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The Legislature concluded its 18th week of the session by advancing a series of budget bills through two rounds of debate. Appropriations Committee members should be credited for their hard work in constructing the two-year, $17.4 billion budget. Senator Lavon Heidemann, the chairman of the committee, said that an extensive study conducted by all of the Legislature’s committees helped identify the cuts that needed to be made in the various state programs and agencies.
Prior to this week, the state faced a $986 million general fund shortfall between expected revenues and necessary expenditures. However, the Nebraska Economic Forecasting Advisory Board recently projected healthier income tax returns would result in a boost to the state coffers of $82.5 million by the end of the fiscal year. Despite the board’s optimism that the economy is slowly recovering from the recession and that the increase in revenue should continue through the two-year cycle, the Legislature still made difficult cuts and significant budget adjustments.
Overall, state spending will increase at an average of 2.6% during the two years, but much of that increase can be attributed to replacing the one-time funds given to Nebraska through the federal American Recovery and Reinvestment Act. Most of these funds went to public school districts to prevent harmful cuts to education during the peak of the recession. Budget-related actions included cutting Childrens Health Insurance (SCHIP) and Medicaid provider rates by 2.5%; eliminating $22 million in state aid to cities, counties and natural resource districts; and adjusting the state aid to schools formula, resulting in $410 million less to schools.
In addition, $105 million from the state’s cash reserve fund was transferred in order to balance the budget, as required by the Nebraska Constitution. This amount could have been much more, but the Legislature voted to put the extra projected funds into the cash reserve, otherwise known as the “rainy day fund”.
I applaud the Appropriations Committee for leading the rest of the Legislature in exercising fiscal restraint and for saving for future tough times. It is common-sense budgeting practices that have resulted in Nebraska recently being identified as the nation’s second least economically stressed state by the Associated Press’ Economic Stress Index. That is something for which we Nebraska should be proud.