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Governor Pete Ricketts gave his annual State of the State address this past week. His recommendations, along with the agency requests, will become the starting point as the Appropriations Committee, and then the entire Legislature, determines what mid-biennium budget adjustments need to be made.
To address the lowered revenue forecast projected by the Nebraska Economic Forecasting Advisory Board this past October, the Governor is proposing across-the-board cuts of 2% this fiscal year and 4% next year, as well as specific reductions. He has also recommended transfers of excess fund balances to the General Fund and a $108 million transfer from the cash reserve fund. These budget reductions come on top of significant cuts made last year when the state experienced a budget shortfall in excess of $1 billion. The Governor stressed that the budget was balanced last year without any tax increases, and his recommendations propose to do the same this year.
The Governor stated that the priorities in his budget include funding for K-12 education, Corrections, and services for those with developmental disabilities. He proposed to maintain funding for state school aid and included an additional $35 million to Child Welfare and Public Assistance for this year and next, after noting the 9% increase in the number of children in our child welfare system. He also mentioned the formation of a new child welfare task force to determine the root causes for this increase, such as the high number of parents using methamphetamine. The Governor recommended expanding the number of corrections officers and reinvesting $6 million to expand bed capacity in our prisons.
Growing Nebraska has always been one of the Governor’s top goals, and he emphasized that cutting and reforming taxes is a key factor in meeting this goal. Although the state has provided $840 million in property tax relief over the past four years, the Tax Foundation ranks Nebraska’s property taxes as 11th highest in the nation. Therefore, the Governor stressed that property tax relief was a top priority. To that end, he announced that Revenue Committee chair, Senator Jim Smith, will introduce the Nebraska Property Tax Cuts and Opportunity Act.
LB 947 contains three major components. First, it would eliminate the current Property Tax Credit Program which provides property owners a tax credit based on the valuation of their property and is shown on tax statements as a credit after full taxes are levied. It also proposes to eliminate the recently passed Personal Property Exemption Program. The legislation would use the funding from these two programs for a refundable credit on state income taxes for property taxes paid, which would ensure that Nebraskans, not absentee landowners, receive the credit. It also includes a trigger mechanism to provide for additional property tax relief in future years when actual tax receipts are higher than forecast projections. Next, the legislation permanently reduces the top individual and corporate income tax rate from 6.84% and 7.81%, respectively, to 6.69%. As I understand, the funding from the elimination of the Property Tax Credit Program and the Personal Property Exemption Program would also be used to fund the income tax rate decreases. Finally, the legislation provides an additional $10 million for workforce development.
Senators have been meeting in full day debate this past week, but will begin meeting only in the mornings starting January 16, as public hearings on every bill introduced will be held in the afternoons. January 18, the 10th day of the legislative session, is the last day that bills can be introduced.
I encourage you to contact me with your thoughts and opinions on the legislation that has been introduced. I can be reached at firstname.lastname@example.org. My mailing address is District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509 and my telephone number is (402)471-2733.
LB 461, the Governor’s plan for tax relief, failed to receive the necessary votes to end the filibuster and allow a vote on the advancement of the bill. A motion to invoke cloture requires 33 votes, but it only received 27, with 9 senators voting no and 13 senators choosing not to vote.
LB 461 proposed to change the way agricultural land is valued from the current market based approach to a new income-producing approach. The statewide aggregate agricultural property valuation could not have increase more than 3.5% from the previous year. The legislation proposed to lower the top brackets of the individual income tax and the corporate income tax to 5.99% in increments over multiple years, when the expected rate of growth in General Fund receipts grew at least 3.5% and 4.0% respectively. Although there were positive features in this legislation, the bottom line was that it provided approximately $10 in income tax relief for every $1 in property tax relief.
Since I hear overwhelmingly from my constituents that their property taxes are too high, I offered an amendment that would have provided for property tax relief first, before income tax relief would be triggered. My amendment proposed to add $75 million to the Property Tax Credit fund when the expected rate of growth is at least 3.5%. The amount of income tax relief each year was lowered and the triggers increased. This property tax relief would have been in addition to the annual $224 million currently appropriated to the Property Tax Credit Cash fund, offering dollar for dollar tax relief to property owners.
