Brighter Economic Outlook

Brighter Economic Outlook:

By Governor Mike Johanns

Dear Nebraska Neighbors:

I write to you this week with some good news on our state's economic front. For the first time in more than two years the state is closing the books on a fiscal year ahead of projections. I am very pleased to report that preliminary figures indicate we will end this year approximately $109 million above revised projections. After several difficult years, this is certainly good news for our state.

The gradual recovery began in March when we first saw signs of improvement statewide. But the recovery has been slow. It appears the final figures for June will exceed the revised forecast by approximately four percent to round out the fiscal year approximately $109 million above projections.

The gradual recovery can be attributed to a number of sources. Businesses are doing better and therefore tax revenues are better. Although we have been struggling with drought, ag prices have improved and that has helped to ease the pain of the last few years. Our consistently low unemployment rate has also helped.

The bottom line is that the economic performance during the past four months presents a brighter outlook for the future and I am cautiously optimistic about its growing strength.

With that said, I believe we must maintain a philosophy of fiscal conservatism. Long-term planning is crucial in supporting economic recovery and as we look ahead it is important to remember that the 2004 legislative session ended without addressing a $300 million budget gap.

Included in that figure is a $151 million judgment against the state in the low-level nuclear waste lawsuit. That's there-it's real and it's a judgment that is owed. As I have said many times before, the state is exploring every avenue to avoid the burden of that payment but the judgment is stern and our remaining options are limited.

So we have good reason to be very cautious as we prepare the next budget, which we're literally starting to draft now. There will be challenges ahead of us, but a strengthening economy certainly brightens our financial outlook. Without question, ending the fiscal year more than $100 million above revised projections leaves us better positioned to face the challenges ahead.

I think it is also worth remembering that despite the economic downturn, we have been able to start the ball rolling on several important initiatives. We are transforming our system of mental health services into a statewide system that focuses on community-based recovery. Vulnerable children in Nebraska will be better protected from abuse and neglect as a result of the sweeping changes in our child protection system. Another example of major reform launched in the last session is our new policy that promotes wise stewardship of a finite resource - water. These are just a few examples of major accomplishments in the midst of a stubborn recession.

Clearly, we have made progress both in terms of important policies and in laying ground work for continuing economic recovery. I am hopeful we can continue to foster growth by remaining cautious in our planning and committed to solving the tough issues that present themselves in our "Nebraska United."