News Release: Tax Proposal would create 2nd largest deficit on record in Nebraska
For release: March 6, 2012
A new analysis conducted by OpenSky Policy Institute shows that the new tax cut proposal under consideration by the Revenue Committee would create the 2nd largest deficit in Nebraska in at least the last 15 years, and further delay revenue recovery.
The potential compromise to LB 970 has been limited to income tax cuts, at a cost of approximately $224 million through the next biennium. The state faces a $392 million projected deficit during this same time, for a total budget gap of $609 million.*
“Passing the tax cut compromise under consideration by the Revenue Committee would bring the projected deficit to over $600 million; the second-largest budget deficit projected in at least 15 years, said Renee Fry, executive director of OpenSky Policy Institute. “This deficit would be second only to the deficits forecast in 2010 and would constitute 8.2% of the budget. To put this number in perspective, it equates to our entire budget for public safety” said Fry.
Further, in 13 of the last 15 years, the legislature has finished the session with a deficit projected in the following biennium. “Clearly, Nebraska has a recurring revenue adequacy problem. It would be more prudent to address this underlying structural deficit through careful tax and spending reform to improve the adequacy and predictability of the budget. Adding new tax cuts now only exacerbates the problem, setting us up for greater budget woes down the road.” Fry said.
Furthermore, revenues aren’t expected to recover to pre-recession levels until 2015 according to the Economic Forecast. LB 970 would significantly delay that recovery.
*There is a $6.5m effect on the minimum reserve so the numbers don’t sum to the total.
OpenSky Policy Institute is a non-partisan, data-driven think tank focused on tax and budget policy in Nebraska. Our mission is to improve opportunities for every Nebraskan by providing impartial and precise research, analysis, education, and leadership.
Contact:
Renee Fry, executive director
OpenSky Policy Institute
(402) 250-4518