LINCOLN — Nebraska’s fiscal picture turned a bit gloomier Thursday when a state panel lowered its prediction of state tax revenue by $110 million through the end of the next budget period.

The new revenue forecast means that lawmakers will have to tighten the state budget for the two fiscal years ending June 30, 2021. It also makes the road ahead rougher for property tax relief measures.

State Sen. John Stinner of Gering, the Appropriations Committee chairman, had anticipated that the news could be even worse. When presenting a preliminary budget plan to colleagues on Wednesday, he emphasized the “preliminary” designation.

“The world may change on Thursday,” he said.

Gov. Pete Ricketts offered a measured response, saying the new forecast would “inform our work as we balance the budget without raising taxes.” He said the new budget would not become final until after April, when officials know more about individual income tax receipts for the year.

The Appropriations Committee’s preliminary budget plan called for balancing the budget based on the previous revenue forecast. It proposed $9.36 billion worth of spending over the two-year period, which would amount to an average increase of 3.3 percent.

Ricketts had recommended a 3.1 percent average increase in spending.

The committee proposal included more money to boost payment rates for Medicaid, child welfare and other service providers. It also incorporated higher state employee raises as required under recently completed collective bargaining agreements.

But the committee plan called for a smaller increase in state aid to schools than the governor’s proposal. The plan assumes passage of a bill to phase out a cost-cutting measure instituted two years ago.

Under current law, that measure is to end on June 30, contributing to a $77 million bump in aid for the 2019-20 school year and another $8 million increase the following year. Legislative Bill 588, introduced by Stinner, would increase aid by $51 million in 2019-20 and $33.5 million the next year.

The new revenue forecast means that Appropriations Committee members will have to revisit some of their budget decisions before sending a final plan to the full Legislature.

The Nebraska Economic Forecasting Advisory Board’s revenue predictions are used by both the Legislature and the governor in crafting state budgets.

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The board last met in October, at which time they raised their projections of this year’s revenue by $69 million and made their first projections for the two-year budget period. The board will meet again in late April, shortly before lawmakers begin debating the Appropriations Committee’s final budget package.

One area likely to get additional attention now will be the cash reserve. Based on the October projection, the $69 million increase in tax revenues for the current year would have automatically gone into the cash reserve.

That transfer will not happen under the new forecast, which could leave the reserve at its lowest level since 2005-06. The preliminary budget plan calls for taking $54.7 million out of the reserve for prison construction. That would put the reserve at an estimated $278.8 million by June 30, 2021.

In the current fiscal year, which ends on June 30, state tax collections have fallen short of projections for four straight months. Through January, net receipts were running about $80 million less than predicted in the October forecast.

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Martha Stoddard keeps legislators honest from The World-Herald's Lincoln bureau, where she covers news from the State Capitol. Follow her on Twitter @StoddardOWH. Phone: 402-473-9583.

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