Policy Documents

Where Did the Money Go? An Analysis of Spending and Revenue in Nebraska and Surrounding States, 2002-2008

Adam B. Summers, Leonard C. Gilroy and Lisa Snell –
July 1, 2010

 

The ongoing economic downturn has made life difficult for taxpayer, legislator, and bureaucrat alike. Those in the private sector have been adjusting to the new and ever-changing economic con-ditions for the past two and a half years, but government budgets, shielded somewhat from eco-nomic conditions (for a time, anyway) by political forces and interests, have been slower to adjust. This, accompanied by a lack of prudent fiscal planning and the apparent belief that the boom times would never end, has led states to spend beyond their means and made the ultimate correction more painful in the long run. We are now at that point of reckoning.

In order to determine where the money should go in the future, it is instructive to see where it has come from, and where it has gone in the recent past. Using U.S. Census data from 2002 through 2008, we looked at Nebraska’s spending and revenue growth and per capita data in a number of categories and compared them to national averages and the figures for surrounding states. Nebraska generally came in about the same or a little below the aggregate national aver-ages in the major spending and revenue categories (and a bit above the national average for general sales tax and corporate income tax revenue), although the national average tends to be skewed higher by the faster growing Southwestern states, large states such as Texas and Flor-ida, and bigger-spending Eastern states. Thus, we determined that it would be more illuminat-ing to measure Nebraska as compared to its neighboring states: Colorado, Iowa, Kansas, Mis-souri, South Dakota, and Wyoming.

Compared to its border states, Nebraska’s spending and revenue performance during the pe-riod is somewhat of a mixed bag. Nebraska generally did better than some states, such as higher-spending Wyoming and Kansas, but not as good as others, such as Colorado and Mis-souri. Thus, Nebraska has not been as profligate as some of its neighbors, but neither has it been as thrifty as others. As such, it has not been able to escape, or more greatly soften, the blow of the effects of the recession.

Between 2002 and 2008, revenue actually increased significantly. Nebraska’s total revenue in-creased 40 percent, a little lower than the aggregate increase of all states (48 percent) but squarely in the middle range of its bordering states. Its total tax revenue increased 41 percent, slightly below the aggregate increase of all states (46 percent) but ahead of all neighboring states except Wyoming and Kansas in terms of both the increase in revenue and 2008 revenue per capita.