After offering my amendment, I began negotiating with Senator Jim Smith, the chair of the Revenue committee and sponsor of LB 461, and the governor’s office. We came up with a compromise amendment that would have offered a higher ratio of property tax relief than income tax relief.
Although the compromise wasn’t everything that I wanted, I voted in support of the cloture motion because it would have made property tax relief a priority. However, when the cloture motion failed, LB 461 was pulled from the agenda and will not reappear this session. I will continue to work on property tax relief, with the hope that we can still get something accomplished this year.
The Legislature gave the budget bills second round approval this past week. To address the latest decrease in projected revenue of $55 million, the Appropriations Committee recommended approximately $10 million in additional cuts and transfers, as well as lowering the minimum reserve requirement from 3% to 2.5% for this biennium only.
Since the legislative session began, the budget gap grew to about $1.1 billion, as the Economic Forecasting Advisory Board twice lowered revenue projections. The budget was balanced through cuts in spending or cuts in the growth of spending of approximately $700 million, transfers from cash funds of $230 million, and withdrawing $173 million from the cash reserve fund.
My priority bill, LB 44, was discussed during the second round of debate this past week. LB 44 required out-state internet retailers to either collect the sales tax or follow reporting requirements spelled out in the legislation. In 1992, the Supreme Court upheld its 1967 ruling that prohibited states from requiring remote sellers to collect sales tax on sales shipped into their state, as it would place an undue burden on out-of-state retailers. States responded by adopting a comprehensive interstate system to streamline their sales tax rules, called the Interstate Streamlined Sales and Use Tax Agreement. Legislation has been introduced on the federal level for years, to grant states that have complied with this agreement the authority to require remote sellers to collect sales and use tax, but has yet to pass.
In frustration over inaction on the federal level, at least 28 states have introduced over 50 bills in an attempt to recover this sales tax revenue which is owed, but few pay. LB 44 combined the South Dakota collecting law, which was introduced as a vehicle to challenge the outdated Supreme Court ruling, and the Colorado reporting law, which has been upheld in court.
An Attorney General’s opinion was sought on LB 44, which stated that it was likely unconstitutional unless amended. I offered an amendment that satisfied the concerns stated in the opinion and clarified the intent of the bill.
I introduced LB 44 as a matter of fairness for our main street businesses, as it would help level the playing field with online retailers. After several hours of discussion, I did not call for a cloture vote, as I realized that I did not have the necessary 33 votes. The governor had indicated that he would veto the bill, which hindered my chances of success. I will try to work with the governor over the interim and bring this bill back next year.
As we enter the final weeks of this legislative session, I still encourage you to contact me with your opinions on the legislation that is before us. 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.
The Legislature debated a number of important issues this past week. LB 640 was up first. This bill proposed to cap the property tax portion of total general fund revenue supporting K-12 school districts at 60%. It also sought to lower the maximum levy for school districts from $1.05 to $1.00 per one hundred dollars of taxable valuation. Although LB 640 would have resulted in property tax relief, the revenue needed to fund the legislation would have been transferred from the Property Tax Credit Fund. This fund currently disperses $224 million in dollar for dollar property tax relief annually. Senators generally saw it as robbing one pot and putting it in another, making it doubtful that the bill will be on the agenda again.
LB 409 seeks to revise the state school aid formula (TEEOSA) by reducing the base limitation rate from 2.5% to 1.5%, which would reduce the amount of increase in TEEOSA aid provided to school districts for the next two school years. It changes the local effort rate from $1.00 to $1.02, which also reduces the amount of state aid provided to school districts because the formula assumes a district has increased resources. Furthermore, LB 409 reduces net option funding by 4.5%. This legislation was necessary due to the significant revenue shortfall that the state is facing. Since TEEOSA school aid represents 69% of total general fund aid to local governments, it was not feasible to leave it off the table when considering budget cuts. Even with LB 409, the amount appropriated to TEEOSA represented the largest increase in the Appropriations Committee’s recommendations for the next biennial budget.
