Nebraska is once again facing a budget shortfall, with a newly projected deficit of $95.3 million for the current two-year budget cycle. The update was confirmed Thursday by Legislative Fiscal Analyst Keisha Patent during a meeting of the Tax Rate Review Committee, offering state lawmakers their first budget status report since the 2025 legislative session concluded in June.
Just a few months ago, lawmakers had managed to bring the state’s deficit under control—reducing a previous shortfall of $432 million down to a $4 million surplus projected through 2027. However, they had already forecasted a $129 million deficit for the 2027–2029 biennium. That projection has now worsened, with the expected deficit for that future period rising to $218 million.
The biggest driver of the current deficit is a drop in tax revenues—$86 million below projections in May and June, according to figures from the Economic Forecasting Advisory Board. Additionally, a $10 million transfer from cash reserves to the general fund contributed further to the gap.
State Sen. Rob Clements of Elmwood, who chairs the Appropriations Committee, stressed the need for strong spending controls when the Legislature reconvenes in 2026. Governor Jim Pillen has already signaled an intention to cut 10%—roughly $500 million—from the general fund for the next fiscal year.
While the financial outlook could shift based on upcoming updates from state agencies and the Department of Revenue—particularly regarding the impacts of the recently passed federal budget reconciliation bill—Clements remains cautiously optimistic. He acknowledged some potential negative impacts from federal changes, such as reduced income tax from a “no tax on tips” provision and increased SNAP administrative costs, but he said none appear significant enough to warrant a special legislative session at this time.
“There’s no cause for alarm,” Clements said, assuring that the situation remains manageable moving forward.
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