spent the 2026 session working to fill a fluctuating shortfall that hit its peak at roughly $646 million. If receipts continue on this trend, this could make the 2027 session the third in a row that lawmakers have had to grapple with a projected deficit.
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With the 2027 session also slated to be a longer 90-day session where lawmakers will form the budget for the next biennium spanning from July 1, 2027 to June 30, 2029, state senators may have to fill two separate deficits. A deficit is projected in the next biennium, currently set at $631 million.
Income tax revenue down; sales and use tax revenue up
The biggest factor in June’s lower receipts was individual income taxes, which were 10.6% below forecast, equating to a $30.9 million loss. This is consistent with March, April and May’s receipts, which saw individual income taxes come in below projections, albeit by larger margins.
Gov. Jim Pillen and other state officials pointed to higher-than-expected tax refunds as the reason why individual income tax revenues were low in previous months. It is unclear whether that remained a factor in June’s receipts.
Nebraska is in the midst of cutting income tax rates, with the top rate scheduled to reach 3.99% in 2027, completing the phased process. Jim Vokal, CEO of conservative thinktank the Platte Institute, said it is still important to keep these phased reductions in place, as Nebraska is “woefully uncompetitive” with other states when it comes to income taxes.
On the flip side, June’s receipts also kept with the trend of sales and use tax revenues coming in above projections. In June, sales and use taxes were 10% above forecasts, equating to a $22.1 million increase.
Vokal said it was encouraging to see sales and use taxes exceed expectations, especially given that nationwide he’s observed a trend of consumers spending less overall.
Craig Beck, research director for progressive thinktank OpenSky Policy Institute, said it will be difficult to gauge the truth of Nebraska’s fiscal state until the forecasting board makes its next projections in October. Those projections will solidify the projected deficit lawmakers will have to handle in the current budget cycle, and the next biennium.
State Sen. Kathleen Kauth of Omaha, who sits on the Legislature’s Revenue Committee, said she expects state tax receipts will fluctuate in the coming months, and potentially fill some of the gap before next session.
Vokal agreed that it’s normal for receipts to fluctuate, but said it’s important to be proactive in responding to the latest information. He praised Pillen for a memo he issued last week announcing a 5% spending cut that would be applied to all state agencies, effective immediately.
Kauth said she also appreciated the governor’s initiative. She said it’s important for state officials to continue shrinking the size of government and remove red tape to make Nebraska a friendlier place for businesses.
“The state does not make money. The state takes money, and then spends it for the citizens,” Kauth said. “I think the less money we can take from citizens and the more they can spend on things that are important to them, the better off we are as a state.”
This story is provided by States Newsroom, a nonprofit state news network and Blox Digital content partner.
