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Sen. John Kuehn

Sen. John Kuehn

District 38

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In a fierce competition characterized as an “incentives arms race”, states aggressively compete against each other to recruit new companies. Companies considering expansion will pit states in a bidding war against each other, with larger and more attractive incentive packages offered to outbid other states. Among states in the Great Plains, both Iowa and Kansas are known for their aggressive recruiting offers, and South Dakota has been recognized internationally for its state support of biotechnology companies. The competition from border states ups the ante for Nebraska when attempting to attract new businesses.

I am opposed to government selectively favoring one business over another by creating inequitable tax policy. The state should not provide financial advantages to specific businesses that are not available to all. However, I also understand that Nebraska would be at a significant disadvantage compared to its neighboring states when recruiting new companies if state economic development incentives are abandoned altogether.

In my last two columns, I have discussed the complexity and challenges of Nebraska’s tax incentive programs, the largest of which is the Nebraska Advantage Act. There are practical statutory changes that can be made to help taxpayers understand what benefits they are providing to companies and their impact. Revisions to Nebraska’s suite of tax incentive programs should include simplification of the number of different programs, clarification of the intended goals of each program, collection of data that specifically addresses the intended outcomes, and creation of enrollment limits for fiscal protection.

First, Nebraska’s complex system of “advantage acts” needs to be simplified. Trying to succinctly describe Nebraska’s tax incentive programs is impossible given the diverse series of tiers, subprograms, and variations of the Advantage Act. For businesses considering growth in Nebraska this complicated system can be a deterrent. For taxpayers it is nearly impossible to see where those foregone tax dollars are going and their impact on the local economy. Collapsing the tiers into a few basic programs that meet well defined goals will be more transparent for prospective businesses and taxpayers alike.

Second, the purpose and intended outcomes of economic development incentive programs need to be clearly delineated in statute. Differences of opinion in the actual objective of Nebraska’s current programs still remain over a decade later. Specifically detailing if the tax incentives are intended to create new jobs, attract new businesses to Nebraska, encourage capital investment, promote business expansion in rural or economically distressed areas is necessary. Each of these has been cited as an outcome, but are not specified in statute. All stakeholders must be on the same page regarding the purpose of the incentive programs for them to be successful.

Third, it is imperative that the reporting requirements for companies participating in the tax incentive programs include data that is useful in evaluating them against their stated goals. As was identified in the Legislative Performance Audit of the Nebraska Advantage Act, many of the questions of importance to lawmakers, taxpayers, and business interests were unable to be answered because of lack of available data. This is a common challenge for incentive programs across the nation. Nebraska has been nationally recognized for its efforts in quantitative evaluation of the costs and impacts of its tax incentive programs. The Pew Charitable Trusts have referred to Nebraska as a “leader” in evaluation of tax incentives. We can build upon that strong foundation, especially if clearly articulated objectives are provided by the Nebraska Legislature.

Finally, establishing upper limits on the annual growth of the total tax incentives program can provide important fiscal protections for the state of Nebraska. With better data collected about the costs and benefits of the incentives, state lawmakers can set manageable, predictable upper limits regarding the size of these programs while taking into account all of the other complexities of Nebraska’s revenue and budget picture. The fiscal protections would not be used to restrict economic development, but rather to provide regular and comprehensive oversight of the net value of Nebraska’s economic development efforts.

Economic development tax incentive programs elicit strong passions among supporters and opponents alike. Regardless of current opinions about the Nebraska Advantage Act and its spinoffs, the potential value of these economic development tools cannot be dismissed. Through straightforward and practical statutory changes, Nebraska’s tax incentives can work for taxpayers and new businesses alike.

Evaluating Nebraska’s complicated and diverse tax incentives programs is a challenge. Although an accounting of tax credits and refunds earned by participating companies is straightforward, determining the impact of those incentives on the total revenue of the state and economic growth is not. Central to the difficulty in assessment is a lack of meaningful data that can be used to measure progress toward specific development goals.

In 2015, the Legislature adopted a requirement that each tax incentive program undergo a legislative performance audit every three years. Unlike a financial audit, performance audits assess the outcomes of program using concrete metrics measured toward specific policy goals. In 2016, the first performance audit report was issued. The overarching theme of the audit was the difficulty in measuring many of the stated intentions of the Nebraska Advantage Act.

A central finding of  the audit was the fact the expected standards of performance were not clearly outlined when the incentive programs were adopted. As a result, the data participating companies are required to report does not necessarily prove useful in evaluating whether or not the incentive programs are having their intended effect.

