State revenue falls short

LINCOLN — At least one state senator believes a special budget-cutting session looks more likely, with Nebraska tax revenues falling $56 million behind projections for the year to date.

But other state officials saw a few glimmers of hope in a report released Monday on April tax revenues.
Gov. Dave Heineman said the report from the state Revenue Department sent a mixed message about the state’s economy.

“While April receipts are disappointing, there are early signs of an improved economy,” Heineman said, noting that business officials tell him they are starting to add hours and increase production.

“I am cautiously hopeful about the future, but I fully expect bumps along the road to a broader economic recovery,” he said.

State Sen. Lavon Heidemann of Elk Creek, chairman of the Legislature’s Appropriations Committee, sounded a similar note.

Lower-than-expected income tax payments reflect last year’s struggling economy, he said.

Net individual income tax revenues were $46 million, or 24 percent, below projections for April. Corporate income tax revenues were $6 million, or 28 percent, lower than expected.

But state sales tax revenues were up slightly — $2.5 million, or 2 percent, for the month — compared with projections, Heidemann said.

Sales taxes reflect more current economic activity, he said.

Sen. Heath Mello of Omaha, an Appropriations Committee member, sees more ominous signs when looking at the revenue report and other business indicators.

The state has fallen short of the February revenue forecast in two of the three months since then, while unemployment rates have risen over the last four months.

“I believe the need for a special legislative session looks more like reality,” Mello said. “We cannot look at this year’s unemployment and revenue trends with rose-colored glasses.”

He said the May revenue report will be telling about whether lawmakers will need to come back early to Lincoln.

Both Heineman and Heidemann said the April report is not gloomy enough to require calling legislators back for another budget-cutting special session.

“Not at this time,” the governor said, about calling a special session. “We’re going to watch it very, very closely.”

Heidemann said the state should have enough money in its reserves to pay bills through the end of the current fiscal year.

But officials, he said, will monitor May and June tax revenues more carefully than usual.

“This isn’t good news, but it isn’t bad enough to come back into special session to tweak things” this far into the two-year budget period, Heidemann said.

Lawmakers confronted a larger budget gap when they met in November, just five months into the budget biennium ending July 30, 2011.

The governor called the special legislative session at that point to deal with a projected $334 million budget gap.

The gap opened when the state’s official revenue forecasting board met in October and lowered revenue projections for the biennium.

The board lowered its forecast again in February, forcing a new but smaller round of cuts.

April typically is a big month for state tax revenues because it is the month when income tax filings are due.