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The Legislature gave first-round approval to the budget bills that make adjustments to the biennial budget passed last year. The Appropriations Committee’s recommendations result in a net increase of $27,739 over the two-year period. However, this does not take into account other legislation with a fiscal impact. If all bills pending on the second and third stage of debate would happen to pass, spending would grow by approximately $44.5 million.
The Appropriations Committee’s budget recommendations included funding for increased costs due to prison overcrowding, funding to serve additional persons with developmental disabilities that are on the waiting list, increased funding for grants for the early childhood education program, and increased funding for our Medicaid match rate, due to a lower federal match rate, which is calculated based on a comparison of our personal per capita income compared with other states. These increased costs were almost entirely offset by reductions in expenses, such as lower costs than projected for the homestead exemption program and the state aid formula for schools.
Bills pending that could increase the spending above the Appropriations Committee’s recommendations include LB 725, which proposes to move the scheduled decrease in the local effort rate (LER) in the school state aid formula up one year. The LER was increased during the budget cutting years of the recession. LB 725 would add approximately $33 million to the budget. LB 986 proposes to increase the number of people that qualify for the homestead exemption by raising the income brackets.
Under the Appropriations Committee’s recommendations, the projected ending balance of the cash reserve fund is $697 million. Committee members made it a priority to leave a sufficient amount in the cash reserve fund, as this is what helped sustain our state during the recent recession, preventing the necessity of raising taxes when revenues fell. Furthermore, the committee emphasized that any use of the cash reserve fund should be for one-time items and not for projects requiring on-going support.
The Appropriations Committee recommended $65 million in transfers from the cash reserve fund. This includes $20 million for water projects, $15 million to state parks, $10 million for job training, $5 million to county jails to ease the burden of prison overcrowding, and $15 million for improvements at the State Capitol, including the replacement of the HVAC system, which is 50 years old and has outlived its predicted lifespan.
During debate on the budget bills, Senator Galen Hadley, chair of the Revenue Committee, offered an amendment to increase funding for the Property Tax Credit program by $20 million, in addition to the $25 million already proposed by the Appropriations Committee. His amendment lost on a 20-18 vote. The Property Tax Credit program was enacted in 2007 and has been funded at $115 million annually since 2008. Currently, a homeowner receives a $60.88 credit per $100,000 of value. The credit will increase to $74.11 under the committee’s proposal, but would have increased to $84.70 per $100,000 of value if the amendment would have been successful.
In addition to the property tax relief offered through the increase in the Property Tax Credit program and an expansion of the Homestead Exemption Program, the Legislature also gave first round approval to LB 987. This bill proposes to adjust individual income tax brackets for inflation and increases the number of persons who won’t be liable for income taxes on their social security income.
With approximately a month left in this legislative session, I encourage you to contact me with your thoughts and opinions. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402) 471-2733.