To illustrate, the Nebraska Advantage Act was promoted during debate as a program for job creation. However, the job creation required for qualification are FTEs, or full-time equivalents, not new full-time employees. Thus, a basic metric like identifying the number of new jobs created by companies through the incentive programs is impossible to determine. Companies are only required to create and report the number of equivalent positions. For example, a company could convert two part-time positions at 20 hours per week into full-time positions and count that as one full-time equivalent–even though no new position was created for a new employee. Additionally, determining how many jobs were created because of the state incentives versus jobs the company would have created through normal growth is impossible to determine using the standards for reporting required by the Advantage Act.

In light of these obstacles, a frequently cited statistic by both opponents and supporters of tax incentives, the cost per new job, is essentially meaningless. Depending on how the data is interpreted, the cost per FTE found by the performance audit could range anywhere from $24,500 to $320,000. Such a wide range makes it almost impossible to judge the merit of the current programs.

Job creation metrics are only one of the many challenges when evaluating the outcomes of Nebraska’s tax incentive programs. Many of the policy goals, such as recruitment of businesses new to Nebraska, growth of jobs in distressed areas, and the creation of high-wage jobs were not specifically detailed in the original legislation. Without intentions and objectives clearly delineated in statute, the subsequent programs do not require reporting of data or qualification of projects specific to those goals.

Significant criticism has been aimed at the cost of the incentive programs compared to legislative intentions when the programs were adopted. The original fiscal note prepared in 2005 during passage of the Advantage Act only projects the foregone revenue for the first two years following adoption. Transcripts of floor debate indicate the expected costs long term would run between $50 and $60 Million annually. While 2013 was a unique outlier, the economic model projections produced by the Department of Revenue through 2020 track close to that range. Given the challenges Nebraska has experienced with economic forecasting for revenues in recent years, the net revenue costs are not far out of line. Unfortunately, whether or not those costs are achieving the job growth, investment, and economic stimulus intended is currently impossible to determine with confidence.  

As discussion continues about changes to the tax incentive programs, it will be critical to clearly state the intended outcomes and require reporting that enables accurate and reliable assessment of progress toward those goals. At minimum, statute should change to collect better data for existing programs going forward. Accurate information is vital to ensuring full accountability of Nebraska’s tax incentive programs.


Each year the Department of Revenue issues a report detailing the specifics of Nebraska’s tax incentive programs that target economic development and business growth. The annual release of these statistics renews discussion about the value and cost of Nebraska’s incentive programs by opponents and supporters alike. In addition to the revenue calculations and economic modelling provided annually by the Revenue Department, the Legislative Performance Audit Committee, which I chair, conducts detailed evaluations of the programs in light of the policy objectives established when they were passed into law.

Tax incentive programs elicit strong responses among proponents and opponents alike. Advocates argue for their necessity, and even expansion, to recruit new business and promote job growth in Nebraska. Opponents see the incentives as lost revenue that could be spent for other government programs. Discussion of both the pros and cons of Nebraska’s tax incentive programs is muddled by their complexity. Over the next several weeks, I will use this opportunity to provide constituents in District 38 with background on the various tax incentives, the evaluations of the programs, and the policy discussion around revisions or changes to Nebraska’s business incentives.

Although commonly referred to as an aggregate group, Nebraska has multiple economic development programs that provide tax incentives. The largest of these is the Nebraska Advantage Act, which became law in 2006. It replaced prior programs, including the Invest Nebraska Act, which stopped accepting new applicants. In addition to the main Nebraska Advantage Act, several smaller incentive programs focus on more specific economic targets. These include the Nebraska Advantage Rural Development Act, the Nebraska Advantage Microenterprise Tax Credit Act, and the Nebraska Advantage Research and Development Act.

Businesses are required to apply and qualify for the incentive programs. Each program has criteria for qualification of benefits, which vary between program and tier.  The Advantage Act alone has six separate tiers, with subdivisions of some tiers. The amount of capital investment, number of full time equivalent (FTE) jobs created, and wage levels all determine eligibility for an incentive program. Depending on the program, business have between 5-7 years to attain qualification for the program, can accumulate benefits over a 6-10 year period, and can carryover and collect earned benefits for a period of time after their entitlement period. A business can participate in an incentive program for a maximum life of 10-15 years, depending on tier and program.

