The end of March brings us very near the end of the current legislative session. When the Unicameral reconvenes after the Easter holiday, we will have just eight working days remaining. Many bills are left to debate and there may be some override motions to take up.

LB 1412 and 1413 were passed this week, consisting of the budget adjustments in this second year of the biennium for state agencies and projects. We had expected a $26 million decrease in TEEOSA school funding. However in mid February we learned the state was facing a $67 million increase, which had to be reflected in the budget.

The bills also make transfers of funds from about twenty state agencies to the General Fund. Overall, the bill reflects a 3.1% increase in state spending, which would have been lower than 2% but for the additional cost of TEEOSA. Just $20 million remains to fund legislative proposals for senators’ bills still in process.

In a statement on the floor, Speaker Arch pointed out that with the abundance of federal funds flowing into the state during and after the pandemic, spending in the past couple of years had reached an unparalleled level, which could not be expected to continue. I echoed his sentiments in a follow up statement.

For LB 1412 and 1413, the Appropriations Committee evaluated the needs of agencies, as well as their reluctance to have unspent money “swept” into the General Fund (such as the $15 million for behavioral health). We worked to align the Governor’s budget proposals with the costs of both ongoing and new funding requests. In addition, we must look at the impact, not only for the current fiscal year, but at least two years into the future.

As I emphasized to my colleagues, our recent reductions to the income tax rate and property tax credits, all good by the way, have left us with only about $20 million for any other bills that require funds. The current list of bills that need funding would create a three year budget deficit of $369 million. The state is not allowed to run a deficit, so either another funding source must be found or a bill will not go anywhere. While $20 million may sound like a lot to us as individuals, it gets used up very quickly by both “wants” and “needs” at the state level.

That said, the long awaited “tax bill” finally made it to the floor for debate. As a way to lower property taxes, make up for the resulting lost revenue and fund schools, LB 388 would increase the state sales tax by up to a cent, and raise taxes on cigarettes, vaping and hemp products. Exemptions would apply to the residential use of electricity, natural gas and propane. A new sales tax would be imposed on soda pop and candy, state lottery tickets and veterinary bills for pets to name a few. The Governor’s office estimates these sales taxes would generate about $730 million in revenue and be sent to K-12 school districts in an effort to lower property taxes by an average of about 30%.

An amendment to the tax bill would set limits on political subdivisions and their levying authority, to place a cap of real growth plus 3%, or a Consumer Price Index (CPI) budget cap, on counties, cities and villages. It allows for a 6% compensation growth for salaries of public safety officers if currently understaffed.

A companion bill would “front load” the property tax credit, taking the levies at every school below 80 cents. Beatrice Public Schools would see a reduction in property tax by 52%. Palmyra would see a 69% reduction. Many, especially in Omaha and LIncoln, have not taken advantage of the current property tax credit on their income tax returns, but would see the full reduction on their property tax bill in the future. This would be a huge tax decrease.
After spending just a few hours of debate on LB 388, Sen. Linehan, who sponsored the bill and chairs the Revenue Committee, asked the Speaker to wait until after Easter before placing the bill back on the agenda. A number of amendments have been offered by other senators, and arguments included whether taxes are regressive (sales) or progressive (income).

I want to point out that the mechanisms in the bill are a way to truly reduce property tax. With LB 388 being a key provision to rebalance the “three legged stool” of tax collection, I fully expect more debate during the last few remaining days.

Our week ended with LB 937, a priority bill brought by Sen. Bostar, that also included parts of ten other bills from the Revenue Committee which were not prioritized. That fact was the subject of some debate and led to a motion to “divide the question”, so that individual parts of the bills could be considered separately.

The topics covered in LB 937 include a tax credit for: family caregivers, contributions to charitable organizations which help with pregnancy, nonprofits, biodiesel fuel, film or video production companies, support and caregiving for people with intellectual and developmental disabilities, food donations, sustainable aviation fuel, shortline railway projects, the Medical Debt Relief Act and a tax credit for reverse osmosis systems.

Every session there are some excellent programs and ideas that deserve to be funded, and some that warrant long term appropriations. The problem is, as I mentioned earlier, with the combination of tax reductions and the end of federal funds coming in from ARPA, the dollars are just not there to sustain everything on the wishlist, no matter how worthy.

Wishing you a blessed celebration of Easter. Please continue to send me your comments and concerns. mdorn@leg.ne.gov 402-471-2620. Thank you!