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The Legislative Performance Audit Act was established in statute by LB 607 in 2003. It replaced the Legislative Program Evaluation Act. A performance audit is an objective and systematic examination of evidence for the purpose of providing an independent assessment of the performance of a government program. These audits assess how well a state program is functioning and provide answers to the following questions. Is the program doing what the Legislature intended it to do? Is the agency administering the program meeting statutory and regulatory requirements? Is the agency running the program effectively and efficiently?
The purpose of the Act is to provide for a system of performance audits to be conducted by the Legislative Audit Office, under the direction of the Legislative Auditor. The Legislative Performance Audit Committee is responsible for overseeing the state’s performance audit process. The committee is made up of seven senators. In January, I was selected to serve as chair of the committee.
This year, the committee adopted three new areas to work on. The first concerns issues relating to the current functioning of the behavioral health system in Nebraska. Committee members are interested in where there may be gaps in behavioral health services across the state. The second is an audit of agency regulations that may be adopted outside of the Administrative Procedure Act, which means the public and other stakeholders do not have the opportunity to comment on the proposed regulations. The final area is the utilization of the long-term care insurance and tax credit to find out if these tools are increasing the number of people who set money aside for long-term care.
The Performance Audit Committee is authorized to introduce legislation. By rule, the committee is granted the authority to designate two priority bills, resulting from a performance audit or involving the performance audit process.
LB 538 was introduced by the Performance Audit Committee this year. The public hearing was held earlier this week before the Revenue Committee.
LB 538 seeks to implement the recommendations of the Tax Incentive Evaluation Committee adopted during the 2014 LR 444 interim study. The interim study was introduced in response to a 2013 performance audit that found the goals of Nebraska’s tax incentive programs were too broad to permit meaningful program evaluation. The Tax Incentive Evaluation Committee was made up of the Performance Audit Committee, as well as the chairman and vice-chairman of the Revenue Committee, and one senator appointed by the Executive Board. Evaluation experts from the Pew Charitable Trusts worked with the committee to help craft recommendations for a tax incentive performance audit process tailored to Nebraska’s needs.
LB 538 creates a process for ongoing evaluation of Nebraska’s existing and future tax incentive programs enacted for the purpose of recruitment or retention of businesses in Nebraska. The bill creates an evaluation structure that will produce information needed for lawmakers to draw clear conclusions about whether tax incentives are benefitting Nebraska’s economy and meeting program goals. LB 538 requires the Legislative Audit Office to conduct a performance audit of each tax incentive program at least every three years, to evaluate whether the goals established by the Legislature are being met.
Additionally, legislative performance auditors will analyze the economic and fiscal impacts of the tax incentive programs taking into account effects on businesses and state and local governments, economic development strategies, and the specific emphasis of individual programs.
Over the years, there has been much discussion as to whether our tax incentives serve as a good investment for our state. One of the missing factors in the discussion is a means to evaluate our tax incentives. LB 538 seeks to provide the necessary information.
If you have any questions on LB 538, the Performance Audit Committee, or on any other issues before the Legislature, 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 firstname.lastname@example.org and my telephone number is (402) 471-2733.
Legislative Resolution 444 was introduced by the Legislative Performance Audit Committee during the 2014 legislative session. I serve as the vice-chair of this committee.
LR 444 created the Tax Incentive Evaluation Committee, which was tasked with developing recommendations on specific and measurable goals for our tax incentive programs. Furthermore, the committee is to recommend a process for regular evaluation of tax incentives and determine who should conduct the evaluations, what type of metrics should be used, and how often the evaluations should be conducted. The committee is to issue a report to the Executive Board of the Legislature by December 15.
A report issued by the Audit Office in 2013 on Nebraska Tax Incentive Programs found that the program goals expressed by the Legislature were too general to permit a meaningful evaluation of whether the programs were accomplishing what the Legislature intended them to accomplish. The audit focused on the Nebraska Advantage Act, the Nebraska Advantage Rural Development Act, the Nebraska Advantage Microenterprise Act, and the Nebraska Advantage Research and Development Act. Furthermore, for two of the programs, the Legislature set no limit on the program’s costs. In response to the Audit’s findings, the Performance Audit Committee committed to work with the Revenue Committee to initiate a comprehensive review of Nebraska’s tax incentive programs to assess whether the programs are producing the results the Legislature intended and, if so, whether they are doing so at a cost the Legislature can support. As a result, LR 444 was introduced.
