The official site of the Nebraska Unicameral Legislature

Sen. John Kuehn

Sen. John Kuehn

District 38


January 3rd, 2017

Thank you for visiting my website. It is an honor to represent the people of the 38th legislative district in the Nebraska Unicameral Legislature.

You’ll find my contact information on the right side of this page, as well as a list of the bills I’ve introduced this session and the committees on which I serve. Please feel free to contact me and my staff about proposed legislation or any other issues you would like to address.

Sen. John Kuehn

Following adjournment of the Legislative session, legislative staff and committees begin work on interim study resolutions. These study proposals, designated with the “LR” prefix, can be submitted by individual senators or standing committees. Each study is referred to one of the standing committees, where Committee Chairs prioritize the resolutions and determine whether a public hearing will be held. This year 127 different studies were introduced.  A full list of the interim study resolutions and their full text is available on the homepage of the Nebraska Legislature’s website.

Interim studies vary significantly in their depth and purpose. Public hearings are not required and are at the discretion of the chair. Interim studies tend to be political, rather than objective, in nature. They should not be confused with a performance audit, which is an objective study of a legislative program with defined standards for analysis conducted by trained professional auditors. Interim studies can be used to research future legislation, providing an opportunity to identify stakeholders that may engage on an issue. They may also examine a concept that failed to advance in a prior session, helping to refine and improve legislation for future years.

This year I introduced two interim study resolutions. The first, LR 190, is to study the creation of an Ethics Committee in the Nebraska Legislature. Outside of issues of campaign finance under the jurisdiction of the Nebraska Accountability and Disclosure Committee, there are no ethics rules for members of the Nebraska Legislature. Consequently, there is no process for addressing ethical concerns among members of the Nebraska Legislature unless it is illegal activity defined by statute via the courts. The public assumes there are rules and a process in place for ethical conduct, even though none exist.

During my three years in the Legislature a number of ethical issues have emerged with no guidance for resolution. These include concerns of conflicts of interest, senators registering to lobby while in office, personal use of state resources, and expectations of residency within a district among others. Public confidence in the legislative process necessitates greater transparency in the ethical expectations of state senators. LR 190 has been referred to the Executive Committee.

My second interim study, LR 242, examines the feasibility of adopting a zero based budgeting process for state agencies. Zero based budgeting is a process for building a budget that begins at “zero” and requires justification for each component of the budget request. Thus, the budget is built each time based on the current priorities and needs of each agency.  

Currently, the Nebraska state budget is developed using a “baseline budget” process. This means that a new budget assumes the previous year’s budget will be supplied, with the appropriations process focusing primarily on the addition of new spending programs to the prior budget base. No justification of need is required for previous funding, nor accountability for the use of taxpayer dollars appropriated before. This process can promote inefficient use of state funds, as well as distort revenue and spending needs. For example, the often cited $900 million shortfall at the beginning of the year was not based on actual spending decisions, but an assumption that state spending would grow during the next two years at an annual rate of 6%.

As progress is made on each of these two studies, I will continue to update constituents of District 38. My office will also be undergoing a staff change. John DeWaard, my Administrative Assistant, will be leaving to start medical school in Missouri at the end of the month. Although he will be missed greatly in the office, I am excited to see my former student and research advisee move forward in his medical career. Jessica Shelburn, my Legislative Aide, will be staffing the office alone until John’s replacement is in place. I do ask for your patience as we accommodate summer schedules during that time.

A term frequently used to describe state policies is “unfunded mandate”. In general, this refers to a statute that requires a government to take an action or perform a function without directly providing funds. The term originated in reference to laws and regulations passed by the federal government that required state action, while requiring states to pay the bill through taxes assessed by the state level. National environmental regulations are often cited examples of federal unfunded mandates upon the states.

In recent years local political subdivisions, including cities, public schools, natural resource districts, and others have adopted the practice of describing state statutes as unfunded mandates, drawing a parallel to the federal practice. The comparison, however, is not equitable. The legal framework between the federal government and the states is distinctly different from the relationship between the state government and the local political subdivisions it creates.