The tax incentives provided are also quite variable, depending on the program. Qualified businesses can receive a direct refund of sales and use taxes that are paid for the purchase of personal property and aircraft. A portion of the total investment in the business, between 3 and 15%, can be earned as an investment credit.  These credits can be accumulated over years, and used to refund additional sales taxes, offset income taxes that are due, or reimburse for property taxes paid. Compensation credits can be earned, which are determined as a percentage of the total new full time equivalent jobs created each year, multiplied by the average wage of those new jobs. Thus, more new, higher paying jobs would earn the business more compensation credits. Those credits can be used of offset income tax withholding or income taxes due for those businesses. Credits earned do not have to be collected in a single year, can but can be applied over the span of the business’s participation in the program. Certain qualifying personal property can also receive an exemption from the business’s personal property tax liability.  

As you can see, these programs defy a simple explanation and evaluation. As of 2016, 114 projects had qualified under the Nebraska Advantage Act alone since 2006. Those businesses earned $842 million in tax credits and collected $362 million of those qualified reductions. $473 million remain as outstanding credits capable of being collected in future years.  

During that same 2006-2016 time span, the qualified projects of the Advantage Act made $7.4 Billion in new capital investment and created 13,993 new full time equivalent jobs in Nebraska. At the same time, $159 Million was provided in sales tax refunds, and $5.2 Billion of personal property value was given an exemption.  

Evaluating the merits and drawbacks of these programs requires a deeper dive into the details of each specific program. In the coming weeks I will provide insight into the attempts to objectively evaluate these programs and determine whether or not they are meeting their intended objectives.

The “Mindset List” has been published every fall since 1998. Compiled by faculty of Beloit College in Wisconsin, the list details notable cultural, historical, and technological events from the year that college freshmen were born. Students entering college this fall were born in 1999, representing the last class to be born in the 20th century. They have never known a world without emojis or Humorous and written to convey the perspective of young adults entering college, the “Mindset List” provides a poignant reminder of how quickly American society, culture, and technology changes.

Although developed as a retrospective to provide a context of the past, looking back at previous Mindset Lists published over the last 19 years provides an important reminder of the need for long-term perspective. All too often policy discussions, especially those led by special interests, focus on immediate payoffs and benefits. This can come at the cost of sound, long-term policy decisions. The fate of property tax relief proposals in the last legislative session provide a perfect example of shortsighted decision making. Agricultural special interests rejected long-term structural changes to ag land valuation because it did not have an immediate effect. Sound tax policy was opposed and the long-term property tax relief for the future was lost.

Students entering college and vocational programs this fall will likely be working in jobs two decades from now using technologies we have not yet envisioned. When they began kindergarten 12 years ago, the iPhone was incomprehensible to most. Today they enter college with more technology in the palm of their hand then was available to the original Apollo astronauts when they landed on the moon. It is shortsighted and illogical for us to assume that the technologies and skills required for jobs in 2017 will be the same skills required for a successful career in 2037.

The emphasis on vocational skills and career readiness in K-12 and higher education has a valuable short-term goal and arises from good intentions. However, the dramatic changes demonstrated by the Mindset List reminds us that these programs should not substitute or crowd out an emphasis on strong intellectual and analytical skills. Proficiency in reading, strong quantitative skills, and problem-solving abilities enable and equip all students to learn and develop skills for success in their first jobs as well as throughout their careers and working life. Career readiness has become equated with a trade rather than a strong foundation for lifelong learning and career advancement.

As we seek to expand high skill manufacturing jobs and train students specifically for those roles, we must learn from the experience of our neighboring states. Communities in Iowa and Kansas have seen significant economic stress created by layoffs and plant closures. These are the very high-tech, high skill, high paying manufacturing jobs we are rushing to train students for in career academies and vocational programs. Despite having held highly technical positions, retraining for new jobs has proven costly and time consuming, in large part due to the need to remediate basic reading and quantitative skills in adult workers. The lack of a strong, comprehensive education has proven a barrier to successful reentry into new jobs.

Those of us over 40 find it difficult to comprehend that today’s young adults have no frame of reference for popcorn that couldn’t be popped in the microwave or rotary dial phones. My niece, who started kindergarten this year, will graduate high school using technologies and likely pursuing a career that does not even exist today. A comprehensive educational foundation will be vital to her future career success.  

Short-term goals and immediate policy outcomes are important. However, they should not come at the price of future disadvantage. As we begin a new school year and marvel at how “things have changed” for this generation, we should be sure we are equipping all Nebraskans with the intellectual skills to be adaptable for whatever the future holds.  


