Last week the legislature began the difficult task of coming up with a budget for the FY 2017-18 / FY 2018-19 biennium. While never easy, this year’s deliberations are especially challenging given the budget shortfall resulting from lower than expected revenue growth.
Over the past 35 years revenue has grown, on average, approximately 4.9 percent per year. FY 2015-16 saw an increase of only .3 percent and and only 1.3 percent in FY 2016-17. This averages out to about .8 percent per year over the two year period. At the same time, spending increased an average 3.7 percent per year.
As it currently stands, even though revenues are down significantly, the state will still take in more money than last year. While many program areas will see some decreases, there will not be across the board budget cuts. Total spending will increase by approximately .4 percent in FY 2017-18 and 1.1 percent in FY 2018-19. TEEOSA school aid will increase by an average 2.4 percent per year and funding for Correctional Services will increase by an average 2 percent per year for the biennium.
The Appropriations Committee was faced with many hard choices when they put together their budget recommendations. In addition to taking over $248 million out of the state Cash Reserve Fund, the “rainy day fund,” one of the sources they turned to for help with closing the revenue gap was to “sweep” the money out of the cash funds of almost fifty boards, agencies, and programs and transfer it into the state’s General Fund. In total about $207.6 million will be redirected from these individual cash funds.
Cash funds are used to account for revenues such as taxes or fees paid by individuals or entities outside of government for a variety of purposes. The use of these funds is generally directly tied to the individuals or entities paying the fee or charge. Laws governing cash funds set specific uses for the funds and do not permit them to be used for other purposes. In 2009, however, the legislature added transfers to the state General Fund as one of the authorized uses for many cash funds.
I strongly disagree with pulling money from cash funds and diverting it from the purpose(s) for which it was intended. It amounts to unilateral policy making by the Appropriations Committee if it can decide, on its own, that funds specifically collected and set aside for one purpose can instead be used for something else.
As Chairperson of the Transportation & Telecommunications Committee I was especially concerned by transfers of cash funds from three agencies under the purview of my committee: the Department of Roads, the Public Service Commission, and the Department of Motor Vehicles.
The Department of Roads is taking one of the biggest hits of any agency. The Department of Roads Operations Cash Fund is scheduled to lose $30 million over the two-year period. The bulk of the money in the fund comes from fuel taxes and is designated specifically to support the activities of the Department of Roads including new construction and maintenance. The department’s Motor Fuel Tax Enforcement & Collection Fund will lose $1.2 million.
The Public Service Commission will lose $600,000 from the Enhanced Wireless 911 Fund which was established to provide enhanced 911 service throughout the state and is funded by surcharges on telephone lines. Another $1.3 million will be taken from the Universal Service Fund. The fund is to be used to help provide universal telecommunications access to all persons in the state. The money comes from a surcharge on the intrastate portion of phone bills.
The Department of Motor Vehicles will lose a total of $2.25 million from three funds: the Department of Motor Vehicles Cash Fund, the Ignition Interlock Fund, and the Nebraska Motor Vehicle Industry Licensing Fund.
But my greater concern is that this is missing the real problem – spending. Whether it’s the right or the wrong thing to do, using cash funds is a one-time partial fix. If revenues stay flat, or decrease, we will have even bigger problems two years down the road and fewer resources to address them.
Additional cuts may still be coming. At its meeting on April 26, the economic forecasting board decreased its revenue projections by an additional $55 million, bringing the total budget shortfall to over $955 million.
Please feel free to contact me and my staff about your legislative concerns or other issues you would like to discuss. My email address is email@example.com and our telephone number is 402-471-2630.