The Legislature also discussed LB 622, which would legalize marijuana for certain medical conditions, and LB 661, which would provide for confidentiality of lethal injection drug sources. Both bills were given a couple hours of debate and now the bill’s sponsor must show the Speaker of the Legislature that he/she has the 33 votes to overcome a filibuster in order for the bill to be placed on the agenda again.
Senators also discussed numerous bills on consent calendar this past week. Consent calendar is limited to non-controversial bills that don’t contain a lot of changes and do not have a general fund impact. This procedure gives bills that don’t warrant a priority designation the chance of passage. An example of this is LB 463, the bill I introduced that would allow a village chairperson to appoint cemetery board members from the county, as well as the village. I introduced this legislation because some villages were having difficulty finding people to serve on the board.
The week ended with discussion on LB 461, the governor’s proposal for tax relief. LB 461 would change the way agricultural land is valued from the current market based approach to an income-producing approach. Capitalization rates would be derived using estimated net income divided by the market value of land as determined using comparable sales. Capitalization rates would be adjusted to assure that aggregate taxable values fall between 55% and 65% of market value. The percentage growth in aggregate taxable value statewide for agricultural land would be limited to 3.5%.
LB 461 also decreases the top individual and corporate income tax rate to 5.99% over a number of years when the expected rate of growth in general fund receipts is at least 3.5% and 4% respectively. The Earned Income Tax Credit would be increased from 10% to 12% of the federal credit. The personal exemption would be reduced for the higher income and a new credit would be created for the lower income. However, calculations reflect that when fully implemented, wealthier Nebraskans are the biggest beneficiaries of this tax relief plan, which offers approximately $10 in income tax relief for every $1 in property tax relief.
I am working on an amendment that alters the trigger mechanism for income tax reductions by increasing the percentage and requiring that it be based on actual rather than expected growth rates. It also would require any increased revenue above the trigger level to be distributed to the Property Tax Credit Fund, with a smaller portion directed towards lowering the top income tax rate. I spoke on the floor that I am opposed to LB 461 as it currently stands because my constituents overwhelmingly favor property tax relief over income tax relief. Although some senators questioned why we were even discussing tax decreases when facing an approximate $1 billion shortfall in revenue projections, many senators support the governor’s efforts. It will be an uphill battle to substantially change this legislation.
Next week will be devoted to budget deliberations. By legislative rule, the 2017-18/2018-19 biennial budget has to be passed by the 80th day, which falls on May 10 this year.
Again, I encourage you to notify me of your thoughts on legislation that senators are discussing. 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 Revenue Committee advanced a package of tax cuts to the full Legislature on a 6-2 vote after several months of work. However, LB 461 contains approximately $10 in income tax relief for every $1 in property tax relief. Earlier, I had stated that I could only support income tax relief if it provided $1 in income tax relief for every $10 in property tax relief.
The total annual cost for this package in ten years would be approximately $450 million. During the upcoming two years, when the state is facing a significant budget shortfall, any loss in revenue would be countered with the suspension of two tax credits – the New Markets Job Growth Investment Act and the Nebraska Historic Tax Credit.
Beginning next year, agricultural land would no longer be valued using market value based on comparable sales. Instead, valuation would be based on the income-capacity of the land. The legislation would ensure that the capitalization rate established resulted in an aggregate agricultural use value that is between 55% and 65% of its actual value. The state average agricultural use value would be capped at 3.5% over the previous year.
In 2019, the top corporate income tax rate would be reduced from 7.81% to 7.59%. The two lowest individual income tax rates of 2.46% and 3.51% would be combined at a rate of 3.25%. In an effort to help low-income workers, the Earned Income Tax Credit would be increased from 10% to 11% of the federal earned income tax credits, further increasing to 12% in 2020.
Beginning in 2020, LB 461 proposes to reduce the top individual income tax rate of 6.84% and the top corporate income tax rate of 7.59% to 5.99%. This would occur over a number of years if the projected growth in state revenue is at least 3.5% for the individual income tax rate reduction and 4.0% for the corporate income tax rate reduction.
