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Sen. Dan Watermeier

Sen. Dan Watermeier

District 1

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Legislative Update

March 28th, 2013

It’s almost crunch time. Senators have begun meeting in full-day session. We’ve passed the 50-day mark of the 90-day legislative session. We’ve discussed only a handful of priority bills and we still have the budget to deal with in May. Furthermore, the Appropriations Committee has estimated that the budget will only allow for $16 million to $19 million in new spending. This figure sounded sufficient, until the sum was calculated for the fiscal impact of the priority bills and came to more than $150 million for the two-year budget period. Consequently, some senator’s priority bills will not pass or they will have to be amended to reduce the fiscal impact. Senators will have to decide which priority bills are the most important for the state, as the Nebraska Legislature is required to pass a balanced budget.

Senators learned of the fiscal imbalance while debating a bill that would adopt the Wildfire Control Act of 2013. The legislation would direct the Nebraska Forest Service to contract for two air tankers for fighting fires, to thin forests to reduce risk, to provide expanded training, to expand the federal excess property programs and to oversee forest rehabilitation. Based on predictions that the drought will be even worse this summer, it was easy to argue the need for the bill. However, the legislation has an annual $1.7 million fiscal impact. Despite the warning, senators gave LB 634 first-round approval.

The following are two more examples of bills with significant fiscal impacts. Both have been designated as priority bills but neither have advanced from committee at this time.

LB 553 amends the School Employee Retirement Plan to address both short-term and long-term funding obligations. The bill creates a new tier of reduced benefits for new employees, reducing the cost-of-living adjustment from 2.5% to 1% and increasing from 3 to 5 the number of years used to determine final average salary for purposes of calculating a member’s retirement benefit. Preliminary discussions by Retirement Committee members would keep the contribution rates required of teachers at the increased level rather than allowing them to sunset. Additionally, the bill proposes to increase the state’s contribution rate from 1% to 2% of compensation, creating a fiscal impact of approximately $17 million per year. In an effort to retain costs, committee members have proposed to delay the increase in the state’s contribution rate to the second year of the biennium. Due to the recession, the pension fund is currently facing a $108 million actuarial shortfall and LB 553 helps to ensure the sustainability of the School Employees Retirement System.

LB 625 would increase the maximum income level for families qualifying for the Child Care Subsidy Program from 120% to 185% of the federal poverty level. In 2011, 13 states set eligibility for child care assistance above 200% and an additional 22 states set eligibility above 150% of federal poverty level. Prior to 2002, the income limit for the child care subsidy was 185% of federal poverty guidelines, but this income level was never authorized in statute. Supporters testified that child care subsidies are critical to ensuring that children are safe and parents can work. Studies have shown that child care represents the largest portion of a family’s income. The fiscal note estimates that the cost to the state would be approximately $11 million per year. As I understand, negotiations are taking place on the percentage of increase in the income level.

The Legislature will have a tough job ahead. All of the bills that have been designated as priority bills have merit and are important to certain groups of Nebraskans. If you have any comments on the bills that have been prioritized, I value your input and encourage you to contact me. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My telephone number is (402) 471-2733 and my e-mail address is


Legislative Update

January 18th, 2013

The Governor presented his State of the State address to the Legislature this past week, in which he outlined what he thought should be the state’s priorities during his final two years in office. Governor Heineman noted how he and the Legislature had worked together to make a positive difference for Nebraskans.

Governor Heineman spoke of the importance of education and noted that his budget proposal contains a 5% increase in each of the next two years for state aid to K-12 school districts, as well as a 5% increase in special education funding. In respect to postsecondary education, the Governor has been working on an agreement with the University of Nebraska and the Nebraska State College System to help ensure continued affordable access to higher education. The Governor’s proposed budget includes an approximate 4% increase for these institutions. In exchange, the university and state colleges have agreed that they will freeze tuition for the next two years at UNL, UNK, UNO, UNMC, Chadron State, Wayne State and Peru State College. The Governor’s budget also includes a similar increase in funding for community colleges.

The majority of the Governor’s address focused on taxes. He believes taxes are too high and that they impede economic growth. He quoted that a high personal income tax rate raises the costs of working, saving, investing and risk-taking. The Governor also noted that 23 states exempt a portion of or all retired military pay and 43 states exempt a portion of or all social security income from taxation. Furthermore, 42 states don’t have an inheritance tax.

The Nebraska income tax generates approximately $2.4 billion annually. The sales tax brings in an additional $1.5 billion. However, the Governor disclosed that the state allows approximately $5 billion in sales tax exemptions. He envisioned that if half of the current exemptions were eliminated, Nebraska wouldn’t need an individual or corporate income tax, meaning that there would be no individual income tax on working Nebraskans; no taxing of small business income; and no taxation of social security or military retirement income. There would be no taxation of any retirement income. The Governor’s address did not give specifics on his tax proposal, but he hinted that he may support lowering the rates for individual and corporate income taxes as an alternative.

Later in the week, the Governor offered two proposals as his recommendations for changes in our tax structure. Omaha Senators Brad Ashford and Beau McCoy will introduce the legislation on behalf of the Governor. The first proposal would repeal $2.34 billion in sales tax exemptions, which would allow for the total elimination of both the individual income tax and the corporate income tax. The second proposal would do away with approximately $395 million in sales tax exemptions, allowing for the elimination of the corporate income tax and the exemption of the first $12,000 of retirement income for married couples and $6,000 for single individuals. Both bills retain the sales tax exemption for food.

Every tax exemption that exists was fought for and is supported by different sectors of our society. Under the Governor’s broad proposal, sales tax would be collected on medical equipment and medicine; hospital and college rooms; agricultural machinery, fertilizer and chemicals, energy used in agriculture, and seeds for commercial use; business repair parts and services; manufacturing machinery and energy used in industry; and from exempt organizations.

The governor has proposed a substantial change for our tax system. In offering two alternatives, he is giving the citizens of Nebraska the chance to offer their input. I think it is important to have the discussion, as our tax system hasn’t faced a major overhaul in almost five decades. It will be interesting to hear from the public as to whether they agree that the income tax is too high, whether they support the elimination of sales tax exemptions or if they are more concerned with other taxes.

I would be interested in your thoughts and opinions on the Governor’s proposals, as well as other issues that are before the Legislature. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My e-mail address is and my office telephone number is (402) 471-2733.

Sen. Dan Watermeier

District 1
Room #2108
P.O. Box 94604
Lincoln, NE 68509
Phone: (402) 471-2733
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