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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.
Gage County was organized in 1856, but lacked a courthouse until about 1870. Twenty years later this grand Richardsonian Romanesque building replaced the first courthouse. Many Nebraska counties have similar stories. Although frontier courts often met in rented space and early courthouses were usually small and cheaply built, by the late 19th century a grand courthouse became a point of pride. Nebraskans were eager to show their progress. The Gage County Courthouse opened in 1892 and is listed on the National Register of Historic Places.
Legislative Update – April 27, 2017
Senator Roy Baker – District 30
It has been a rocky road these past few days – more on roads later in this column – and it is all due to debate on the biennium budget. The Appropriations Committee has spent months preparing the budget proposals. When the committee first began their internal discussions, those members agreed that three priority areas should not be targeted for cuts, in order to prevent irreversible damage to those programs.
The three areas prioritized by Appropriations make up the majority of the state budget. 44% of the budget is dedicated to K-12 and higher education. About 35-37% goes toward aid to individuals like Medicaid, provider reimbursements, etc. And the third area of priority, which takes about 10% of the state budget, is the court system, Corrections and the State Patrol.
First, K-12 education was set as a priority and no cuts were made to TEEOSA (state equalization aid). Any cuts to TEEOSA would push K-12 education funding needs to the property tax base. Also included in the education piece is higher education; the universities, state and community colleges. Having quality education from kindergarten through the college level feeds into work force development and a better economy. Any major cuts to higher education would mean students would see significant tuition increases rates. The University of Nebraska did take a $10 million reduction in aid.
The second priority is aid to individuals which comprises almost 37% of the budget. This includes Medicaid to the aged, blind, disabled, provider reimbursements and so on. Cuts to these programs would potentially impact the elderly in assisted living and nursing homes, low income families with children and their health care, rates to providers who care for the developmental disabled or those with mental health issues. The committee saw the need to protect this funding.
The last area deemed a priority was corrections, the courts and state patrol. The Department of Corrections is facing large overcrowding problems in state prisons and has been involved in Justice Reinvestment with more programing, more parole officers, and review of sentencing guidelines for certain offenses. The courts and jails did take a reduction of $9.2 million.
The remaining agencies in state government took anywhere from 4% to 8% reductions. Money from the state’s cash reserve or “rainy day fund” has also helped address the shortfall. Senator Stinner, the Chairman of the Appropriations Committee, stated that Nebraska is experiencing the 3rd lowest revenue growth rate in the last 36 years. Usually when there is low revenue growth, the state has a year or two of increased revenue growth to help recover. For the past three years, the state has seen low or negative growth. So the state never had the chance to recover from the previous down-turn.
On April 25th senators began the long discussion of where cuts should and could be made. The first contentious reduction made by the Appropriations Committee was cutting $30 million from the Department of Roads which has a $1.7 billion budget. This cut equates to a 1.75% reduction in the Roads budget. Part of the committee’s rationale was that in 2011, a law was enacted that took a ¼ cent of the state sales tax revenue, approximately $60 million, and dedicated it to roads. Since current funding to roads includes a portion of the state’s General Fund revenue stream, the committee deemed it appropriate to have this agency help in addressing the budget shortfall. An amendment offered by Senator Curt Friesen of Henderson tried to take money from a Medicaid cash transfer fund to replace the $30 million cut from roads. This amendment was defeated.
On April 26th the Nebraska Economic Forecasting Board came in with an additional $50 million shortfall. The committee and the full Legislature will again need to look at where more cuts can be made. A bill that would look at taxing internet sales is working its way through the legislative process and could have a potential revenue increase of $30-$40 million. However there is a court case that does not allow a state to require a business outside that state to pay sales tax. At the time the courts made these decisions, the internet was only just beginning. A point to be made is Nebraska residents have always been required to track their mail order or on-line purchases and to remit the sales tax to the state. The compliance with this law is marginal at best. Internet sales are hurting our main street stores in our communities. This bill would level the field
The Speaker of the Legislature ended the debate on LB 327, the budget bill, at 9 pm Wednesday night after it became stuck in extended debate on Title X women’s health funding. Some senators expressed concern that language in the bill could cut funding going to Planned Parenthood agencies in the state. These agencies provide basic women’s health services, including such things as cervical cancer screening and family planning services. State law does not allow any state or federal funds to be used for abortions. Senators from the opposing sides will get together before the next round of debate to try to reach a compromise.
The budget should be passed by May 10 and will go to the Governor for any potential line-item vetoes. At that point senators will once again have the opportunity to review those cuts and consider any over-rides we deem necessary.
Legislative Update – April 24, 2017
Senator Roy Baker – District 30
Day 70 of the first session of the Unicameral is the day the new state budget for the next two years is presented to the Legislature. Monday morning was day 70. Senator John Stinner, the Chairman of the Appropriations Committee, held a budget briefing for senators and staff. By now Nebraskans know the state is facing a significant reduction in state revenue to the tune of $1 billion. The Appropriations Committee has worked for the last three months to hammer out the details of addressing this shortfall and still ensure the state can meet its financial obligations. The debate will begin this week.
The financial downturn can be largely attributed to revenue growth of just .3% in FY 15-16 and 1.3% in the FY 16-17. These are the third lowest back to back revenue growth years over the past 36 years. Not only was revenue growth low, it also occurred very quickly.