Specifically, under the U.S. Constitution, the federal government does not have absolute power over the states. Known as federalism, the states are seen as distinct and autonomous of the national government, which has specific enumerated powers listed in Article I, Section 8 of the U.S. Constitution. Furthermore, the Tenth Amendment states “the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

This is in stark contrast to the relationship between the state government and the local political subdivisions it creates. Nebraska is known as a “Dillon’s Rule” state. As described in the 1868 court case that established the doctrine, “municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. If it may destroy, it may abridge and control”. Thus, local governments are not entities of themselves. Their creation, authority to tax, ability to spend, and areas of jurisdiction are granted entirely by the Legislature. They cannot exercise any authority not specifically granted to them by the Legislature.

To that end, local governments’ ability to tax is granted by the Legislature, which provides funding for the responsibilities required of them by the Legislature. Whether or not funds from the state treasury follow a particular statutory requirement is irrelevant, as the ability to collect property taxes, sales taxes, issue bonds, and charge fees are granted by the state. Local governance set the priorities for how they choose to implement state authorized taxing authority.

It can be amusing to see what activities local subdivisions label “unfunded mandates”. These include Natural Resources Districts’ labelling compliance with their resource management plans as such. Managing their resources is their primary reason for existence. Municipalities list public records compliance and public notice publication requirements as unfunded mandates, despite these are essential functions of local, citizen led government. School districts cite assessment of student learning. By such broad and illogical definitions, any local government activity paid for by local tax dollars is an “unfunded mandate”. That does not stand up to reason, nor is it consistent with Dillon’s Rule.

Because the term is politically charged, it is often used to generate opposition to a bill. For example, this past session, the education lobby, in opposition to LB 651, called requiring all third grade students to be grade level proficient in reading an unfunded mandate. Nevermind that teaching reading is the primary function of early elementary education. In contrast, LB 427, which required schools to provide physical accommodations and an academic support plan for pregnant and breastfeeding students, was supported by the Nebraska State Education Association in the committee hearing. No funds were provided by the state to build and maintain these required facilities, nor to develop the individualized learning plans for student mothers. The term “unfunded mandate” was rebuffed by proponents during floor debate. It is important to note that the teacher’s union saw developing plans to enable elementary students to read at grade level as an unfunded mandate, but not individualized accommodations for high school mothers wishing to breastfeed during the school day. The inconsistency between the two positions reflects political ideology, not principle.

Local governance of our communities is a hallmark of Nebraska. The ability of locally elected officials to make decisions as close to taxpayers is critical. Serving in locally elected office requires just as much dedication and responsibility as serving at the state level. Prioritizing taxing and spending decisions locally can be especially difficult, as the decisions directly impact your neighbors, coworkers, and community.

I fully support local control, but recognize there are instances where inconsistencies based on arbitrary political boundaries are not in the best interest of Nebraskans, either locally or statewide. As establishments of the state, local governments must exercise extreme prudence and accountability for prioritizing tax dollars and imposing regulations. In turn, the state must judiciously exercise its authority over the political subdivisions it creates. Cooperation is vital to representing the best interests of the ultimately arbiter of political power: the individual citizens.

As your state senator, I have the responsibility to study the facts of policy issues in depth and make decisions based on evidence. Our democratic republic operates upon a level of trust that elected officials act in a logical, reasoned manner using valid evidence. For representative government to be successful, voters must also critically and skeptically evaluate information presented to them.

This is no easy task. We all have our own preconceived biases and ideology influencing our objectivity. Nobel-prize winning physicist Richard Feynman summed up our ability to misinterpret information by stating “the first principle is that you must not fool yourself, and you are the easiest person to fool”.

A frequent logical error in political rhetoric is known as the “false dilemma”. This strategy reduces an issue down to an either-or decision, with one choice being mutually exclusive of the other. Many of the funding discussions during the past legislative session were portrayed as such a false dichotomy. For example, it has been asserted that since I did not support the full request for funding increases for developmental disability, mental health, or other health care providers, then I do not support the disabled, the elderly, or the vulnerable. This is a false choice.