Although not part of the package, the Revenue Committee advanced another bill that deals with property taxes. As amended, LB 640 proposes to cap property taxes at 55% of a school’s general fund revenue. However, the funding for this would come from the Property Tax Credit Fund, which now provides $224 million annually in property tax relief to taxpayers. Although I believe that there is a disproportionate burden on property taxes to fund our schools, particularly in rural areas, I also believe that the Property Tax Credit Fund is a good way to provide dollar for dollar relief to property taxpayers.
I am disappointed with the options that have been placed before the Legislature dealing with tax relief. I will work with other senators to determine if alternative measures can garner sufficient support.
The Governor signed LB 46 this past week, the bill I introduced authorizing “Choose Life” license plates. He emphasized that this is the first pro-life legislation passed in the last 6 years.
The Appropriations Committee is finishing its work on the next biennial budget. This has been a very difficult task due to the significant shortfall facing the state.
As we begin to discuss tax relief measures and budgetary issues, I encourage your input. 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.
The Legislature began full-day sessions this past week, debating and advancing numerous bills. Among them was LB 137, which would adopt the Unclaimed Life Insurance Benefits Act. The act requires life insurance companies to compare its insureds with the Death Master File of the U.S. Social Security Administration to identify possible matches and determine whether benefits are due. The insurance companies would be required to try to locate the beneficiary and provide them with instructions on how to make a claim.
People usually purchase a life insurance policy as a means to provide money to family members when they die. However, the family members aren’t always aware of the existence of the policy. Sometimes companies can’t locate the beneficiaries but this isn’t always the case. Insurance officials estimate at least $1 billion in life insurance benefits are unclaimed nationally. More than twenty states have enacted similar legislation to LB 137. I believe it is time that Nebraska joined the ranks, so I signed on as a co-sponsor of the bill. LB 137 received first-round approval on a 31-0 vote.
LB 487 was given initial approval by the Legislature on a 35-4 vote. It proposes to change penalties for persons experiencing or witnessing a drug overdose if they request emergency medical assistance for themselves or another person. For the exemption from charges for possession of a controlled substance to apply, the person must be the first to request assistance, must remain on the scene until help arrives and must cooperate with emergency personnel. LB 487 is similar to legislation passed a couple of years ago that protected minors who called for help for friends experiencing alcohol poisoning.
A bill that was amended into LB 487 through the Judiciary Committee amendments was LB 167. This bill proposes to reschedule cannabidiol in a drug product approved by the FDA into Schedule V of the Nebraska Controlled Substances Act. Currently, cannabidiol (known as CBD) in any form is a Schedule I Controlled Substance with a high potential for abuse and no approved medical use. CBD can be referred to as the “medical part” of the marijuana plant, which is different from THC, the “recreational part” of the plant that gets a person high.
Later this year, CBD in a pharmaceutical formulation will be submitted to the FDA for approval. The drug, called Epidiolex, is an investigational product being studied as a potential anti-convulsive treatment for children with certain types of epilepsy. LB 167 allows Nebraska to proactively reschedule CBD in an FDA approved product, ensuring it will be available to patients in Nebraska as soon as rescheduling by the DEA on the federal level is complete.
The Revenue Committee is continuing to work on a package for tax relief that will be sent to the full Legislature for debate. It appears that it may include an income tax relief provision, which would commit future revenue for this purpose. Therefore, senators who believe that property tax relief needs to be the priority may not be able to support the package. I am disappointed in the direction this legislation is going.
Again, I encourage you to contact me with your thoughts and opinions on legislation that is being discussed by senators. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, Nebraska 68509. My telephone number is (402) 471-2733 and my email address is firstname.lastname@example.org.
I have been appointed to chair a Special Committee of the Legislature to hear a challenge to Senator Ernie Chambers’ qualifications to represent his legislative district. The challenger unsuccessfully ran against Senator Chambers in the general election. He then filed a qualification challenge, as allowed by state law and legislative rules, questioning whether Senator Chambers has satisfied the Nebraska Constitution’s residency requirement.
