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Governor Ricketts delivered his State of the State Address this past week. It serves as the starting point for the Appropriations committee’s work on the next biennial budget.
In his speech, the Governor recognized our unique, nonpartisan Unicameral, where the Legislature consistently passes a balanced budget on time, every bill gets a hearing, and debate happens in the public, not behind a closed door conference committee. Governor Ricketts also touched on his accomplishments during his first two years in office, including online applications for permits through the Nebraska Department of Environmental Quality, improving call wait times and application processing for citizens applying for benefits with the Department of Health and Human Services, and the development of a reemployment program under the Department of Labor.
Governor Ricketts outlined the principles that guided his budget recommendations. He stressed that we must reduce government expenditures because he will not support any increase in taxes to deal with the nearly $900 million projected budget gap. In balancing the budget, the governor wants to maintain an approximate $500 million balance in the cash reserve.
If the governor’s proposal for deficits in the current fiscal year is approved, the budget for the next biennium would result in an average 1.7% increase in state spending. Realizing that there are certain priorities that need to be funded, the Governor revealed his intent to increase funding for special education and for TEEOSA aid to K-12 schools, as well as the Department of Corrections, in an attempt to reduce employee vacancy rates, upgrade technology, and improve the Lincoln Correctional Center. He proposed cuts in spending for virtually every other agency and service.
The Governor’s budget proposes both property and income tax reform. Property taxes on agricultural land have risen by 176% in the last decade, and cattle and crop prices have dropped. Consequently, the governor has proposed changing the methodology for assessing property value from a market-based system to an income-potential assessment. The governor believes that income potential is a fairer measure and will slow the growth of agricultural land valuation increases, noting that if the system were in place for 2017, it would have reduced agricultural land valuations by approximately $2.2 billion. Agriculture Chair Lydia Brasch has introduced LB 338, the Agricultural Valuation Fairness Act, at the request of the governor. Several of our neighboring states, including South Dakota, Kansas, and Iowa also use income potential based property tax assessments.
When speaking of income tax reform, the Governor pointed out that only one of our bordering states has a higher income tax rate. He believes that our high tax rate hampers our ability to grow our state’s economy, discourages new investment, and causes people to leave our state. Under legislation introduced by Senator Jim Smith, the chair of the Revenue Committee, the top income tax rate would be reduced approximately one-tenth of 1% per year, beginning in 2020, if the state’s revenue growth is greater than 3.5%. LB 337, when fully implemented, would reduce the top income tax rate from 6.84% to 5.99%. This reduction in income taxes would apply to individuals making $29,831 or married couples making $59,661.
The governor’s proposal also includes several measures aimed at government efficiency. Through the merger of the Division of Veterans Homes, currently under the Department of Health and Human Services, with the Nebraska Department of Veterans Affairs, services can be streamlined and some red tape eliminated. He also proposes to merge the Department of Roads and the Department of Aeronautics into the Department of Transportation. Furthermore, the governor wants to eliminate unnecessary regulations in occupational licenses, making it easier for people to work and open businesses in Nebraska. He has asked senators to introduce 8 bills, ranging from reducing classroom hours for massage therapists to eliminating a license for auto sellers.
Wednesday, January 18 is the last day for bill introduction. As the Legislature begins the public hearing process, I encourage you to contact me with your thoughts and opinions on legislation that has been introduced. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is firstname.lastname@example.org and my telephone number is (402) 471-2733.