The past week the Revenue Department released the certified report for state revenue during July, the first month of the 2017 fiscal year. Tax collections were $7.6 million below the level projected in April by the Nebraska Economic Forecasting Advisory Board. This is the third consecutive month in which revenues did not meet projections since the Board lowered revenue expectations in April. This trend raises the possibility of modifications to the budget enacted during the past session that became effective on July 1st. Concluding my discussion over the past few weeks of the budget process, this week I will address how the budget can be modified after its adoption as law.

The state budget covers a two-year funding period, known as a biennial budget. Developed during 90-day legislative sessions held during odd numbered years, the budget covers two fiscal years that begin July 1 of each year. Although state dollars are appropriated to a specific fiscal year, it is general practice that funds not spent in the first fiscal year, known as reappropriations, roll over into the second fiscal year of the biennium. Adopting a balanced budget and meeting the statutory minimum reserve levels are required at the end of the two-year period, not at the beginning of the budget cycle, at the end of each fiscal year, or each month throughout.

The General Fund portion of the state budget is built to meet the revenue the state is predicted to collect by the Nebraska Economic Forecast Advisory Board. The revenue forecast is based upon analysis of economic models that attempt to predict consumer behavior, earnings of Nebraskans, and economic conditions both locally and nationally. If revenues do need meet forecast, spending must be reduced or money must be taken from other sources, like the rainy day fund, to make up the difference. Revenues in excess of forecast are automatically transferred to the Cash Reserve.

Although a budget is developed and adopted on a biennial basis, the “off year” involves the development and adoption of a “deficit budget”.  This does not mean that the budget is allowing spending by the state in a deficit balance, but rather that modifications are being made to a previously adopted budget. Special sessions can also be called to modify an existing budget.

In theory, off year adjustments to the budget would only address unforeseen expenses, differences from the revenue projections, and statutory changes. However, in recent years the deficit budget process has expanded to include new spending and additions to the base appropriations of some agencies. The expansion of this practice is more political than pragmatic. Deficit requests made to a previously adopted budget can obscure the total increase in spending an agency may request by breaking it up into two smaller requests, one at the beginning and one the second year of the biennium.

As was seen with LB 22 at the beginning of the last session, a deficit budget bill can be a vehicle to decrease spending to meet lower revenues. With the exception of state aid to K-12 public schools, agencies receive their appropriation in equal installments from the Department of Administrative Services at the beginning of each quarter of the of the fiscal year. If the distribution has already been made for the quarter, any reductions will be taken from the remaining distributions.  For example, if a deficit bill passed in the next session were to reduce an agency’s appropriation by 4%, it would all be taken from the remaining quarter of the fiscal year, meaning the agency would receive only 21% of its original appropriation on April 1st, rather than 25%.  In contrast, if the same 4% reduction were taken in a special session in October, a smaller reduced distribution would take place over the last two quarters of the year, with each being 23% of the original appropriation.

Since the state budget is a plan for spending, the plan changes as state revenues and government program needs change. This flexibility is needed, but should not be abused for political gain. The dynamic nature of the appropriations process requires careful attention by lawmakers and taxpayers alike.

A common misconception is that the Legislature appropriates money to the level of a specific position, agency process, or reimbursement fee. A high level of detail may be provided during public hearings and in budget documents to explain the intention for how requested funds plan to be used, but the actual appropriations bill is not that specific. “Intent language” is statutory language associated with an appropriation amount that provides specific legislative direction for how funds are to be used. These earmarks are the exception, not the rule. A budget can best be described as a plan for spending during a fiscal year. A government budget document does not tell you how dollars were actually spent, but rather is a prospective document that details how they plan to be spent.  

Each state agency is assigned a number within the state budget system. For example, the Department of Agriculture is Agency 18, while the Department of Corrections is Agency 46. An agency can be a “code” or “non-code” agency, indicating whether it is under direct management of the Governor or is independent. Code agencies have a Director hired by and are accountable to the Governor. The Departments of Economic Development and Revenue are examples. Non-code agencies are autonomous, with governing boards that may be elected or appointed. Management of those agencies is accountable to their board, although the Legislature has the sole authority to appropriate public money. To illustrate, the Tourism Commission is governed by an appointed Board of Directors defined by statute, while the Board of Regents of the University of Nebraska operates under constitutional authority.

