LINCOLN — Though Nebraska saw record high revenues at the end of its latest fiscal year, state financial analysts don’t expect the trend to continue.
Nebraska’s Tax Rate Review Committee met Monday to hear the latest report on the state’s revenues at the end of fiscal year 2021-22, which finished June 30. Tom Bergquist, director of the state’s Legislative Fiscal Office, said Nebraska’s revenue growth was a record-setting 22.1%, more than 7 percentage points higher than the previous record of 13.5% that was set last year.
Before last year, Nebraska’s previous record-high revenue growth was logged in the late 1980s, at around 12%, Bergquist said. At the start of the fiscal year, he said, the state’s forecasting board projected Nebraska would see about 10.6% revenue growth.
According to a Nebraska Department of Revenue report released Friday, the state collected $624 million more for the fiscal year than what was predicted in February. Much of that was collected between March and April, Bergquist said, when about $515 million was brought in.
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Overall, Nebraska saw net tax revenues near $6.35 billion during the fiscal year, according to the report.
The spike in revenues can be largely attributed to a jump in individual income taxes, which were up 87%, and corporate taxes, which were up more than 100%, Bergquist said.
One area where state revenues dropped was in sales taxes, which Bergquist said were down $46 million in February. A big reason for that, he said, were high sales tax refunds during the fiscal year, reaching about $213 million.
“We’re pretty fortunate we had it happen during a high revenue time,” said State Sen. John Stinner of Gering, chair of the state Appropriations Committee.
The state revenues were “extraordinarily high,” Bergquist said — enough that he expects the forecasting board will set its next revenue projections higher than ever before in October. He said, however, that Nebraska already may have hit its peak.
Bergquist noted that state revenues typically fluctuate from year to year. About five years ago, he said, Nebraska saw back-to-back years where overall revenue growth was at a meager 0.3%.
“When it’s good, it’s good,” Bergquist said. “And when it’s bad, it hurts.”
One big question mark is how much federal aid contributed to Nebraska’s unprecedented revenue growth, he said. Since the start of the COVID-19 pandemic, the federal government has contributed billions of dollars to Nebraska, but that aid recently has tapered off.
“That’s gonna be the big issue,” Bergquist said.
The good news is even if state revenues drop in coming years, Bergquist said he expects Nebraska’s future budgets will be fine. The extra revenue will add to the state’s cash reserve, which already was expected to hit a record high of $1.25 billion by the end of next June. Now, the reserve is expected to be closer to $1.69 billion.
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