Weekly Update – May 8, 2017
Revenue. The Revenue Committee’s tax reduction bill LB461 and AM954, introduced by Committee Chair Jim Smith on behalf of Governor Ricketts, failed to advance on May 2. The cloture motion received 27 votes, but 33 votes are required. I was “not voting” on the cloture motion.
The Revenue Committee rolled LB338, the Agricultural Valuation Fairness Act, into the omnibus AM954. There appears to be support for the concept of the production model for valuing ag land, and those provisions may come back as an amendment to another bill.
I have and will continue to support measures designed to reduce over-reliance on local property taxes, while maintaining support of K-12 public schools. AM594 would not have done those things. Even the rural senators who voted for cloture expressed dissatisfaction with the bill’s minimal impact on ag land property taxes. Farm organizations on record as opposed to LB461 include Nebraska Farm Bureau Federation, Nebraska Corn Growers Association, Nebraska Pork Producers Association, Nebraska Soybean Growers Association, and the Nebraska State Dairy Association. Urban senators report little demand from their constituents for lowering income taxes; most city dwellers also prefer the focus to be on lowering property taxes.
In AM954, income tax rate reductions and property tax credits would have been enacted in the future, based on ‘triggers’ – when revenue in a year would be projected to grow by 3.5%, the following year the income tax and property tax provisions would be enacted. Concerns were voiced regarding future inflation. While the rate of inflation has hovered around one percent the past few years, it is quite conceivable that we could see inflation rates of 3.5% or higher at some point in the future. Yet growth in revenue at or above the 3.5% threshold would still trigger income tax reductions and further property tax credits despite inflation, leaving the state with diminished ability to meet the basic responsibilities of state government. Appropriations Committee Chair John Stinner has stated that further cuts to the austere state budget could result in very negative long term consequences.
Questions also arose as to how the proper level of the state’s cash reserve would be restored under the provisions of AM954. The desired level is around $700 million. This year, the Legislature is dipping in to the ‘rainy day’ fund, drawing it down to $400 million. When the state’s economy improves, restoring the cash reserve needs to be a priority.
Budget. The 2017 Legislature has a $1.1 billion problem. In short, the proposed solution includes $700 million in cuts, $230 million in transfers, and approximately $170 million from the ‘rainy day’ fund. The most recent revenue forecast shows a need to find another $55 million. Appropriation Committee Chair Stinner proposes to reduce the minimum cash reserve percentage from 3% to 2.5%. This is separate from the rainy day fund – it is General Fund money kept in the checking account as excess balance to manage the ebbs and flows of month to month transactions. Sen. Stinner criticized what he has termed ‘crony capitalism’ – exemptions given to certain entities over the years that now totals $816 million.
The main budget bill is LB327. Progress toward the necessary task of adopting a budget for the next biennium was slowed when new language involving Title X was discovered in the budget bill. Title X is a federal grant program dedicated solely to providing individuals with family planning and related preventative health services, e.g., pap smears. The new language dealt with prioritization of the agencies with regards to receiving Title X funding. Most of the Appropriations Committee had not recognized the change in language that had been slipped in. When considering the impact on clinics and compliance with federal law, it was determined the language should be removed from the budget bill, and call for further study by the committee to be designated by the Referencing Committee.
No state tax dollars are involved with Title X. It is also important to note that no state or federal dollars go to paying for abortions or abortion counseling.
As we take up these crucial topics in debate, I welcome your input and comments. Please contact me at 402.471.2620, or email@example.com. You can track legislation and find a link to stream live debate on your computer at www.nebraskalegislature.gov.