State braces for economic slowdown

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By JoANNE YOUNG / Lincoln Journal Star

Nebraska’s economic forecasters put their heads together Friday and came up with some bad news.

Their estimates for how much state tax receipts will go up this year and next are lower than projected last October.

That news caused Gov. Dave Heineman to rein in thoughts of giving state residents $75 million in tax relief and to call for agencies to scrutinize all spending. New spending should be rejected, he said.

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Gov. Dave Heineman

Gov. Dave Heineman

“Every penny, every dime, every dollar counts,” he said.

He led the way by canceling his trip this weekend to the National Governors Conference in Washington, D.C., and Lt. Gov. Rick Sheehy’s trip to a similar conference in March.

“We knew there was going to be a day we were going to have to prepare for an economic slowdown,” Heineman said.

A national economic slowdown is finally having an impact on the state, he said.

The Nebraska economy has always had mood swings, with four to five years of above average growth, followed by four or five with below average growth.

The Nebraska Economic Forecasting Advisory Board adopted a forecast for this year that shows total tax receipts could be $3.407 billion, down $51 million from previous forecasts.

Next year, the total could be $3.514 billion, down $75 million from October 2007 forecasts.

The growth in revenue is projected to be below average, at 4.2 percent this year and 3.7 percent next year.

The forecast shows the state will be short $68 million by the end of the legislative session. Nebraska must balance its budget, but not by raising taxes, Heineman said.

He doesn’t believe the state will have to dip into its estimated $500 million cash reserve.

Laurence Lanphier, forecasting board chairman, said the revenue dip predictions reflect increased oil prices and a housing downturn.

“There are an awful lot of variables,” he said.

The economy will change, he said. “We just have to wait and see how much.”

While some have predicted a nationwide recession, the Nebraska forecasters said it all depends on how you define a recession. But many economists agree there won’t be much growth in at least the first half of this year.

Lincoln’s sales tax revenue has been flat, said forecaster Steve Ferris, of Ferris Financial Group in Lincoln. He saw no real optimism for the economy in the next year.

Gerald Conway said that in northeast Nebraska grain farmers are pretty satisfied. Good land prices mean a lot of land is turning over, primarily with neighbors buying from neighbors to expand. Grain price futures are all solid, he said.

Leslie Andersen said things are not quite so bright in the Omaha area. Sales are flat, the residential construction market is dead and unemployment is expected to increase for at least the next year.

Sen. Lavon Heidemann, chairman of the Legislature’s Appropriations Committee, said the state will have to come up with the $68 million, required by state law for the budget’s minimum reserve.

Heidemann said he agrees with the governor: It will be hard to justify new spending.

“We have a lot of work in front of us,” he said.

Lawmakers are cautiously eyeing one big ticket item on the budget — state aid to schools.

The governor has fully funded school aid since he has been in office. But the state’s portion of school funding is predicted to increase 17.5 percent for the next school year, and then 11 percent for each of the next two years.

Heineman earlier called for changes in the state aid formula.

Reach JoAnne Young at 473-7228 or jyoung@journalstar.com.