LINCOLN, Neb. — State lawmakers returning to Lincoln next week may have a brighter budget outlook, but will be facing potentially expensive decisions over child welfare services and a federal mandate to help the uninsured.

Both issues rank among the top priorities for lawmakers during the scheduled 60-day session that starts Jan. 4.

Speaker of the Legislature Mike Flood said he expects debate over recommended child welfare reforms, an insurance exchange program required under the new national health care law and a proposal that would give cities an additional half-percent of sales tax authority with voter approval.

Flood, a Republican, said he and other lawmakers are waiting for a new revenue forecast that will help determine how the state should proceed. The Nebraska Economic Forecasting Advisory Board predicted in October that state's outlook would improve with help from the strong farm economy, relatively low unemployment and state population growth. The board will meet again in February to certify new estimates.

"A lot of this session is going to depend on what happens in that meeting," Flood said in an interview. "It's going to shape the session in more ways than one. It's going to outline a pathway forward."

A legislative report released this month urged state officials to reclaim case management duties from private contractors and place all child services within a new state department. Lawmakers who have worked on child welfare issues say Nebraska's system has reached a crisis point the state can no longer ignore.

"There can be no failure here," said state Sen. Brad Ashford of Omaha, who heads the Judiciary Committee and has worked to reduce student absences from school. "We have no room for failure. It's not an option."

Flood said he doesn't yet know how lawmakers will proceed with efforts to prepare an insurance exchange to comply with the Obama administration's new health care law.

Health care advocates have said Nebraska should at least prepare a budget and oversight plan for a state-based exchange before their scheduled adjournment in April. Critics of the law have urged the state not to enact anything until the U.S. Supreme Court rules on the law in June. States that miss a June 29 deadline also risk losing millions in federal aid to help set up the exchanges.

"It's an expensive decision no matter what you do," Flood said. "It's got to be made very carefully, and it's going to take input from a lot of people in this state."

The exchanges are meant to offer a one-stop shop for Americans to buy health insurance. They must be federally certified by January 2013, operational by 2014 and self-sustaining by 2015. The Nebraska Department of Insurance has predicted that a family with two children that makes $55,125 per year could pay an estimated $370 per month because of the income caps and subsidies.

Flood said he sees "a looming battle" over a sales tax proposal expected to return this session. The bill would let Nebraska cities impose a sales tax as high as 2 percent, up from the current 1.5 percent maximum, if voters approve the increase for a specific purpose. The local sales tax would come on top of Nebraska's 5.5 percent state sales tax.

Supporters say cities need the revenue to pay for crumbling roads, bridges, and other infrastructure, but also could use it for property tax relief.

Lynn Rex, executive director of the League of Nebraska Municipalities, said her group plans an aggressive push on the measure, which has won support from officials in Omaha, Lincoln, Kearney, Ralston and La Vista. But Gov. Dave Heineman has said he opposes the proposal because it would increase the tax burden on middle- and low-income families.

The bill won first-round legislative approval in April, by a 27-14 vote, and was carried over for two more required votes during the session that begins next week. Overriding a governor's veto requires support from at least 30 of the 49 lawmakers in the one-house Legislature.

Lawmakers may also revive debate over the Keystone XL oil pipeline, which prompted a public outcry and special session in November to address concerns over the project's route.

Pipeline opponent Jane Kleeb, executive director of the group Bold Nebraska, has said the state still lacks laws to shield landowners from oil-spill liability or deal with the prospect of eminent domain if landowners oppose a developer's offer to buy land.