When I cast a vote on a budget item, there are many constituencies I must consider: those who receive the funds, the taxpayers who pay for it, and other programs that must be prioritized for finite funds. My consideration must also take into account the magnitude of the funding, as well as the current and future trends in revenue and needs of the state. There is no “either-or” choice. The costs and benefits are spread across a continuum, with multiple choices and outcomes.

With regard to the state funds appropriated to programs that assist vulnerable Nebraskans, I voted to invest $833 million each year in Medicaid, $149 million in developmental disability aid, $104 million in public assistance, and $72 million in behavioral health aid. The two year budget funds Medicaid at 99.2% of the prior biennium, developmental disability aid at 99.1%, public assistance at 98.5%, and behavioral health aid at 98.9%. Supporting $2.3 Billion of General Funds over the course of a biennium is a significant commitment to vulnerable Nebraskans. Furthermore, the Department of Health and Human Services is confident it can manage these small, target reductions through operational efficiency without reducing funds available for care. The false dilemma created by the political rhetoric is not logical.

Evidence and factual data are essential for sound policy. From a reasoned point of view, the burden of proof lies with the individual making the positive claim. In the scientific method, the hypothesis, or claim, being made is assumed to be false until proven otherwise. This is known as the “null hypothesis”. A failure to meet the burden of proof is best illustrated by the claims made by administrators about reductions to the University of Nebraska appropriation.

Over the course of the biennium, the University received an average reduction of 0.2% over the previous budget. University leadership made a variety of dramatic claims and generalizations about the impact of this reduction. However, they provided no clear evidence of direct, specific impacts to programs, much less harm to the overall mission of the University. It is particularly ironic that higher education administrators would fail in this basic logical tenant, whose roots lie deep within the scientific method and academic inquiry.

The lack of proof is likely because the data to support the claim does not exist. The $1.15 Billion Nebraska taxpayers will invest in the University system during the next two years is not tracked and accounted for beyond the campus to which it is allocated. Following requests to University administration for information about where state tax dollars are spent so I could better understand the potential impacts of any reductions, I was provided only a “best estimate” about distribution of tax dollars. It is impossible to logically evaluate the impact of a reduction in state funding if there is no knowledge of how much taxpayer money each program receives and what the state tax dollars are used for.

Political talking points may make for great headlines, but they fail to adequately capture the complexity of most policy decisions. This is particularly true when discussing issues of funding. Constituents may note that I am not a very “quotable” state senator. Reducing all of the evidence and perspectives of an important issue into a media sound bite is a political skill that continues to elude me.

At the conclusion of the recent legislative session a reporter asked senators to describe the session in a single word. I chose “misinformed”. The Legislature addressed a number of extremely complex policy topics, including a major tax reform package, developing a new budget in light of slowed revenue growth, several programs that made changes to existing property tax authorities and deductions, as well as education issues. A shocking amount of misinformation was disseminated to voters through email, social media, and even inaccurate content in some mainstream media.

It would seem logical that the myriad of ways we now have to communicate electronically would improve the information voters receive. However, the mass quantity of information has come as the cost of accuracy. Politicians are well known for rhetoric, but special interest groups have become adept at using social media, email, and the press to distribute their talking points. Voters need to critically evaluate information, assessing both the source and validity. Newsmedia must carefully fact check statements and press releases before repeating them.

Data is frequently misrepresented to voters with the intention to create opposition to a bill. To illustrate, a message sent to many taxpayers by lobby groups was that LB 461, the tax reform bill, “provided $10 in income tax relief for every $1 of property tax relief”. This claim relied upon a series of assumptions that were unknowable and highly improbable. The income tax number was based on the unrealistically optimistic assumption that state revenue growth would exceed the rate required to trigger the income tax rate reduction every single year for ten consecutive years. The property tax number assumed relatively stable increases in ag lang property values over the same time period, so the valuation growth cap would appear to have little effect. By using two opposing projections, inflating one figure and discounting the other, the comparison was not logically valid. The data was skewed to make the point of the paid special interests and accomplish their agenda, not provide accurate information to voters attempting to objectively evaluate the legislation.

