Nebraska Didn’t Go Bankrupt But Its Budget Did

How one red state’s tax cuts exposed a national blueprint for economic sabotage.

A TikTok clip went viral: “Nebraska is bankrupt!” It’s false, but only technically. Nebraska can’t legally declare bankruptcy; its constitution demands a balanced budget every year. Yet the state is staring down a significant deficit in the wake of tax cuts aimed at the wealthy and corporations, cuts that were sold as economic relief rather than revenue loss.

In 2023, Nebraska lawmakers approved sweeping income and corporate tax reductions, while maintaining promises of property tax relief. By early 2025, projections had flipped from a $1.9 billion surplus to a projected shortfall that, at one point, towered at $432 million. Although that number has since been whittled down to a more manageable $95 million deficit, it’s only by pulling the levers of reserve funds and scaling back ambition, moves that only delay the collapse, not solve it. Nebraska isn’t bankrupt. However, the fallout suggests that the outcome was predetermined.

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The Pattern Was Set Long Before Nebraska

Kansas: The Brownback Catastrophe

In 2012, Kansas Governor Sam Brownback launched what he called a “real live experiment” in conservative economics. With full support from a Republican-dominated legislature, he passed one of the most radical tax overhauls in state history, eliminating income taxes for more than 330,000 businesses and significantly slashing personal income tax rates across the board.

Brownback promised these cuts would unleash an economic boom, attract investment, and pay for themselves through growth. Instead, the opposite happened. State revenues plunged, dropping by more than $700 million in just the first year, and the promised growth never materialized. Rather than experiencing job growth, Kansas's job market lagged behind that of neighboring states and the national average.

To cover the shortfall, Kansas made deep cuts to public services. Education funding was slashed, forcing school districts to shorten the school year, freeze teacher pay, and lay off staff. Infrastructure deteriorated as road repair and maintenance funds were siphoned off to plug general budget holes. Even basic state functions, such as keeping courthouses open five days a week, became unsustainable in some counties.

The economic distress was so profound that Standard & Poor’s and Moody’s both downgraded Kansas’s credit rating, citing the instability of the state's tax structure. Legislative sessions devolved into annual budget battles, with Republicans increasingly splintered between Brownback loyalists and those facing backlash from constituents furious over the collapse of services.

By 2017, the experiment had failed so clearly and so publicly that the Republican-controlled legislature voted to override Brownback’s veto and repeal key portions of his tax plan. That same year, a bipartisan coalition restored income tax rates to near pre-2012 levels, effectively acknowledging that the ideological gamble had harmed the state’s economy.

The “Kansas experiment” didn’t just fail. It became a case study in how trickle-down tax cuts devastate state budgets, erode essential services, and leave the most vulnerable to bear the brunt of the consequences. It’s a blueprint that should have served as a warning. Instead, it became a roadmap.

Louisiana: Jindal’s Budget Collapse

When Governor Bobby Jindal took office in 2008, he inherited a budget surplus. However, over the next seven years, he pushed through more than $1 billion in tax cuts, primarily benefiting corporations and high-income earners. These included:

• Eliminating taxes on capital gains.

• Reducing corporate franchise taxes.

• Supporting corporate subsidy programs, such as film tax credits, which cost the state hundreds of millions.

To mask the damage, Jindal relied on one-time budget gimmicks such as draining the rainy-day fund, raiding trust accounts, and delaying payments. But by 2015, the state was in crisis. Louisiana faced a $1.6 billion shortfall just to maintain existing services. Universities were warned they might not open in the fall. LSU prepared for bankruptcy proceedings. Public healthcare facilities were privatized or shuttered altogether.

Jindal’s approval rating collapsed alongside the state’s fiscal outlook, and when he left office in early 2016, Louisiana was in worse financial shape than nearly any other state. His successor, Governor John Bel Edwards, was compelled to convene multiple special sessions to rectify the situation, primarily through tax increases and budgetary adjustments.

Wisconsin: Walker’s War on Public Institutions

In 2011, newly elected Governor Scott Walker pushed through Act 10, stripping collective bargaining rights from most public-sector workers and slashing their pensions and healthcare benefits. The move ignited massive protests, but that was only the beginning.

Walker paired these anti-union policies with deep tax cuts:

• $2 billion in income and property tax reductions.

• Business tax credits that drained state revenue.

To offset the cuts, Walker defunded public education at historically low levels. Wisconsin’s per-pupil spending fell by more than $1,000 over his tenure. He cut $800 million from K-12 education in his first budget alone.

Meanwhile, rural hospitals and schools struggled, and the state lagged in job creation. By 2018, Wisconsin’s economic growth had trailed the national average, and even conservative commentators began to admit that the “Wisconsin model” hadn’t delivered the promised prosperity.

Walker’s policies didn’t shrink government inefficiency. They eroded public trust, public services, and the state's long-term capacity to meet its residents’ needs.

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Why These Examples Matter

Louisiana and Wisconsin weren’t isolated miscalculations. Like Kansas and Nebraska today, they followed a pattern: enacting tax cuts for the wealthy, slashing essential services, and then pointing to government failure as proof that public systems don’t work. Each time, the real failure wasn’t the government. It was governance.

