Positive receipts come two weeks ahead of final economic forecast before Legislature finalizes state budget changes
By Erin Bamer
Nebraska Examiner
LINCOLN — As lawmakers work to close a projected $471 million budget deficit, they got a bit of relief Friday in Nebraska’s latest tax revenues, which came in above expectations.
The state’s January tax receipts show a net growth of 6.5% over what Nebraska’s Economic Forecasting Advisory Board predicted in October, according to the state Department of Revenue.
That equates to just under $37 million in extra revenue flowing into the state’s coffers. Overall, fiscal year-to-date net receipts are nearly on track with expectations, just 0.2% below projections — a $9.6 million difference.
The biggest contributor to January’s positive receipts came from sales and use tax revenues, which came in 26.6% above projections for a $69.7 million gain.
This was welcome news to State Sen. Rob Clements of Elmwood, chair of the Nebraska Legislature’s Appropriations Committee, who said sales taxes are a good indicator of how the state’s economy is doing.
Legislative Fiscal Analyst Keisha Patent said January is historically a good month for sales and use taxes because it reflects holiday spending. Even so, she said sales and use tax revenues exceeded expectations for the month.
Individual income taxes came in 8% below forecasts, for a $17.7 million loss. Clements said he believes that was due to the continued impact of the state’s phased-in decreases to individual income tax rates, which are set to wrap up in 2027, when the rate will hit 3.99%.
Corporate income taxes also came in below projections by 30.5%, but because it typically is a smaller tax category, the drop equated to a $16.8 million loss. Patent said this was likely due to quarterly estimated payments for businesses coming in below projections for January.
The latest tax receipts are one of the final economic indicators feeding the forecasting board before its members update projections at their next meeting Feb. 27. The meeting will be critical in determining the size of the projected budget deficit lawmakers have to fill before the end of March.
Patent has said the Legislative Fiscal Office incorporates other economic factors into its reports to the forecasting board, including significant changes to Nebraska’s Gross Domestic Product. This could also be beneficial to the budget, as both the second and third quarters of 2025 saw Nebraska’s GDP grow by roughly 5%.
January’s tax receipts put Clements “a bit more at ease” as the Appropriations Committee is in the middle of considering a list of proposed budget cuts to fill the deficit. He said he’d been concerned that additional cuts might be needed if the forecasting board’s projections increased the deficit further, but given the latest receipts he expects the next forecast to remain relatively flat.
“I don’t know where it will be, but it is encouraging,” Clements said.