The Special Committee is made up of seven legislators, including myself. The committee hired outside legal counsel, former Supreme Court Judge William Connolly. At our first meeting, the Special Committee discussed jurisdictional issues and determined that the challenger had met all statutory requirements for filing his challenge. A second meeting was held to approve an order regarding procedures for the hearing on the merits of the challenge and to set the hearing date. The hearing is scheduled for April 7th in the State Capitol.
I introduced LB 46 to authorize the Department of Motor Vehicles to design “Choose Life” license plates. The design is to reflect support for the protection of Nebraska’s children. Choose Life license plates, which allow motorists to show support for pregnant mothers and the unborn, are available in 29 states. The additional revenue brought in through the sale of the plates would be used to supplement federal funds available for the Temporary Assistance for Needy Families program. TANF provides cash assistance to low-income families with minor children and is used to pay for family living expenses, such as rent, utilities, food, clothing and other necessities. LB 46 was given second-round approval this week and is now ready for final reading.
The Appropriations Committee, on which I serve, has completed the public hearing process on all bills referred to the committee, and has heard from state agencies. We will now begin post-hearing budget reviews. Our final recommendations are due to the entire Legislature by the 70th legislative day, which falls on April 24 of this year.
Farm profits in Nebraska were expected to fall to just over $4 billion in 2016, down from a high of approximately $7.5 billion in 2013. The valuation of agricultural land is beginning to decrease but not to the extent that farm income has fallen. A local economist recently noted that local taxing authorities have continued to increase property taxes on farmland, even with sharply lower farm income. Between 2013 and 2014, assessed values of farmland for a 10-state rural region increased by 11.4%, while farm earnings fell by 18%. During this time, local governments increased K-12 school spending per student by a median 3.3%, with Nebraska showing a 7.3% increase, the highest among the 10 states.
This illustrates the critical need to decrease property taxes, yet some senators in the Legislature and the Governor are still focusing on income tax relief, as well as property tax relief. The only way I could support any income tax relief is if we offered $10 of property tax relief for every $1 of income tax relief. However, the feasibility of offering any tax relief will depend on budget negotiations, as the state is facing a $1 billion shortfall. The Appropriations Committee is in the process of cutting spending significantly, something that also must be done on the local level. These cuts are difficult to make but the alternative is an increase in taxes.
As the public hearing process nears completion and the Legislature discusses bills with priority status, I encourage you to inform me of your 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.
This past week was overshadowed by an incident at Tecumseh State Correctional Institution. Unfortunately, two inmates lost their lives. Two years ago, an incident escalated into a riot on Mother’s Day. On Thursday, staff were able to quickly bring the situation under control and no staff were hurt. Although we still have a long road ahead, I see the procedural improvements that staff have implemented. I commend the employees at TSCI and other state institutions for their commitment to work in our correctional system, as their job is dangerous, but very important. I also want to recognize the Johnson County Sheriff, the fire and rescue squad, and the county attorney who are also highly involved during these situations. I was able to visit with some employees the night of the incident and saw first-hand their determination in keeping the public safe.
LB 45 authorizes military honor plates for reservists. I introduced this bill at the request of a constituent who served for 10 years as an army reservist and had a service-connected injury. He was surprised to find out that he did not qualify for the military honor plates. LB 45 was passed by the Legislature on Friday on a vote of 46-1.
LB 46, authorizing the creation of Choose Life license plates, received first-round approval this past week from the Legislature. The Department of Motor Vehicles would create a design reflecting support for the protection of Nebraska’s children. Twenty-nine other states allow motorists to show their support for pregnant women and the unborn through the purchase of such plates.
I introduced LB 545 before the Appropriations Committee this past week. This bill would increase the appropriation to the Property Tax Credit program by $200 million per year in each of the next three years. The property tax relief offered through this program appears on every taxpayer’s property tax statement. LB 545 would increase the current annual appropriation of $224 million to $824 million.
Of the combined revenue used for governmental services, property taxes currently account for approximately 48%, income taxes 33%, and sales taxes 19%. In 2000, property taxes accounted for 42%, income taxes 35%, and sales tax 23% of total revenue for government services. Since that time, the share of revenue from the sales tax has decreased, the share of revenue from the income tax has decreased, but the share of revenue from the property tax has increased significantly. LB 545 is projected to lower the share of the tax burden from property taxes to approximately 40%, more evenly balancing the revenue streams.
