Nebraska Gov. Jim Pillen hosts an inaugural public roundtable with 18 of his appointed cabinet members in the Nebraska State Capitol. April 20, 2026. (Zach Wendling/Nebraska Examiner)
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LINCOLN — More state budget cuts could be on the way in 2027 as Nebraska Gov. Jim Pillen again pledges to shrink state government with a goal of paying more to offset local property taxes.
Pillen made the promise Monday during his first-ever public roundtable with 18 members of his cabinet, plus Nebraska Lt. Gov. Joe Kelly, when a reporter asked how his appointees could work with him on a goal he’s had since before taking office in 2023: major property tax reform.
The governor, who is seeking reelection, said his team would work “collaboratively” and get better at shrinking government and spending “so that more dollars can be utilized for property tax reform.” Last week, he challenged the next Legislature to “solve the property tax crisis” in 2027.
“Silos have been long gone in the farm, and we’re knocking them all out in government,” Pillen said at the more than two-hour event Monday morning. “We’re working together, not just working in our own little wheelhouse.”
This spring marked the second of Pillen’s four legislative sessions in which lawmakers have sought to close a major projected budget deficit, fed partly by a combination of increased spending on property tax relief and income tax cuts. The governor and the Legislature have sparred over how to balance the budget. In total, the two years have dug a combined hole of more than $1 billion.
April 10 estimates from the Legislative Fiscal Office project that lawmakers next year could face a $632 million budget deficit when crafting the next two-year state budget, for between July 2027 and June 2029. The projected deficit includes current laws plus assumptions of 3.6% more revenue and 2.5% in increased expenditures in Fiscal Year 2027-28, along with 5.6% more revenue and 2.4% in increased expenditures in Fiscal Year 2028-29, compared to the prior fiscal years.
Economic forecasts and tax receipts will alter those estimates over time.
‘Growing government’
Pillen said Monday that a spending growth projection of 3% or so “has no reality to it.” If he and the Legislature hold spending flat, that would save a little more than $400 million. Federal Medicaid and economic assistance cuts are also passing on increased costs to state governments.
Next year also marks the last step of the state’s four-year, phased reduction in income tax rates to 3.99%, which Pillen supported and the Legislature passed in 2023. That legislation from Pillen’s first year included merging the state’s top two income tax brackets and eliminating a bifurcated tax on those making more than $100,000. Income tax filers won’t see the full impact until 2027 tax returns are filed — most of them by April 2028.
In recent years, the state’s structurally imbalanced budget has been filled in part by spending cuts and taking money from the state’s “rainy day” cash reserve fund and by sweeping various state agency cash funds, some funded via fees on taxpayers.
Pillen on Monday pledged that as long as he’s governor, “we will not be growing government.” His notable exception: state spending on increased property tax relief.
While Pillen has sought to refute reports that spending is up in his term, the Nebraska State Treasurer’s Office, led by Pillen appointee Treasurer Joey Spellerberg, shows state spending increasing every year Pillen has been in office. Part of that is Pillen’s increased willingness to accept and seek federal funding and increased investments in K-12 education.
Annual state spending increased from $17.17 billion in the fiscal year ending June 30, 2023, Pillen’s first six months in office, to $20.17 billion through June 30, 2025, according to the State Treasurer’s Office.
‘Feeding the demon’
In effect, the state’s increased spending on property tax credits is meant to buy down local spending and give taxpayers relief from a tax the state itself is prohibited from assessing.
Critics argue the approach is unsustainable, including State Sen. Tanya Storer of Whitman, who last year said she was concerned property tax credits were “feeding the demon” and taking away accountability from local taxing authorities.
“We still haven’t pulled the right triggers,” said Storer, a freshman lawmaker, rancher and former county commissioner, in May 2025.
Pillen and his allies have pitched expanding what exempted goods and services should be subject to the state’s 5.5-cent tax, plus local sales taxes of up to 2 cents. But some Republicans, including Storer, have balked at the idea, with some leading the charge against recent proposals.
The standstill hasn’t moved Pillen. He’s unafraid to push the same ideas while saying he would sit down with lawmakers as he hunts an elusive 33 senators to get around organized opposition and pass his ideas.
Pillen said Nebraska needs 33 lawmakers who will put ideology aside and be problem solvers on property taxes.
A property tax proposal, which mirrored some of Pillen’s broader tax base suggestions, around sales and “sin” taxes, fell short 30-15. There was no major vote in 2026, and lawmakers ended up ditching most of Pillen’s ideas in a 2024 special session dedicated to property tax relief, called at his request.
State Sen. Brad von Gillern of the Elkhorn area, the Revenue Committee chair, had said that 2025 proposal was “putting dollars into the top of a bucket that has a hole in the bottom of it.”
Progress and next steps
Pillen has made some progress toward property tax relief, including the first property tax decrease statewide in 26 years — by $6 million in 2024, compared to a total of $5.3 billion in property taxes statewide. The decrease was largely because lawmakers moved most community college costs off of local property tax rolls and had the state pick up the tab, using income and sales taxes instead.
Similar legislation to pick up more of the tab for local K-12 schools has repeatedly failed to gain traction, and data from the Nebraska Department of Revenue shows the era of holding the amount of property taxes levied flat was short-lived. Property taxes assessed in 2025 again increased by $285 million.
That was the third-largest increase in state history, just behind similar increases in 2022 ($292.93 million) and 2023 ($286.09 million), before Pillen took office. Local property taxes now total $5.59 billion statewide.
While Pillen and the Legislature have increased property tax credits and homestead exemptions, those bumps have not reached more than $300 million in any given fiscal year, behind the increase in property taxes levied in recent years.
Neil Sullivan, Nebraska’s state budget administrator in the Nebraska Department of Administrative Services, said seeking a “harder line” or cap on the growth of local spending is another idea on the table. While he hinted at other states with a broader tax base, he didn’t explicitly say that would be in the cards for 2027. Pillen has continued to beat the drum for that idea.
“We are making huge investments in property tax relief, and we all know the next step is to fix the leak,” Sullivan said Monday.
Counties, municipalities and schools, the three major property taxing entities that together account for nearly 90% of property taxes, have long argued that hard caps could hurt local control and decrease the amount or quality of services to taxpayers, who want more, not less, from local governments.
Also at the roundtable Monday, each cabinet member took time to tout what has occurred in their respective agencies since Pillen took office in 2023, ranging from steps to increase apprenticeships, accelerate highway construction and pursue the Perkins County Canal to a partnership with the federal government for an immigration detention center alongside a clearer state focus on prison rehabilitation.
A few cabinet members, including division leads in the Nebraska Department of Health and Human Services, Director Rhonda Lahm of the Nebraska Department of Motor Vehicles and State Fire Marshal Doug Hobein, did not attend.
“I’m so grateful that we all have the expectation that we can be the best, and that’s what I’m proud of: continuing to work,” Pillen said. “We just keep rolling our sleeves up, be pleased but sure as heck not satisfied, and we’ll continue to keep working until we’re the best as a team in America.”
This story is provided by States Newsroom, a nonprofit state news network and Blox Digital content partner.