Unless specifically told about the details of the methodology used to arrive at the numbers, voters cannot make an informed decision based on accurate information. Do not assume data is being presented to you by special interest groups in an objective and unbiased manner. That is not their purpose. They are paid to achieve a political result. A folk saying frequently attributed to Mark Twain, “figures don’t lie, but liars can figure”, is particularly relevant when evaluating political messages.

When asked to sign an online petition, cut-and-paste or forward an email, or participate in patch-through calls generated by purchased call lists, ask for the source of the data and evaluate it critically. Misinformation and bad data can go viral almost instantaneously via email, twitter, and other social media platforms. It is not uncommon for my office to receive several hundred identical form emails about a topic, all with the same inaccurate information and special interest talking points. The senders are all well intentioned and acting based on information they think is factual. Frequently it is not.

Voters also must discern between editorial content and factual reporting. Editorials are not intended to be unbiased, nor do they represent objective, fact-based reporting. Few clearly identify the names of their authors. Statements without evidence are mere opinions. In my experience as a state senator, far too much policy is “eminence based” rather than “evidence based”. In other words, who makes the statement is given greater weight than facts. History is littered with examples of eminent individuals being really wrong, from science and medicine through policy and business, when their reputation was given greater value than the evidence presented.

From the first day of the session to the last, theories about coalitions, political pressure, and partisanship were rampant in media coverage and the political gossip mill. It was based purely on speculation and sensationalized conspiracy theories. In reality, the unique circumstances of this session were pretty basic and and not clandestine. Senators talked to each other, sought objective facts outside of special interests and lobbyists, intentionally cooperated to achieve common interests, and actively listened to constituents outside of the echo chamber of the Capitol environment. It is what we are supposed to do. I encourage voters to do the same.

On Tuesday, May 23rd the First Session of the 105th Nebraska Legislature adjourned for the year. Speaker Jim Scheer ended the session on Legislative Day 86, four days short of the maximum 90 days in the first year of the biennium. The Legislature will formally reconvene on January 3, 2018 for a 60 day session. Although the Legislature is not in session, work continues on constituent services, interim studies, and revision of legislation. During the interim period, the Executive Board of the Legislative Council, of which I am vice-chair, supervises the operations of the Legislature as a state agency.

Of the 667 bills introduced during the first ten days of the session, 173 were passed and signed into law. Those bills passed with an “emergency clause” became effective upon their signature by the Governor. The majority of bills will become law 90 days after their signature. Because this is the first year of the biennium, bills not Indefinitely Postponed or “killed” remain active into the next session. 105 bills remain on General File, the first round of debate by the full Legislature, while 9 have advanced to Select File, the second round. Over 300 bills remain in their assigned committee awaiting action.

The primary focus of the legislative session was addressing the lower-than projected revenue in the current fiscal year and developing the next two year state budget to take effect July 1, 2017. In an unprecedented accomplishment, the Appropriations Committee, of which I am a member, held public hearings and advanced a deficit budget for the current fiscal year within the first 6 weeks of a biennial budget session. Work then began on the next two-year budget, which was passed by the full Legislature on Day 79.

Many states struggle to pass a budget, much less a balanced one, within the course of their regular session. Regardless of your political opinions regarding the choices made in the budget, Nebraskans should take pride in the fact Nebraska state government developed and passed not one but two balanced budgets in a single session. While I do not agree with the use of $369 million of one time cash transfers to fund ongoing expenses, we did pass a balanced budget without raising taxes or eliminating state programs.

Going into the session, tax reform was a priority of many legislators. The Revenue Committee did advance a comprehensive tax reform plan that included a new method for valuing agricultural land based on the income it produced, a cap on the rate of valuation increase annually on agricultural land, a consolidation of income tax brackets, an increase in the earned income tax credit for low income families, and triggered 0.1% reductions in the income tax rate for business and families if certain revenue growth levels were met statewide. In theory, the package provided a benefit to all Nebraskans: agricultural land owners, low income earners, middle income families, and businesses.

