By Associated Press Writer
updated 5/10/2010 2:09:26 PM ET 2010-05-10T18:09:26

A report released Monday said Nebraska state government's tax revenue fell far below projections in April, adding fresh concerns about the state budget. But the data also gave politicians hope that the economy is starting to recover.

"When you dig into the numbers a little bit, the parts where we were down reflected the economy in 2009 more than 2010," said Sen. Lavon Heidemann of Elk Creek, chairman of the Legislature's budget-writing Appropriations Committee, adding later: "We might have actually hit bottom."

Net tax revenue in April was off by nearly $52 million, or 14.6 percent below official projections that set the baseline for the state budget, according to the state Department of Revenue report. Net individual and corporate income taxes were 25 percent and 28 percent below projections, respectively.

Gov. Dave Heineman called the April figures disappointing but said they contain early signs of an improved economy. Net sales taxes actually beat projections by more than 2 percent and state Tax Commissioner Doug Ewald said tax withholding by employers in April was strong.

"I am cautiously hopeful about the future, but I fully expect bumps along the road to a broader economic recovery," Heineman said in a statement.

Overall, net tax receipts for the month were below official projections by $51.9 million. For the fiscal year to date, state receipts are $56.1 million below projections.

If revenues rebound and are close to projections in May and June, lawmakers probably won't have to hold a special legislative session to make changes to the budget, Heidemann said.

Another lawmaker on the Appropriations Committee disagreed, saying that if May revenues fall below projections, a special session should be held.

"I'm concerned that some are saying we won't need to worry about this for the next couple months — that's almost $60 million we'll have to find," said Sen. Heath Mello of Omaha. "I'm concerned people are wearing rose-colored glasses."

Lower-than-expected tax revenues forced Heineman to call a special session in November. During the session, he and lawmakers quickly closed a $334 million budget gap, primarily using across-the-board cuts to state agencies.

During the regular legislative session that ended a month ago, lawmakers and Heineman reduced the current two-year budget by another $48 million, cutting agencies more.

If lawmakers are able to avoid a special session this summer, they're still expected to face deep budget problems when they meet in January to craft a new two-year budget.

Current estimates peg the budget deficit for the two-year budget that will begin in July 2011 at roughly $670 million.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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