- Associated Press - Friday, October 30, 2015

LINCOLN, Neb. (AP) - Nebraska state government could face a financial squeeze in next year’s legislative session, forcing lawmakers and Gov. Pete Ricketts to trim from the budget or find money elsewhere.

New revenue estimates approved Friday by the Nebraska Economic Forecasting Advisory Board will create a projected $132 million shortfall in the two-year, $8.7 billion budget that was approved earlier this year.

The estimates could complicate efforts to pass major tax cuts or new spending priorities during the session that begins on Jan. 6.

“More than anything else, it’s going to lead to an extremely lean legislative session,” said Sen. Heath Mello, chairman of the budget-writing Appropriations Committee. “I think it shows that right now, engaging in any risky tax reform could only be more detrimental to the state moving forward.”

Ricketts vowed to continue working with senators, tax experts and other stakeholders to prepare tax proposals, while taking steps to control state agency spending. Ricketts has said he plans to unveil a package that will lower income and property taxes.

“As I have traveled the state, Nebraskans have told me that their family and small business budgets benefit from tax relief,” Ricketts said.

The state forecasting board reduced its revenue forecast by $154 million over the two-year budget cycle, which would place the state’s general fund below the minimum reserve required by law.

Because of accounting adjustments and money that’s already in the general fund, the projected shortfall that lawmakers could face is closer to $132 million.

Revenue is now projected to grow 3.6 percent in the current fiscal year, and 4.1 percent in the next fiscal year. State revenue has traditionally grown by about 5 percent annually.

Forecasting board members continued to express optimism about Nebraska’s economy, but pointed to worries about the global economy and companies cutting jobs.

“As optimistic as I am about the economy, I’m more cautious than I was in our last meeting” in April, said member Steven Ferris, a financial adviser from Lincoln.

Jerome Deichert of Omaha, the board’s chairman, said the entire state continues to face a shortage of housing and employees who can fill high-skill jobs.

The new forecast illustrates the importance of caution when it comes to state spending and tax policies, said Renee Fry, executive director of the OpenSky Policy Institute. Fry said state revenues can be unpredictable even when the economy is strong and unemployment is low.

“Fortunately in Nebraska, our lawmakers have maintained a strong cash reserve that will help us maintain our schools, roads and other vital services when the economy dips,” Fry said in a statement.

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