Although the tax reform plan did not give all special interests everything they wanted, it did provide a step forward toward tax relief for almost everyone. Unfortunately, agricultural groups actively lobbied against the reforms, choosing no property tax relief this year over the basic steps forward offered in the package. Special interests advocating for more state spending, including schools, also opposed the tax reforms. Ultimately, the bill failed to advance, but remains on General File for next year. I was disappointed by the amount of misinformation spread to voters about the tax reform package by special interest groups. In some cases, tax dollars were used against taxpayers to lobby in opposition to their own financial interests.

I will continue my weekly columns throughout the interim. My goal is to provide residents of District 38 with greater insight into a number of topics discussed in the Legislature this session, as well as address topics likely to return next year. If there is a topic you would like addressed, do not hesitate to contact my office and suggest it. I am grateful for all of the newspapers across the district that provide this opportunity for me to communicate with citizens and voters about legislative issues. An informed electorate is the foundation of a successful democracy.

This past week Governor Ricketts returned the budget passed by the Legislature with several line item vetoes reducing spending. Included in the additional reductions was a 0.5% reduction in the operations budget of any agency that had not received a 3% or greater cut by the Legislature, excluding K-12 education and corrections. Additionally, the total appropriation for the Medicaid program was reduced to the original recommendation made by Governor Ricketts in his proposed budget in February. The Legislature passed a budget which had increased that appropriation above the request of the Department of Health and Human Services, which manages Medicaid.

Some members of the Legislature attempted to override the line item veto of the additional appropriation to Medicaid, but the Governor’s recommendation was ultimately sustained. As a member of the Appropriations Committee, I supported the original budget proposal from DHHS throughout the budget process, and did not vote to increase their spending above their request.

Opponents of the line item veto preyed upon misinformation and fears of the public to make their case for increasing the appropriation, rather than the facts. Care of Nebraska’s most vulnerable population is an important priority. Medicaid is the second largest expense in Nebraska’s General Fund budget, and is a program that has seen significant improvement in management of its resources in the past two years. This careful management has resulted in excess appropriations which have been returned to the General Fund over the past two fiscal years.

Any claim that the reduction to the total appropriations to Medicaid automatically results in lower reimbursement for services to providers is false. The Legislature does not set specific rates for reimbursement in the General Fund budget. A block of money, totaling $833 million, is appropriated as a pool to the Department of Health and Human Services. DHHS uses that money to fund the state’s portion of Medicaid expenses. That total amount needed to provide those services is based on a forecast that projects the total needs of the program during the coming two year budget. Appropriations are not made to a specific provider type or service, but rather to the entire budget program as a whole.

How the pool of money in the Medicaid budget is spent is a product of three factors. First are the provider reimbursements, which is the actual fee schedule for specific services to Medicaid patients by physicians, disability service providers, nursing homes, and other Medicaid service providers. There fees are determined by complicated rate studies which must be approved at the federal level by the Center for Medicaid Services. The federal government has extensive oversight over these rate schedules, since a percentage of the total reimbursement is paid for by the federal government. The federal share is determined by a factor known as the FMAP.

Medicaid is an entitlement program driven primarily by the other two factors that determine how the total appropriation is spent: enrollment and utilization. Enrollment refers to the number of people who participate in the Medicaid program in Nebraska. Nebraska has experienced steady to flat growth in enrollment in recent years. The third component of the equation is the utilization factor, which is the total costs to the state per enrolled Medicaid patient.

Thus, Medicaid does not operate from a fixed budget. It is a dynamic interaction of all three factors. Throughout the budget process, I have been carefully examining the total needs of the Medicaid program as a member of the Appropriations Committee. This has included discussion with DHHS CEO Courtney Phillips and Medicaid Director Calder Lynch. Through careful management and responsible budgeting on their part, they are able to successfully manage the Medicaid program with the $833 million proposed by the governor and ultimately sustained by the legislature this week. Their management approach to make better use of every state dollar is exactly the kind of process improvement that reduces excess and waste in government, while still meeting the obligations to our most vulnerable citizens.

