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COVID-19 scare stokes worries about Nebraska tax collections

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Posted at 10:47 AM, Feb 29, 2020
and last updated 2020-02-29 11:47:09-05

LINCOLN, Neb. (AP) — Nebraska state government could see a boost to its emergency fund over the next few months, based on new estimates released Friday, but the COVID-19 virus and a panicked stock market are tempering some of those expectations.

Members of the Nebraska Economic Forecasting Advisory Board predicted that the state will collect $5.2 billion in tax revenue during the current fiscal year, which ends June 30. That’s about $115 million more than the previous projections, and by law, that excess money will go into Nebraska state government’s cash reserve fund.

If the estimates are accurate, the cash reserve that’s commonly used for emergencies and one-time expenses would grow to about $731 million. But board members warned that the outlook could change quickly given the last week’s market selloff and growing fears about the virus, also known as the novel coronavirus.

“Whatever forecast we end up with today, it’s going to be the best-case scenario,” board member Richard McGinnis said.

In the next fiscal year, board members predicted the state will receive $5.175 billion, just $25 million higher than their previous estimate.

Tom Bergquist, the director of the Legislature’s Fiscal Office, said it’s too early to know what effect the scares will have on state revenue.

“There’d be some significant declines if this continues to go on,” he said.

Nebraska Gov. Pete Ricketts said in an interview that the new forecast still gives lawmakers the opportunity to fulfill his top priority of lowering property taxes. He said state officials are monitoring the situation with the COVID-19 virus and will respond accordingly.

“This increased forecast eases the Legislature’s pathway to delivering over $500 million of property tax relief this session,” Ricketts said in a statement after the new estimates were approved. “As one famous Nebraskan would say, ’Let’s git-r-done!”

Board member Tonn Ostergard said the virus is already affecting the global supply chain that serves Nebraska businesses. Even so, “the economy of Nebraska basically is strong,” he said.

Board member Steve Seline said the upcoming presidential election could also sway the markets, which in turn would influence state tax collections. On the flip side, he said the flood-recovery efforts in parts of Nebraska have given a boost to the local economy.

The virus and other factors such as U.S. tariffs, the 2017 federal tax cuts and the cost of Nebraska’s tax incentives will create a good deal of uncertainty for lawmakers as they update their budget, said Renee Fry, executive director of the OpenSky Policy Institute, a tax-policy think tank.

“More money in the cash reserve is a good thing for the state, particularly if there is economic fallout from a potential pandemic,” Fry said.