Appropriations Committee Chairman John Stinner says the length and depth of any economic downturn caused by the novel coronavirus outbreak could have a significant impact on Nebraska’s state and local finances for years to come.
During a webinar hosted by the Platte Institute on the state budget and COVID-19, the senator from Gering said the budget proposal currently pending in the Legislature, which includes a significant increase in the state’s cash reserve, up to 3% more in overall spending and $30 million in discretionary funds, is really no longer reflective of where the state stands today due to the pandemic.
Stinner said he’s waiting to find out if and how federal stimulus money can be used to offset revenue reductions, especially for local governments like the City of Scottsbluff that can expect to lose a chunk of income due to lower sales tax revenues. “This whole thing just ripples straight down, federal government through the state government, and I guess we’re going to have to sit back and start to react and plan for revenue shortfalls for essential services, those types of things we normally go through in business when we have a down-cycle,” He said much of what can or should be done will also be highly dependent on revenue receipts versus projections that will likely be lower in the coming months than previously anticipated at the beginning of the year.
Stinner says it could take up to three years for the overall economy and state revenues to return to where they were before the onset of the pandemic, depending on whether a recovery is V-shaped or U-shaped, and the ability of businesses and individuals to meet tax obligations.
However, he does say he would resist any calls to raise taxes to fill any revenue gap resulting from public health measures intended to slow the virus’ impact. “Raising taxes in the middle of a kind of recessionary environment we’re talking about is really contrary to what we should be doing,” said Stinner. “I know that sounds a little bit strange when you have a revenue shortfall, but economically, you can’t burden people with additional taxes when they’re just trying to survive.”
Stinner says the state has a budget that could likely stand up to the initial phases of an economic downturn, but failure to take any additional action at some point this year as revenue forecasts change would make budgetary work that much more difficult for lawmakers in the next biennium.