Careful, thoughtful, and evidence based analysis is critical to all spending decisions. While political rhetoric makes for interesting headlines, prompts social media action alerts, and motivates voters to engage, if it is not accurate it complicates productive discussion and grinds effective government to a halt. To make the most responsible decisions for all Nebraskans, both those dependent on state programs and those paying taxes, I must actively seek and operate from accurate data and information. I encourage citizens to aggressively question information as well.

As is common in the closing weeks of a legislative session, a number of contentious issues have been discussed during floor debate. Fiscal issues like tax reform, levy authorities, bond priorities, and state spending in the budget draw sharp distinctions between political philosophies and, more commonly, rural and urban differences. Topics of a social nature, including eliminating mandatory minimum sentences, felon voting, prioritizing funding for comprehensive women’s healthcare, and voter identification issues demonstrate the differences in perspective among senators.

With so many complex and often emotionally charged topics debated and voted on in such a compact period of time at the end, coalitions and votes on one bill unfortunately bleed over and influence others. This is an unfortunate reality of the political process.

Understanding the entire scope of an issue is critical to productive dialogue and good policy. In an era of social media and “action alert” email blasts, special interest groups can quickly distribute talking points and political spin to voters and the media. In my experience as a state senator, I have seen many issues intentionally obscured by misinformation spread to generate opposition. I encourage all voters to thoroughly explore and understand issues of interest to them, especially before just accepting and perpetuating interest group talking points.

Many of the topics that have generated the most debate this session are complex and have significant historical context. Changes to tax policy, whether it be who pays property taxes, how property is valued, exemptions and credits applied to income tax, or even sales tax rates impact every Nebraskan in a different way. Changes in funding to a state program will have different results in each community. Seemingly straightforward topics like internet sales tax collection and craft beer distribution are complicated by interaction between federal law, state statute, and agency regulation. Unfortunately, much of the discussion on these topics resembles a Sunday morning talk show, with whoever shouts the loudest and the longest ending up triumphant.

I am very disappointed that tax relief will not happen again this session. The voices of hard working Nebraskans were drowned out by special interests serving their own needs. Despite a myriad of proposals put forth and a comprehensive package advanced to the floor by the Revenue Committee, lobbyists crying “it is not enough” and protecting their vested special interests made sure Nebraska ag land owners, working families, and business owners received nothing.

The biennial budget passed and sent to Governor Ricketts depends on an accounting gimmick and an unsustainable use of one time dollars to balance the state budget. Advanced over the objections of several Appropriations Committee members and a significant number of senators in the Legislature, the budget as passed puts the state on fiscally shaky ground if ambitious projections for revenue growth are not met in the short term. Long term, the stability of the budget will likely require even deeper cuts or tax increases in the next biennium. If revenues continue to lag, it is likely a special session will be required to make the spending decisions the majority of senators failed to make now.

As the session moves into its last full week, the final issues with support of a two-thirds majority of senators to move beyond cloture will be discussed and voted upon. Chief among them will be addressing any line-item vetoes by the Governor to the state budget. A vote of 30 of the 49 senators will be required to override any spending reductions made by the Governor. Pay close attention, as the results of those final votes will determine the trajectory of the State of Nebraska for the years ahead.

As the 105th Nebraska Legislature moves into the last month of the legislative session, the two most important functions of state government have been the topic of much debate: taxes and spending. Discussion of a comprehensive tax reform package and the state budget have dominated the time on the floor. Both are large legislative initiatives that impact the daily lives of every resident of District 38.

As a member of the Appropriations Committee I have been personally involved in crafting the 2017-2019 biennial budget during the entire session. As growth in state sales and income tax revenue continues to be slower than projected, spending decisions require greater prioritization. I, along with 2 other members of the Appropriations Committee, did not vote in favor the advancement of the mainline budget bill, the cash funds transfer bill, or the cash reserve transfer bill from the Appropriations Committee to General File. I have not voted to advance those three bills through the first two rounds of debate either.