The LR 444 Tax Incentive Evaluation Committee met this past week. I was elected vice-chair of the committee, which is chaired by Senator John Harms of Scottsbluff. Robert Zahradnik, from the Pew Center of the States, developed a presentation, which was delivered by Martha Carter, the Legislative Auditor. Mr. Zahradnik will attend the next committee meeting in July.
The six tax incentive programs that LR 444 specifically addresses are:
+Angel Investment Act – provides refundable state income tax credits to qualified
investors that invest in qualified early-stage companies.
+Beginning Farmer Tax Credit Act – rewards agricultural asset owners for their contributions that assist starting farmers and ranchers.
+Nebraska Advantage Act – provides comprehensive economic development incentives for expanding or relocating businesses.
+Nebraska Advantage Rural Development Act – similar to the Advantage Act but aimed at businesses in less populated counties.
+Nebraska Advantage Microenterprise Act – provides persons actively involved in microbusinesses a refundable individual income tax credit based on demonstrated growth of their business over two tax years.
+Nebraska Advantage Research and Development Act – provides tax credits to business firms that incur research and experimental expenditures.
Although this past week’s hearing was limited to invited testimony, the LR 444 Tax Incentive Evaluation Committee plans to hold additional hearings where the public will be allowed to testify. The public hearings will be held in Kearney on August 27 from 1:30 to 4:30 p.m. and in Lincoln from 9:00 a.m. to noon on August 28. I encourage those interested in our state’s tax incentive programs to attend.
As vice-chair of the Legislative Performance Audit Committee, I introduced LB 836 this past week before the Revenue Committee. LB 836 proposes to add basic goal language to certain tax incentive programs, such as the Nebraska Advantage Act and the Angel Investment Tax Credit Act, that currently have limited or no goal language.
Of the tax incentive programs, the Nebraska Advantage Act has the largest impact on the state budget. This act provides benefits to companies that invest or create jobs in Nebraska.
Last year, the Performance Audit Committee, working with the Pew Center for the States, issued three reports on tax incentives. The committee found that an absence of clear, measurable goals for each tax incentive program made it difficult to assess whether the program is doing what the Legislature intended it to do.
The Pew Center recommended a process for legislators to follow in improving the evaluation of the state’s tax incentive programs, which included the development of goals, metrics, and benchmarks. LB 836 represents a first step in increasing accountability and improving the state’s evaluation of tax incentive programs. The Performance Audit Committee has designated LB 836 as its committee priority bill, assuring that it will be debated by the Legislature, if it advances from the Revenue Committee.
The Performance Audit Committee also introduced LR 444, which proposes to create a committee to develop an ongoing, regular review of tax incentive programs. The intent is to introduce legislation containing additional recommendations next year.
The Appropriations Committee has made some preliminary recommendations for the mid-biennium budget adjustments that must be presented to the Legislature by the 40th legislative day, which falls on March 10th this year. Included in their preliminary recommendations, is a $15 million transfer from the Cash Reserve Fund and a one-time $2.5 million transfer from the State Recreation Road Fund for State Park deferred maintenance and improvements statewide. The Game and Parks Commission has indicated that this level of funding would allow them to undertake capital projects at Ponca State Park, as identified in LB 874, and allow for priority capital projects at Arbor Lodge State Historical Park, in order to place existing facilities in a condition that would be conducive to transferring operating and management to a local partner, as identified in LB 1033.
I introduced LB 1033 to allow for the transfer of the operation and management of Arbor Lodge State Historical Park from the state to a local partnership. I believe a local partnership will be in a position to promote more utilization and offer greater stability of this important landmark in southeast Nebraska. I am grateful to the Appropriations Committee members for including this provision in their preliminary recommendations.
As the Legislature begins full-day debate, focusing on bills that have been designated as priority bills, I encourage you to contact me with your thoughts and opinions on the various issues. I can be reached at District #1, P.O. Box 94606, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402 471-2733.