The Appropriations Committee allocates specific dollar amounts of General, Cash, and Federal Funds to each agency. Within the agency, the appropriations are specified into one of three categories: operations, aid to individuals, and aid to local government. Operations budgets are the dollars appropriated for the day-to-day functions of the agency. This includes employee costs, office space, and all of the expenses associated with running the agency. Contrary to popular belief, operations expenses are only approximately $1.5 Billion of the $4.6 Billion General Fund budget. Higher education makes up over ⅓ of the total. Operations of all of state government comprise less than 25% of the total General Fund Budget.

Aid to individuals is commonly referred to as entitlement spending. These are public dollars that are paid directly to individuals, such as with public assistance, or paid for specific services associated with an individual, such as developmental disability aid. Some programs, like student grants for higher education, are wholly funded with state tax dollars. Others, like Medicaid, are a cost share with the federal government. Thus, the appropriation includes both General Fund and Federal Funds. Aid to individuals is about ⅓ of the General Fund budget, with Medicaid, by far the largest individual aid program, comprising 60%.

Aid to local government is dollars that pass through the state to local political subdivisions. Over ⅔ of that aid, almost $1 Billion is TEEOSA aid to K-12 public schools, commonly referred to as state equalization aid. Special education and community college aid make up another $300 Million in aid to local governments. One-third of the state General Fund is distributed to local governments.

An agency may have specific subdivisions, known as programs, which divide the agency’s budget. The number of programs or their size within any agency has a historical basis. Some agencies are appropriated as a single program, while others have many program areas of varying size. Management within an agency has the statutory authority to move dollars around within a program area. They may not transfer appropriations between programs in an agency without legislative approval. An appropriation is a legal authority for the agency to spend allocated dollars within the boundaries of state statute.

The budget is a plan, and is not actual spending. Expenditure reports detail how and if the dollars were spent as originally planned. If budgeted funds are not spent, they may be rolled over into the next budget. These carryover funds are known as “reappropriations”. Because Nebraska uses a baseline budget process that does not require justification of funds appropriated in prior budgets, reappropriated dollars are common. Historically there has been little legislative oversight of the use of these funds, as blanket reappropriations are frequently allowed.

In July, the Nebraska Department of Revenue released a final report on General Fund tax receipts for the end of the fiscal year. Despite the Nebraska Economic Forecasting Advisory Board reducing revenue projections at its April meeting, the state still ended the fiscal year on June 30 collecting $34 Million less than predicted. In the event that revenues continue to fall under projections in coming months, the biennial budget passed in May will need to be adjusted. This may require a special legislative session this fall or adoption of adjustments in the next legislative session, depending on the magnitude of any shortfall in the next few months.

In light of these numbers, a review of the budgeting and appropriations process will help citizens of District 38 put these numbers in context. Over the next several weeks, I will address a how budget requests are developed by state agencies, the difference between the budget and actual expenses, and deficit budget adjustments made to a biennial budget after it has been adopted. While I have discussed the biennial budget and appropriations process in previous columns, I want to highlight unique aspects of the state budget from other budgets you may have experience with.

The budget of any state agency consists of appropriations from three types of funds: General, Cash, and Federal. The General Fund budget, over $4 Billion, is funded by income and sales taxes. When most taxpayers think of the “budget”, it is typically the General Fund. Cash Funds are dollars that are collected by an agency as “fees”, usually associated with a specific function. Those fees are intended to pay for the cost of delivering that service. An example would be fees collected by the Department of Agriculture for food safety inspections. Federal Funds are allocated by the federal government to the state for specific programs. Most of these dollars require some portion of state General Fund as a match. The federal portion of Medicaid and federal education dollars are examples.

Nebraska utilizes a “baseline budgeting” process. The philosophy behind baseline budgeting assumes an agency will receive its prior year’s budget in addition to any increases such as negotiated employee salary raises, increases in health insurance premiums, and other inflationary costs. In a typical budget process, the primary task of the Appropriations Committee is to accept or reject requests for new funding. No justification is required for previously appropriated dollars.

The baseline budgeting approach makes reductions to a General Fund budget challenging. Since previous spending is not evaluated for effectiveness and prioritized as part of the request, it is not readily obvious how any reduction may impact specific services. Since previous spending is expected to operate in perpetuity, it is assumed that any increases in employee costs or due to inflation will have to be covered with new appropriations and not within an existing budget.  