Spending decisions are difficult. When revenues are high, it is easy to say “yes” to every new spending request and request for increases in spending. When the money is not available, saying “no” is difficult. Every dollar of the $4.3 Billion spent out of the General Fund has a constituency and advocate who will be affected. Distinguishing core functions and spending needs from that which is discretionary is essential. Accountability and transparency of how each of those tax dollars is spent is critical to evaluate the priority of each spending request.

To accommodate spending that exceeds the amount of sales and income tax coming into the state, the current budget proposal will transfer almost $209 million from specific Cash Funds into the General Fund. Cash Funds are fees and taxes collected for specific purposes to fund operations associated with those activities. For example, the documentary stamp fee collected on every property transfer is distributed to a number of economic development cash funds, such as the Affordable Housing Trust Fund and the Job Training Cash Fund. In addition, $173 million will be transferred from the Cash Reserve, known as the “rainy day fund”, to balance the General Fund. The minimum reserve requirement, which is the amount of cash the state must have on hand to ensure cash flow as the state pays its bills, was also lowered from 3% to 2.5%. That is a $45 million accounting change that permits new spending without matching revenue.

In total, $382 million of “one time” money is being used to fund on-going expenses in the proposed 2017-2019 biennial budget. Thus, 4.3% of the General Fund dollars spent in the coming two years for ongoing appropriations will be paid with one time cash transfers.

In order to meet those ongoing obligations in the next biennium, revenue growth will need to exceed the 4.3% level. An additional 1-1.5% growth will be needed to accommodate increases in state employee salaries and benefits. Failure to meet either target will require additional reductions to programs going into the future.

While I fully understand the need for some use of the Cash Reserve and one time transfers to balance the state budget, I do not support the magnitude of one time transfers used. Given continued low commodity prices, the challenges on the ag economy, and the overwhelming tax burden faced by Nebraska farmers and ranchers, meeting 5% or greater revenue growth in the coming two years is not a rational expectation. It is my assessment that the current budget as proposed is unsustainable.

Spending reductions are always painful. However, reasonable 1, 2, or even 3% reductions at a time are easier to accommodate than larger reductions forced by a fiscal crisis. By filling so large a gap between tax revenue and spending for ongoing expenses with one time money, we increase the likelihood that even modest revenue growth will require a special legislative session to adjust spending and balance Nebraska’s budget.

Sustainable spending is essential to fiscally sound state policy. Citizens that depend on state services need predictability for essential programs. The uncertainty created by an unsustainable budget negatively impacts all Nebraskans, and is not a policy I can support.

Education is the foundation of a productive civilization. Education equalizes social disparities, expands options, and stabilizes communities. The Nebraska Constitution reinforces the value our state places on education, stating in Article VII, “the Legislature shall provide for the free instruction in the common schools of the state all persons between the ages of five and twenty-one years.” Proficiency in basic skills, including reading and math, is the primary function of public education.

Parents, students, and employers assume that advancing from one grade to the next means a student has mastered the material in that grade. It is also presumed to indicate the student is prepared to begin learning the more advanced material in the next grade level. Unfortunately, that is not the case for many children in Nebraska. The 2015 National Assessment of Educational Progress reports only 39% of Nebraska fourth graders are proficient in reading. By 8th grade, that proficiency falls to 38%. This statistic should outrage parents and concerned citizens. Put simply, students are being advanced through school without mastering basic reading. This proficiency gap is the impetus behind LB 651, a bill that requires schools to ensure reading proficiency in the early elementary years and create an action plan to develop proficiency in students who are behind.

If unable to read at grade level, students cannot continue their educational growth and progress in math, science, social studies, or vocational education. Advancing children to higher grades, expecting more complex work without mastering reading, sets students up for failure. The fact that the proportion of students not proficient in reading remains static between 4th and 8th grade demonstrates that the deficiency is not addressed between elementary and the end of junior high.

According to the Annie E. Casey Foundation, nearly 90% of the students who fail to graduate from high school struggled to read in the third grade. Two-thirds of students who cannot read proficiently by the end of the fourth grade will end up in jail or on welfare assistance.