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Now the Blueprint Is Federal and There Is No Safety Net

Fast forward to July 4, 2025, when Congress passed the One Big Beautiful Bill (OBBB), dubbed “beautiful” by its supporters and “Reverse‑Robin‑Hood” by critics. It permanently extended the 2017 Trump tax cuts, lifted certain deductions, added new credits for tips, overtime, auto loans, and more, and simultaneously phased out green-energy incentives. It raised the debt ceiling by $5 trillion and slashed over $1.2 trillion from Medicaid and SNAP programs. 

As a result, the Congressional Budget Office projects that OBBB will add roughly $2.8 trillion to the deficit by 2034, and potentially as much as $4 trillion—including interest—over the next decade. Debt held by the public is on track to mushroom from 100 percent of GDP today to 127 percent by 2034.

See our previous reporting on the OBBB here:

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ICYMI: The One Big Beautiful Budget Breakdown

ICYMI: The OBBB Senate Version Breakdown

Unlike Nebraska and the other states cited, the federal government isn’t bound by a balanced budget clause. Instead of forced austerity, Washington borrows more. The result is spiraling debt, but in the short term, no visible backlash until the bills come due.

Reaganomics Redux: When “Starving the Beast” Becomes the Endgame

This isn’t incompetence. It’s an intervention. The “Dog Eat Dog” experiment at the federal level, even clipping imaginary “fat” from vulnerable agencies via DOGE, was never about efficiency. It was about bludgeoning public institutions to justify the myth of bloated government. It was about starving the beast. The cuts to Medicaid and SNAP aren’t fixes; they’re wedges. The revenue losses aren’t accidents; they’re tools for austerity.

When services collapse, the narrative becomes: government fails. Then the privatizers whisper: buy the solution. ’ Meanwhile, the wealthy, who were just handed permanent tax cuts, sit insulated. Across states like Kansas and Nebraska, and now at the national level, the pattern is unmistakable: promise relief, trigger collapse, dismantle public power.

From the States to the Nation: It’s Not a Crisis. It’s a Blueprint.

Nebraska didn’t go bankrupt, not in legal terms. However, it did follow a well-worn path, one that ultimately leads to service cuts and rising inequality. That same path is now embedded in federal law, with no constitutional brake. Just more debt, fewer services, and a widening wealth gap.

This isn’t economic policy. It’s economic sabotage wrapped in patriotic paint.

Sources:

• Nebraska’s Surplus Turns to Shortfall After Tax Cuts and One‑Time Windfall Fades – Center on Budget and Policy Priorities

• Nebraska Is Back in a Projected Deficit of $95 Million Due to Lower Tax Revenues – Nebraska Examiner

• Nebraska Faces Projected Revenue Shortfall Amid Tax Cuts – KETV

• OpenSkyLIGHTS: Focus on Nebraska Fiscal Policy (August 1, 2025) – OpenSky Policy Institute

• Gov. Jim Pillen Touts New Efficiencies as He Seeks $500 Million Budget Cuts – Nebraska Examiner

• Closing Nebraska’s $262 Million Biennial Budget Gap – Platte Institute

• "Kansas Provides Compelling Evidence of Failure of ‘Supply‑Side’ Tax Cuts" – Center on Budget and Policy Priorities

• "Timeline: 5 Years of Kansas' Tax‑Cut Disaster" – CBPP Blog

• "The Kansas Tax‑Cut Experiment" – Brookings Institution

• "As Trump Proposes Tax Cuts, Kansas Deals With Aftermath of Experiment" – BPR

• "Kansas Experiment" – Wikipedia

• "Court Halts Kansas Governor’s School Funding Cuts" – Time

• "‘Out of tricks:’ How Louisiana Gov. Bobby Jindal Has Driven State to $1.6B Budget Deficit" – University of Louisiana

• "Bobby Jindal, Budget Cuts, and the Uncertain Fate of Louisiana’s Public Universities" – The Atlantic

• "Louisiana’s $1.6 Billion Problem: How Did We Get Here?" – Invest Louisiana

• "Governor Jindal Weighs Economic Incentives Against Higher‑Ed and Health‑Care Cuts in Budget Proposal" – Louisiana Department of Health

• 2011 Wisconsin Act 10 – Wikipedia

• Act 10, Scourge of Wisconsin Teachers, Faces Uncertain Future in Court – The 74 Million

• Wisconsin’s Act 10, Flexible Pay, and the Impact on Teacher Labor Markets – Education Next

• Attacks on Public-Sector Unions Harm States: How Act 10 Affected Education in Wisconsin – Center for American Progress Action

• Act 10 Savings Top $35 Billion in 2025 – MacIver Institute
  Estimated Budgetary Effects of Public Law 119‑21 (OBBB) – Congressional Budget Office

• What Does the One Big Beautiful Bill Cost? – Bipartisan Policy Center

• H.R. 1, One Big Beautiful Bill Act (Dynamic Estimate) – Congressional Budget Office

• The One Big Beautiful Bill Act – Wikipedia

• Three Ways the Big Budget Bill Fails Americans – Peterson Institute for International Economics

• Opinion: Trump’s Big Beautiful Budget Bill Is the End of Conservatism as We Know It – The Daily Beast

• What Will Be the Consequences of Donald Trump’s "One Big Beautiful Bill"? – MoneyWeek

• Elon Musk and Most Taxpayers Don’t Like What’s in Trump’s ‘Big Beautiful Bill’ – Kiplinger

• I’m an Economist: The GOP Budget Undeniably Takes From the Working Class and Gives to the Rich – Time Magazine