Our last major tax reform 25 years ago increased state aid to schools significantly in an effort to decrease our reliance on property taxes to fund our public schools. One problem associated with this type of property tax relief is whether it results in dollar for dollar tax relief or if it allows for increased spending. By increasing the funding to the Property Tax Credit program, it truly does provide dollar for dollar property tax relief.
Nebraskans pay the 7th highest property taxes in the country. Over the last 10 years, the valuation of agricultural land has increased 176%, compared to a 35% increase in residential valuation. Nebraska farmers and ranchers represent less than 3% of the state’s population but pay more than 30% of the total property taxes collected statewide. In the majority of the state, agricultural land comprises more than 60% of a school district’s total valuation base. Rural landowners are disproportionately funding our rural school districts, even though all residents of the school district benefit equally from having their children educated in our public schools. Even though valuation of agricultural land has increased substantially more than other classifications of land, all property taxes are too high.
The Legislature is also facing a significant shortfall in the budget for the next two years. We are in the midst of cutting funding for government agencies and services. Although it will be difficult, I think we must also address property taxes. Legislation has been introduced to broaden the base of the sales tax. I am opposed to a tax increase, but am open to a redistribution of funding in order to offer property tax relief.
As senators and committees finish up the process of selecting their priority bills for this session, I encourage you to contact me with your thoughts and opinions on this legislation. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509.
I introduced LB 547 before the Natural Resources Committee this past week. This bill is an extension of legislation that was passed last year, in which we removed a public power district’s authority to use eminent domain to take over renewable electricity generation projects. LB 547 would remove a public power district’s authority to use eminent domain over all types of privately owned and operated electricity generation and transmission projects. The legislation does not alter a public power district’s current authority to build its own generation and transmission.
I introduced this bill for economic development reasons. I believe economic development is very important in our state’s welfare. It seems counter-productive that private capital must look outside our state for electricity generation projects, thereby preventing our state from benefitting from the increased jobs, increased property tax revenue, and increased income taxes.
The argument is that Nebraska already has an excess of electricity. However, since our state has joined the Southwest Power Pool (SPP), it is now the SPP that collects all the generation in its 14-state territory, deciding how much generation its transmission system can handle and dispatching the lowest-priced energy first. The SPP has 45,000 megawatts of pending generation interconnection requests – which is about 6 times more than the 7,000 megawatts of generation that our entire state has right now. If other states don’t have eminent domain authority, those states will appear more business-friendly to private companies. Since SPP operates an integrated market, any new generation will compete with Nebraska’s public power system – whether it is within or outside of our state. If the new generation is going to happen anyway, I feel that it is in Nebraska’s best interest to promote economic development within our state.
My intent is not to harm our current public power system, as it has worked well in the past, but to plan for the future. The environment has changed since Nebraska joined the SPP. Consequently, we must work together on what is best for Nebraska ratepayers. I am looking forward to working with the industry in the partnership of the Legislature and public power.
The public hearings were held on LB 312 and LB 313 this week before the Revenue Committee. These bills were backed by the Nebraska Ag Leaders Working Group, which is composed of the Nebraska Farm Bureau, Nebraska Cattlemen, Nebraska Pork Producers Association, Nebraska Corn Growers Association, Nebraska Soybean Association, and Nebraska State Dairy Association.
These organizations look at the bills as a way to better balance the three-legged stool, symbolizing the three sources of revenue to fund government services, by increasing revenue from the sales tax and using it to decrease the reliance on property taxes.
LB 312 would impose sales tax on additional services, such as the repair or maintenance of motor vehicles, pet related services, lawn care, and personal care services (hair care, massage, nail and spa services). The legislation would also remove the sales tax exemption on such things as school lunches, admissions to school events, soda pop, candy, and lottery tickets. LB 313 would increase the state sales tax rate from 5.5% to 6.5%. In an effort to reduce the impact of the sales tax increase on the lower income, both bills would increase the earned income tax credit to 17% of the federal credit, with the remainder of the increased revenue dedicated for property tax relief. It is projected that both of the bills combined would generate more than $500 million annually for property tax relief.