Not developing reading proficiency early has lifelong consequences for Nebraska children. As children fall further and further behind in school, their options for higher education and career success decrease dramatically. Over 60% of community college students require remedial education, paying hard earned dollars to obtain skills they did not master in high school. Nebraska’s ACT scores demonstrate most high school graduates are not prepared for success in college level reading, math, and science.

Six in ten Nebraska children in 4th and 8th grade are not proficient readers under the current system. This is unacceptable. The challenges faced by teachers helping students learn to read are very real. However, not confronting the problem of poor literacy among Nebraska children is not an option. Teaching children to read is the fundamental function of Nebraska schools.

The opposition of the education establishment to defining clear expectations that every 3rd grader in Nebraska should be able to read at grade level before moving to the next grade is disheartening. LB 651 has been the target of a significant misinformation campaign by the education lobbyists and the teacher’s union. Criticism has focussed on the effects of holding a child back on their self esteem, ignoring the fact the bill outlines a stepwise progression to ensure children receive intervention and individualized strategies every year of their early elementary years.

Repeating a grade is a last resort, only after significant intervention has failed. LB 651 anticipates special circumstances and outlines specific criteria for students with special needs, including learning disabilities, English as a second language learners, and other individual needs. Formal cooperation and communication between parents, the student, and teachers are integral components of the proposal.

Nebraska children need an education that helps them succeed, and it begins with elementary reading proficiency. Nebraska taxpayers have a right to expect schools to establish and maintain basic reading standards in exchange for the $11,000 and more they invest in the education of every student annually. All Nebraska students deserve to be equipped with the basic reading ability to enable them to be independent citizens.

Collecting taxes and spending those dollars is a fundamental function of state government. Over the next several weeks the Nebraska Legislature will debate both issues in depth with the advancement of the biennial budget to the floor by the Appropriations Committee and the advancement of the Nebraska Taxpayer Reform Act by the Revenue Committee. Both are large, significant pieces of legislation that will impact Nebraskans for years to come.

The 2017-2019 Budget advanced to the full Legislature by the Appropriations Committee recommends a 1.1% increase in General Fund state spending over the next two years. This represents a slowdown in the growth of state government spending from prior years, reflecting the decreased state revenue from sales and income taxes. Economic stress in the agricultural economy, Nebraska’s top industry, is the reason revenues have lagged below projections.

As a member of the Appropriations Committee, I did not vote in support of the advancement of three bills that compromise the seven bills of the “budget package”. In order to balance the budget, over $200 million was swept from Cash Funds and transferred to the General Fund. Additionally, $173 million was transferred from the Cash Reserve, known as the “rainy day fund”. In total, 4.2% of the next General Fund biennial budget as proposed will be funded by one-time money from these cash transfers.

I fundamentally disagree with the extent to which one time cash transfers are proposed for use in this budget to fund ongoing state expenses. It creates a structural imbalance that does not represent a balance between tax dollars coming into the state treasury and spending. The Cash Reserve is a backstop, and should the profits in agriculture not grow significantly in the next two years, we will have to drain those reserves or have drastic cuts in state programs. The state will need to generate half a billion dollars in new tax dollars in the next biennium just to fill the hole created by funding ongoing appropriations with one-time money.

Tax receipts are coming in below projections for a basic reason: Nebraska families are not making and spending as much money as projected. Tapping deeper into family budgets that are already stretched tight to collect additional sales or income taxes does not solve the problem. It simply puts more financial strain on taxpayers, both families and businesses.

Setting spending priorities and making difficult decisions about state programs is not an easy task. Powerful special interests spend millions of dollars annually lobbying senators to insure their state funds keep flowing. Sound bites and political taglines replace thoughtful debate. Nevertheless, kicking the can down the road is not a responsible action.

As debate begins on the budget bills, my focus will be on both the immediate and long term implications of the spending decisions for Nebraska taxpayers. Structure balance to the budget, both now and in the future, is my top priority.

Sen. John Kuehn

District 38
Room #2000
P.O. Box 94604
Lincoln, NE 68509
Phone: (402) 471-2732
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