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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.