LINCOLN — Modestly higher projections of Nebraska tax revenue issued Thursday appear to leave little room for either tax relief or spending growth.
But Gov. Dave Heineman called the figures “very good news for tax relief.”
“It's further evidence that Nebraska's economy is generating excess revenue and this money should be returned to taxpayers,” he said.
The state's official economic forecasting panel boosted its estimates of tax collections by $63 million for the current two-year budget period, which began July 1.
But under state law, the $46million projected increase for the current fiscal year will go directly to the state's cash reserve fund.
That leaves $17 million in fiscal year 2014-15 for new initiatives. That amount is less than one-half of a percent of the state budget for the year.
State Sen. Heath Mello of Omaha, the Appropriations Committee chairman, said he's taking a cautious approach to the new projections and plans to urge his colleagues to do the same.
“We didn't see a significant jump in revenues, and there's a lot of uncertainty,” he said. “If we're entertaining any tax relief proposals, they need to be responsible proposals.”
Mello said he was glad the projections had increased compared with those issued in April.
But he said the state revenue picture still has too many uncertainties, including the impact of the partial federal shutdown, the future path of federal fiscal policy and the need to address state prison overcrowding.
Lawmakers have turned to the cash reserve to fund one-time construction projects. It has been used for tax cuts as well, an approach Heineman favors.
He said adding the $46 million to the cash reserve would make a record reserve even larger. The additional revenue would push the reserve to $725 million by July 1 next year.
Heineman declined to say how big a tax cut he plans to offer but said he believes the state did fine with a cash reserve of $500million to $525 million.
A legislative committee led by Sen. Galen Hadley of Kearney has spent the summer studying a possible revamp of the state tax system. Committee members have said they are looking at ways to improve state taxes while remaining revenue neutral.
Michael Calvert, the legislative fiscal analyst, said the new projections from the Nebraska Economic Forecasting Advisory Board represent “pretty modest” annual growth in tax revenue.
After accounting for changes in state law and one-time events, the new forecast represents 3.4 percent annual growth in revenue for fiscal year 2013-14. The 2014-15 forecast represents 4 percent annual growth.
Nebraska revenue growth for the past 31 years has averaged 5 percent. The average for the last 10 years has be 4.5 percent.
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