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State report shows more economic doom and gloom

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BY NANCY HICKS / Lincoln Journal Star

Wednesday, Nov 19, 2008 - 03:56:01 pm CST

State government will need most of its cash reserve to keep in the black over the next three years, if the prediction of slow growth in tax revenue continues.

That’s according to data in a report from the Legislature’s Fiscal Office presented Wednesday to a tax review committee created to monitor the financial situation for the Legislature.

The state would be in the hole by $377 million at the end of the next two-year budget cycle, June 30, 2011, without tapping into the cash reserve and without any major change in the economy.

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The amount in the state’s cash reserve is about $500 million.

That’s the best-case scenario, said Mike Calvert, director of the Fiscal Office, after a meeting with the tax review committee.

The fiscal office analysis is based on the slow growth (less than 1.5 percent a year) during the two years of the next biennium, a prediction that doesn’t take fully into account the economic problems created by the Wall Street chaos.

There are “huge uncertainties” about future state revenue, Calvert said.

The expected downturn has not yet shown up on monthly reports of income and sales tax revenue. State tax revenue continues to flow in as expected, but that is not likely to continue, said Tax Commissioner Doug Ewald.

Ewald doesn’t expect the aftermath of the Wall Street chaos, or the effects of the recession — already in full bloom in other states — to show up in Nebraska’s income and sales tax revenue until next year. “It’s coming,” he said, predicting perhaps January or February.

There are also uncertainties on the spending side. The current budget plans show slower-than-normal growth on Medicaid, public assistance and children’s health insurance, all programs aimed at lower income families. But these programs tend to be counter-cyclical, meaning they grow faster during recessions than in good economic times, Calvert noted.

Other unknowns include potential loss of $25 million a year in federal funds at the Beatrice State Developmental Center; liability damages under the Kansas versus Nebraska water litigation; higher than 1 percent rate increases to pay state-contracted health care providers (3 percent increases would cost another $50 million over two years); and potential unknown state costs to keep some of the state retirement plans sound, according to the report.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.


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Bdryn wrote on November 19, 2008 12:24 pm:
" Will this be a red flag to legislature to rein in some spending proposals? I some how doubt it that it will. Hopefully government can be proactive rather than reactive, and avoid some of the messes of other states like California and New York. Don't be so quick to create new programs of spending, just because there is money there, because as this article states, it won't always be the case! "

 re Bdryn wrote on November 19, 2008 12:33 pm:
" Right on! The reserve should be maintained, spending should be reduced, and taxes should not be raised. "

 Yup wrote on November 19, 2008 12:41 pm:
" Good thing we didn't spend the surpluss...or did we? "

 am a state night worker wrote on November 19, 2008 1:29 pm:
" When the budget proposes a 2% to 2.5% raise for employees, the comments will fly high as we don't deserve it. Well the cost in health care that you read above has already been passed on to us effective January 09 and another increase in July 09. So until that point I will be losing $24 month until July when even with a raise will not cover the next go arounds of Blue Cross increases effective July 1. Think I have donated to my side of economy. I still want to know the thousands upon thousands they make from the parking garages, 700 cars @ $30/mo x 2 garages or about $42,000 a month PLUS what they get when gouging private parking at $5.00 a vehicle. But that never gets answered. "

 Saunders Co. Self-Employed wrote on November 19, 2008 2:34 pm:
" Cut the size of the state employee corps. Cut. Cut. Cut. "

 Alan wrote on November 19, 2008 3:06 pm:
" Hopefully our new Senators are close enough to the people yet to realize that tax increases must be off the table. Maybe even tax and spend Lincoln will realize now is not the time to forge ahead with a new arena. "

 Apologista wrote on November 19, 2008 3:08 pm:
" I agree with Saunders Co. Clearly, the most prudent course of action in face of the recession is to lay a bunch of people off. "

 Well wrote on November 19, 2008 3:46 pm:
" Be glad you can still work. At a seniors health insurance meeting,
when you start having doctors wanting you to make appointments before you
even leave from one appointment, or unfortunately have a medical problem,
THEN you'll have something to scream about. And you might be fortunate
just to be able to get health insurance. On a limited fixed income
and the prices keep rising for premiums, then copays, coinsurance,
and $4,000. to $6,000. out of pocket expense a year, that will about
do ya in!!! But gee, I'm sure the state & city will want the seniors
to poney up for them too!!! "

 Brock Landers wrote on November 19, 2008 4:17 pm:
" Cut away the employees and who provides the services that you demand and expect? Get real... cutting employees is NOT the answer here! You want to cut employees? OK, then tell me which services you are willing to let go... "

 Tax Chopper wrote on November 19, 2008 4:17 pm:
" Cut, cut, cut, why do we have all of these obsolete board and commissions, they are a waste. Cut, cut and make even deeper cuts. "

 Dan in Havelock wrote on November 19, 2008 4:59 pm:
" Yeah, I think we could cut some state spending.
My big brother works in the State Office bldg (I'm not saying which office, you think I'm nutz?).Two folks in his office were out for awhile and he covered both of their jobs for them while they were gone and swears he still could have gone home after lunch with a clean desk. In the meantime, he's become the nations foremost sudoku player! :) "

 Entitled wrote on November 19, 2008 5:05 pm:
" Why does every individual think that a health plan is a god given right? It is a benefit!!! Back in the day, our grandparentsa did not have a health plan, they saved their money for a rainy day and paid cash. So state employees helathc are costs have increased, so have the private sectors. The pivate sector controls costs at all expense, so should the state, and if that means you lose a job, or take a pay cut, then so be it. Deal with it or find a different job. "

 Once again wrote on November 19, 2008 7:23 pm:
" As a state employee I am more than happy to be like the private sector and "take a pay cut or lose a job" as long as I can get a bonus and/or performance pay increases. Unfortunately (for you and me) that will never happen. "

 why wrote on November 19, 2008 9:14 pm:
" always we hear these state workers complaining about how bad they have it but yet they STAY whats up with that here is a idea get a new job "

 State Night Worker Again wrote on November 20, 2008 7:49 am:
" I agree much of the upper level management is top heavy in the state, unnecessary travel etc. It is the support functions that suffer and actually do the work. I also agree there are too many little sub-commissions etc that could go by the wayside. I am not complaining when I wrote about the health insurance but so many of you think state workers get a deal--so not true. We service YOU the public and most in the front office are making barely minimum wage, maybe a little over. Those are the ones I take stance for regarding the increases. Now cut those positions and you wait in line for a service, there you go complaining again. There is one in my area, she works 3 jobs and about 85 hours a week, never sick, dedicated to her position. She collasped last week at 48 years old, she could keep it up. Again, those are the ones I am talking about--we are just like you. Yes I am greatful that I have a job and been there numerous years. And yes again, I have looked in the private sector and at my age I am not wanted. So I am stuck..yap stuck...and I will continue to service you with a SMILE. Before they let go support positions which of course will be the first, they need to evaluate the upper crust, seems those positions are always safe being state, city,county or private sector. "

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