Senators and committees have begun to select their priority bills, which will now be debated ahead of bills without priority status. I encourage you to contact me with your thoughts and opinions on legislation. 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 email address is firstname.lastname@example.org.
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 email@example.com and my telephone number is (402) 471-2733.
The Legislature gave first-round approval to both bills introduced on behalf of Governor Ricketts, containing his plan for property tax relief. However, the bills have been completely rewritten through the amendment process.
LB 959, as amended by committee amendments, eliminates the minimum levy penalty which reduces state aid to districts with levies less than .95 cents, removes the levy criteria from the averaging adjustment calculation, and caps the special levy school districts can use to address health, safety and accessibility problems in school buildings at 3 cents, down from 5.2 cents. LB 959 will allow a number of school districts to reduce their levy and will also provide more state aid to some districts that depend heavily on property taxes to fund their schools.
LB 958, as introduced, would have affected local governments by placing limitations on the budget of restricted funds and reducing the number of exclusions to the property tax levy limit. It also would have limited the state-wide increase in agricultural land valuations to 3 percent. Following the public hearing, when the committee heard significant opposition from representatives of cities and other political subdivisions, LB 958 was advanced from the Revenue Committee with committee amendments that rewrote the bill. Although a portion of the original bill remained in the committee amendments, pertaining to the unused restricted funds authority for community colleges, the sponsor of the bill has filed an amendment to strike this portion during the second round of debate, as he doesn’t want it to hinder the passage of the bill.
Under the committee amendments, LB 958 proposed a $30 million increase in the Property Tax Credit program, targeted for agricultural landowners. This would be accomplished by valuing agricultural land for purposes of the Property Tax Credit program at full market value rather than 75% of market value. With the additional funding, on top of the $204 million already appropriated for the program, the credit for agricultural landowners would result in an approximate 10% reduction in property taxes.
During debate on LB 958, urban senators felt that all taxpayers should receive tax relief, not just rural landowners, and an amendment was offered to strike the provisions of the bill, replacing it with an income tax reduction. Following several hours of contentious debate, a compromise amendment was offered to reduce the additional funding for rural landowners through the Property Tax Credit program to approximately $20 million annually. I was disappointed that we had to compromise in order to get LB 958 advanced. Considering that property taxes collected statewide on agricultural land increased 176% over the last 10 years, compared with a 35% increase in residential property and a 49% increase in commercial property, it was obvious that agricultural landowners deserved some immediate relief. However, the Legislature must continue to work to provide significant relief for all taxpayers.
LB 1032, is Nebraska’s fourth attempt at expanding Medicaid, as part of the federal Affordable Care Act. After about an hour of debate, a motion was offered to bracket the bill until April 20, which is the last day of session. The motion was successful, meaning that the bill is essentially killed for this session.
The Health and Human Services Committee amendments to LB 1032 proposed to add a sunset date in three years. The amendments also proposed to appropriate $63 million from the Health Care Cash Fund to fund the state match for the coverage of the newly eligible.
In addition to the sunset, LB 1032 also states that if the federal share falls below 90%, the coverage for newly eligible individuals shall terminate. Although the intent of the bill is to ensure no appeals to the loss of eligibility if the program terminates, this could be problematic. Federal law classifies the new Medicaid expansion population as a “mandatory population” for states that opt into the expansion.
Furthermore, senators questioned whether the source of funding was sustainable. When federal reimbursement falls to 90% in 2020, the projected cost to the state for the expanded population would be approximately $58 million annually. Although the Health Care Cash fund has a positive balance currently, it only brings in approximately $59 million annually and is used to fund many other programs as well, such as tobacco-cessation programs, biomedical research, and behavior health and substance abuse services. Senators sympathized with those who fall in the gap, making too much to qualify for Medicaid, but not enough to be eligible for subsidies. However, the majority feared that the program could end up costing more than our state could afford, thereby requiring cuts in other essential programs and services.
With just a few days left in this legislative session, I still encourage you to contact me with your opinion on issues before us. 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.