Nebraska’s July tax receipts come close to economic forecasts as impact of tax refunds wanes

Nebraska’s tax receipts have consistently fallen below forecasts for most of 2026 so far. The last time revenue came in above forecasts was January.

While July’s tax report was the closest the state has come to seeing tax revenues rise above forecasts since then, the $402,000 difference will still add to the state’s projected budget deficit, currently set at $208 million.

July’s report also lists that state tax refunds for the month were 7.3% (or $7.7 million) above economic forecasts. Tax refunds have consistently come in above forecasts since March, with April being the peak at 98.3% ($162 million) above forecasts.

Since April, the impact of issued tax refunds has steadily waned. May’s tax refunds were 32.5% ($45.5 million) above forecasts, and June’s was 12.5% ($15 million) above forecasts.

Gov. Jim Pillen in April pointed to the higher-than-expected tax refunds as the reason why individual income tax revenues were low during those months. Pillen argued that this was a good thing.

“Nebraskans are keeping more of their pay instead of giving it to government,” Pillen said in an April press release. “That’s the objective we want to achieve for hard-working Nebraskans. At the same time, we need to relentlessly cut spending to ensure that the state is living within its means.”

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Neil Sullivan, the state budget director, said the forecasting board’s projections for tax refunds were far lower than what was actually allocated. He said the board projected about $802 million in refunds for all of fiscal year 2026, but the year instead brought about $1.1 billion in refunds.

For FY 2027, which began in July, Sullivan said, the board projected refunds at $842 million. He said he is more confident this forecast will be more accurate.

Lawmakers spent the 2026 session working to fill a fluctuating shortfall that peaked at roughly $646 million. If receipts continue on this trend, the 2027 session could be the third in a row that lawmakers have had to grapple with a projected deficit.

During the 90-day session that begins in January, state senators will form the budget for the next biennium, July 1, 2027, to June 30, 2029. They may have to fill two separate deficits. An $846 million deficit is projected for the 2027-2029 budget.

As the impact of tax refunds wanes, it’s possible that future revenue reports will balance out or possibly rise above forecasts. Sullivan, however, said he doesn’t expect to see a “surge” in receipts and instead is hoping they remain flat to forecasts in the coming months.

“The message of this month’s receipts is that it’s on track, and that’s a great start for fiscal year (2027),” Sullivan said.

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