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2017 marks the beginning of a new biennium in the Nebraska budget process. Every odd-numbered year the Nebraska Legislature develops and adopts a two year budget. Adjustments to the two year budget, called deficit appropriations, happen in the opposite year to address additional budget issues that arise unexpectedly. The state fiscal year runs from July 1 through June 30. Thus, dollars currently being spent were originally appropriated in the 2015 session for expenditure during the 2016-2017 fiscal year, which will end this June.
The budget process begins with the introduction of a budget proposal by the Governor. The Legislature’s Appropriations Committee, made up of 9 members representing each of the three congressional districts, reviews each component of the budget proposal line-by-line. The committee develops a preliminary recommendation, which forms the basis for public hearings held to obtain input from agencies, voters, and taxpayers. Following public hearings, the Appropriations Committee again works through the budget. Adjustments are made based on new information obtained from the public before advancing a final budget proposal to the floor for debate by the full Legislature. Following passage of the budget, the Governor does have the authority to exercise a line-item-veto of any single appropriation.
The amount of money used to develop the General Fund portion of the budget is based on projections of the Nebraska Economic Forecasting Advisory Board. These estimates are certified as a “Revenue Forecast”, based on the anticipated amount of sales tax and income taxes that will be paid in the future. It is important for voters to recognize these are calculations based on a number of economic assumptions, which try to predict your spending habits and income levels 24 months in advance in an attempt to estimate how much tax revenue may come into the state.
Over the past 7 months the actual receipts of tax revenue has been lower than projected. Thus, the assumptions around which the last state budget was developed did not prove to be correct. The “shortfall” represents this disparity between the expected revenue from taxes and the dollars appropriated. The Nebraska Constitution does not allow the state of Nebraska to spend money it does not have. Thus, adjustments must be made to the previously passed budget.
On the 17th and 18th of January the Appropriations Committee will hold public hearings on the proposed changes to the current fiscal year budget in response to the decreased revenue receipts. The budget adjustments include a combination of spending reductions, transfers into the General Fund from other funds including the Cash Reserve, and lapsing of unspent appropriations from last fiscal year.
Before work can begin on the next biennial budget, the current year adjustments must be passed by the Legislature. The typical process for the evaluation and development of the preliminary budget for 2017-2019 will be delayed during the process of revising the existing budget.
The Nebraska Economic Forecasting Advisory Board will meet again in February and April. That board has the ability to make adjustments to the certified revenue forecast based on economic data they have at that time. Those projections will need to be accommodated if they arise. As state revenues remain fluid, the budget writing process will need to be responsive to those conditions as well. Nebraska has a proud tradition of passing a balanced budget consistently on time, an accomplishment not achieved by many states. With diligent work, we will maintain that successful history.