Two bills introduced at the request of the Governor were heard before the Revenue Committee in a lengthy hearing this past week. LB 337 was introduced by Senator Jim Smith, who serves as the Revenue Committee chair. It would phase in an income tax reduction for those in the top income bracket. The top bracket would be lowered from 6.84 percent to 5.99 percent over an eight-year period, or by approximately 0.11 percent a year. However, the decrease would only be triggered if the expected rate of growth in net General Fund receipts, as determined by the Nebraska Economic Forecasting Advisory Board’s October forecast, is 3.5 percent or greater. When fully implemented, LB 337 would reduce state revenue by $288 million.
Testifiers representing the business community offered support for the legislation, claiming that LB 337 will help grow the state. Opponents wanted the Legislature to focus on property tax relief and others expressed concern that LB 337 could have a negative impact on funding for local schools and other governmental services.
In October 2015, the Forecasting Advisory Board projected a 3.6 percent growth in revenue, which would have triggered a tax cut in 2016, if LB 337 would have been in effect. However, projections quickly dropped, as the state is now facing a projected $900 million shortfall.
LB 338 was introduced by Senator Lydia Brasch, the Agriculture Committee chair, at the request of the Governor. It creates the Agricultural Valuation Fairness Act. Rather than valuating agricultural land according to sales, which can be influenced by other uses for the land, the bill proposes to assess agricultural land based on its capacity to produce income. LB 338 also places a 3.5 percent cap on increases in valuation of such land from year to year. Under the bill, county assessors are to use a range of incomes for land capability groups and capitalization rates, as determined by the Property Tax Administrator, in calculating the agricultural use value. The income ranges are to be based on the average yield information for the ten prior years published by the U.S. Department of Agriculture.
Although most testifiers were in support of LB 338 and felt that it was a step in the right direction, concern was expressed that it didn’t go far enough in efforts to provide property tax relief. According to an analysis by Nebraska Farm Bureau, if LB 338 would have been in place in 2017, taxable values for agricultural land would have been $2.2 billion lower statewide. This equates to an approximate 2 percent reduction in agricultural land values or about a $20 million reduction out of $3.8 billion in property taxes levied statewide. Agricultural land values statewide increased more than 6 percent from 2015 to 2016 and more than 263 percent over the last decade.
LB 661, introduced by Heartwell Senator John Kuehn, was heard by the Government, Military and Veterans Affairs Committee. This legislation seeks to amend public records laws by providing confidentiality of information relating to the drugs used in carrying out the death penalty. Following the November vote to reinstate the death penalty, the Department of Corrections recently revised the lethal injection protocol in an effort to add flexibility so that the death penalty can be carried out. Originally, the revised protocol authorized the supplier of lethal injection drugs to remain confidential, but this portion was removed after the public hearing where testifiers criticized the secrecy and lack of transparency in the process. This bill seeks to reinstate the confidentiality provision. When introducing the bill, Senator Kuehn mentioned that some of the same drugs used in lethal injections are used in operating rooms, causing him concern about their availability if this bill is not passed. Fifteen of the thirty-one states that have the death penalty withhold information on the identities of those supplying the lethal injection drugs.
This past week before the Revenue Committee, I introduced LB 546 at the request of the Nebraska Department of Revenue and the Nebraska Department of Economic Development. The intent of the bill is to simplify the application and administrative aspects of the Nebraska Advantage Act by amending several areas of the current law that has caused delays in approval of applications and benefits earned under this tax incentive program.
Rob Clements, a banker from Elmwood, was selected by Governor Ricketts this past week to fill the vacancy of Senator Bill Kintner. His district covers all of Cass County, a portion of Sarpy County, and the northeast corner of Otoe County. I look forward to working with him on state issues, as well as issues concerning Otoe County.
As legislative committees continue with public hearings on bills, I encourage you to contact me with your comments 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.
The public hearing process has concluded. Every bill that was introduced was referred to a committee for a hearing, where the public was invited to testify. Committees are finishing the process of advancing the bills that they think should be discussed by the full Legislature. Beginning Monday, March 7th, senators will meet in full-day session.
Last year, I was elected as the chair of the Legislative Performance Audit Committee. This committee is responsible for overseeing the state’s performance audit process. Performance auditing is a systematic review of any aspect of agencies and their programs to evaluate an agency’s success in effectively implementing legislative intent. This function is carried out by the Performance Audit staff, under the direction of the Legislative Auditor.
The Legislative Performance Audit Committee is authorized to introduce legislation. This year, we introduced three bills and one legislative resolution. I personally introduced another bill pertaining to the jurisdiction of the Performance Audit Act.
LB 867 proposes to amend the Administrative Procedure Act, which sets forth the formal process for agencies to follow when adopting administrative regulations. This bill was introduced as the result of a 2015 audit, which found that the APA does not provide adequate guidance to agencies about what types of policies must go through the formal rulemaking process. LB 867 also puts in place a process for the adoption of emergency rules. LB 867 was designated as a Performance Audit Committee priority bill and is pending on the agenda for first-round debate.
The intent of LB 1022 is to provide the Legislative Audit Office with full access to the information they need in order to perform accurate and thorough evaluations of state programs. Last year, legislation was passed to require the Legislative Audit Office to conduct a performance audit of our tax incentive programs. However, when the auditors started the first audit, they found that they were not able to access necessary electronic files pertaining to the Nebraska Advantage Act in a timely fashion, nor were they given access to records for all tax incentive program projects. LB 1022, another committee priority bill, has received first round approval from the Legislature.
LB 756 would eliminate the Long-Term Care Savings Plan, which the committee recommended following a performance audit of the program. The audit found that very few people were participating in the plan and that the program was not meeting its goals of encouraging Nebraskans to save for long-term care or reducing the costs of Medicaid. LB 756 has not been advanced from the Revenue Committee at this time, but has been designated as a speaker priority bill, giving it a good chance for debate once it is advanced to the floor.
LR 413 is a legislative resolution that proposes to create the Task Force on Behavioral Health. The purpose of the task force is to provide legislative oversight to monitor the progress of the Department of Health and Human Services in conducting a statewide needs assessment and in the development of a strategic plan. Furthermore, the task force will study the infrastructure, provider rates, current workforce, delivery systems, and the number of qualified facilities within the state. The resolution was introduced as the result of a 2015 audit of the Behavioral Health System in Nebraska, which identified several gaps in services across the state. LR 413 was adopted by the Legislature earlier this week.
Finally, LB 1016, the bill that I introduced, amends the definition of “agency” in the Legislative Performance Audit Act, adding the Office of Probation Administration and the Office of Public Guardian to the list of governmental units that can be subject to a performance audit. LB 1016 was passed by the Legislature this past week on a 49-0 vote.
As we begin full-day debates, 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.
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.