The state is required to have a 3% minimum reserve, basically a savings account. The legislature tends to keep a higher reserve, usually 7%, for instances when the revenue falls short. The Nebraska Economic and Forecast Advisory Board (NEFAB) meets four times per year and runs calculations to determine projected growth or reductions in state revenues. In the summer of 2016 the NEFAB reduced its projections of revenue growth, meaning the projected revenue fell short of expectations. This board will meet again on April 26 and provide new projections. It is important to remember that General Fund revenue growth is cyclic and there are highs and lows. The job of NEFAB is to help predict those highs and lows. The average growth in revenue over the past 35 years is 4.9%. The Board forecast for 2017-18 equated to a 1.3% growth.
The Appropriations Committee average spending growth in the budget package is 1%. The committee prioritized a few funding areas believed to be essential to a solid budget. Increases in state funding were given to priority areas which include: corrections, equalization aid to schools, provider rates for behavior health and developmental disabilities, children’s health insurance fund, and special education to name a few. Areas cut were: aid to Universities and State Colleges, various programs in the Health and Human Services system, Medicaid, aid to local governments, and public health aid, among others.
For a more detailed review of the state budget, go to: http://www.nebraskalegislature.gov/pdf/reports/fiscal/2017proposed.pdf
A major issue that will be debated on Monday is LB 595 introduced by Senator Mike Groene of North Platte. LB 595 would provide for the use of physical force or physical restraint or removal from a classroom in response to student behavior. I believe Senator Groene had good intentions with the bill and is trying to improve it with his amendment. We all want a safe learning environment in our classrooms. State law already gives guidance to teachers, administrators and school boards on the appropriate steps to take when dealing with a student who may pose a risk to themselves, other students, teachers or school property. Existing law allows a teacher or administrator to use physical contact short of corporal punishment to the degree necessary to preserve safety, order and control in the school environment.
There are legal issues created by LB 595. Section 504 of the Rehabilitation Act of 1973 requires accommodations for students with disabilities in accessing educational programs. LB 595 contradicts federal enforcement actions and civil rights with respect to seclusion and restraint of vulnerable children and may be discriminatory on its face.
There are practical concerns as well. The bill would allow a teacher to ban a student from a classroom. However, in small rural school districts there may be only one section of an elementary grade level, or there may be only one section of a particular course in any size of school.
I have an amendment that replaces the bill and reflects a court decision already on the books that allows a teacher to defend oneself and others in the classroom. If this amendment is adopted, I would have no objections to the bill.
To close, I will cover the budget and the proposed tax reductions in more detail in the next newsletter as our debate on these issues unfolds. If you would like to contact me, my phone number is 402-471-2620. My email address is firstname.lastname@example.org. You can find information on bills and access NET television’s livestream of the Legislature at www.nebraskalegislature.gov.
Legislative Update – April 13, 2017
Senator Roy Baker – District 30
Day 65 of the legislative session occurred on Thursday, April 13th and we are in recess until Tuesday the 18th for the Easter weekend. But this means when we return, just 25 legislative days remain to debate, amend, vote on and pass the new biennium budget, consider income tax and property tax relief, and address state equalization aid to public schools. Then there are the priority bills totaling 107 – of which one has passed, 44 are waiting for Final Reading, and 63 are at various stages of debate, some even in committee. In other words, there is much to be done and little time remaining to act on all the priorities.
In the past few days, we have debated very controversial issues: LB 68 dealing with concealed carry gun rights, LB 173 pertaining to civil rights protection for LGBT in the workplace, and LR 6 calling for a constitutional convention of the states. Speaker Jim Scheer has structured debate in an attempt to maximize the use of our time. He has stated that controversial bills can have three hours of debate and then the bill will be placed on hold until such time when the sponsor of the bill can prove that he or she has enough votes to gain cloture. Thirty-three votes are needed to end extended debate. I believe this provides the introducer the opportunity to have the issue debated, but also makes them work to get the necessary votes to keep the bill moving along.
On controversial issues, I hear from very passionate individuals, some are constituents, some from other parts of the state and even some from outside the state of Nebraska. The passion runs strong on both sides of the issues – and there are always two sides to these contentious topics. I sometimes hear that I must vote a certain way otherwise it is thought I have been unduly influenced by the lobby. In my decision making, I take the time to listen to my colleagues both pro and con. I read up on the information provided, again both pro and con. And of course I consider the comments made by my constituents and those expressed by others. I must point out that the least effective form of communication is a form letter or a calling tree prompted by an organization. I still take those contacts into consideration but the ones that have the most impact are the personalized letters, emails and phone calls. If a person takes the time to express his or her point of view and explain how they are personally affected, I take it more seriously.
After the recess, LB 640 will be the first bill up for debate. This bill reduces the levy lid from $1.05 to $0.987 (in the committee amendment) per $100 taxable valuation. If equalization aid is reduced, a school district could ask for an additional $.03 cents with a two-thirds vote of the school board after a public hearing. A school district would qualify for the School District Property Tax Relief Aid (PTRA) if its general fund property tax receipts exceed 55% of its total general fund revenue. School districts that qualify for the PTRA are required to budget the monies as a revenue source before property taxes. This is only a partial explanation of what is contained in the bill. School equalization aid is complex because it attempts to address a multitude of diverse school district issues across the state. All senators will need to gain a working knowledge of the complexities of the formula and the impacts to districts with proposed changes. I plan to call upon my 37 years of experience as a school superintendent to help my senate colleagues with their understanding of the proposed changes.
As noted, I welcome your input and communication. My phone number is 402-471-2620 and you can email me at email@example.com. You can also find information about every bill as well as our daily agenda at www.nebrasklalegislature.gov.