Gov Jim Pillen, Courtesy Governor’s Office
Governor Jim Pillen has ordered state agencies, boards and commissions to further tighten spending, citing an unexpected $307 million increase in state tax refunds that has put additional pressure on Nebraska’s budget.
In a memo dated July 8, Pillen said the higher-than-expected refunds returned more money to Nebraska taxpayers, but also created a need for greater fiscal restraint to maintain a balanced budget while preserving recent income tax cuts and expanded property tax relief.
“In FY 2026, the State paid out $307 million more in refunds than anticipated,” Pillen wrote. “Higher refunds are great news for Nebraskans who have received money back in their pockets, but it also means we must double our efforts to reduce government spending.”
The governor said Nebraska must continue protecting the reduction of the state’s top individual income tax rate from 6.44% to 3.99% while maintaining approximately $1.8 billion annually in property tax relief.
Pillen compared state government to a business, saying agencies must embrace change and operate more efficiently.
“We must run government like a business and embrace the innovation and change that is necessary to shrink the size of government,” he wrote. “Bloated businesses don’t survive for long.”
Hiring Freeze, Reduced Spending
Among the directives taking effect immediately:
- Most state positions cannot be created or refilled without approval from the State Budget Division. Sworn law enforcement officers and correctional officers are exempt.
- The State Budget Division will reduce monthly agency allotments by at least five percent in aggregate during Fiscal Year 2026-27 while lawmakers consider additional budget adjustments during the 2027 legislative session.
- Agencies, boards and commissions must begin submitting monthly cash-flow projections and identify appropriations expected to lapse because of spending reductions.
- Each agency must submit a fiscal restraint and spending reduction plan to the State Budget Division by July 31.
The governor also instructed agencies to limit travel, hiring, membership dues, technology upgrades and equipment purchases.
Focus on Long-Term Savings
Pillen encouraged agencies to identify structural ways to reduce government spending rather than relying solely on short-term cuts.
He directed agencies to focus on:
- Eliminating redundant services and regulations.
- Reducing non-essential programs and regulatory burdens.
- Consolidating teams, services and office space.
- Setting fees and assessments at levels that fully cover the cost of providing services.
- Prioritizing core agency missions while eliminating lower-priority activities.
The governor said fiscal discipline should extend beyond General Fund agencies and also apply to agencies supported through fees, assessments and other tax revenue.
Pillen warned agencies to prepare for reduced appropriations not only during Fiscal Year 2026-27 but also throughout the next biennium covering Fiscal Years 2027-28 and 2028-29.
He said the spending reductions are necessary to preserve tax relief while maintaining the state’s financial stability.
State agencies are expected to comply with the directives to the fullest extent allowed under Nebraska law.