When submitting their budget requests, state agencies also include budget “modifications”, which are items they identify and offer as potential reductions to their base budget. The Governor provides instruction to state agencies when developing their budgets whether to propose modifications at 5, 8, or 10% of their General Fund budget. Typically, Cash and Federal Funds are not suggested for reduction. In my experience as a member of the Appropriations Committee, these voluntary modifications are generally not helpful. To avoid the possibility of a reduction being adopted, agencies offer politically popular programs or funding that would require a statutory change to reduce. Thus, they are not a sincere attempt at spending prioritization or management of budget growth.

The default of the state budget process assumes the General Fund budget will continue to grow. You may recall discussion about a projected $900 Million shortfall when the legislative session began this spring. That figure assumed the General Fund budget would grow at approximately 6% annually for the two years of the biennium. That projected growth alone comprised over 75% of that figure. A flat budget would have immediately dropped that figure to $250 million without any reductions to spending or increases in taxes.

I do not believe government should pick winner and losers in private industry. Using publicly available campaign reports, voters can see all of the political donations made to elected officials. Since candidates are required to disclose campaign contributions they receive and the reports are available on the Nebraska Accountability and Disclosure Commission website, voters can easily make their own evaluation regarding these donations.

A much more direct but far less transparent way of influencing public policy is known as political “rent seeking”. Through direct manipulation of policy, a company or trade group can gain a financial advantage in the marketplace. The adoption of regulations that favor one special interest at the expense of others, creating mandates that capture a specific market share regardless of consumer choice, or incentives that lower the cost of production for some businesses but not others, are ways of using the political system to seek financial gain. While direct payment of bribes or corruption are illegal, there are many legal means of political rent seeking that have become common practice. Most of these strategies are not readily obvious to taxpayers.

A tactic I have observed in the Nebraska Legislature is the use of interim studies and task forces to give special interests a public hearing, then using the credibility gained by the subsequent legislative report to pass rent seeking legislation into law. The past two legislative sessions provide a textbook example of how an industry interest can use the system to gain a direct financial payment.

LB 1093, introduced by Omaha Senator Heath Mello, was adopted by the Legislature in 2014. Amended into LB 1093 was LB 987, a bill introduced by Lincoln Senator Adam Morfeld, as well as Mello and Gothenburg Senator Matt Williams, which created the Biosciences Steering Committee. The steering committee was tasked by statute with creating a strategic plan for the biosciences industry in Nebraska. I was selected to serve on the Steering Committee.

The statute stated the committee “shall commission a nonprofit corporation to provide research, analysis, and recommendations to the committee for the development of the study and strategic plan. The nonprofit corporation … shall be engaged in activities to facilitate and promote the growth of life sciences within Nebraska, and shall be dedicated to the development and growth of the bioscience economy.” While Nebraska law prohibits legislation specific to an individual group or company, the criteria written in the statute applies to only one nonprofit corporation: the trade industry group for bioscience companies in Nebraska. Consequently, the trade organization for the industry was paid, using tax dollars, to develop recommendations for policy that would benefit their member companies. Senator Morfeld chaired the committee, hearings were held, and a report was written, with direct input from the special interest.

During the past Legislative session LB 641 was passed. Introduced by Senator Morfeld and designated his personal priority bill, LB 641 used the existence of the Biosciences Steering Committee process to give credibility to the policy of providing $2.5 million in direct financial assistance to bioscience companies over the next two years. The funds were redirected to the industry through repayment of loans made by the Nebraska Progress Loan Fund.

An industry trade group getting paid to conduct and produce a study that results in $2.5 million in public funds for use by the private companies it represents is a perfect example of successful political rent seeking. There is not a publicly available report for voters to identify the specific lobbying activities, participation of lobbyists in the public hearings, or legislation that results from the those activities. While I fully support the biosciences industry, I do not approve of the practice of government financial support of private industry that gives competitive advantages.

As policy discussions continue regarding expansion of Tax Increment Financing to private housing developers, expansion of tax incentives, energy mandates, and countless other issues, voters should carefully look for manipulation of the social or political environment by interests who stand to gain financially. Political party affiliation and campaign contributions are really easy to see and evaluate. The cronyism and influence trading at play in political rent seeking that benefits private interests are difficult to track but have profound implications for voters and taxpayers.  

Using data to demonstrate the effectiveness of programs funded by state tax dollars is the basis of Evidence Based Budgeting. As states nationwide face greater demands for spending, many are adopting principles that use evidence to support strategic prioritization of taxpayer dollars and improve government accountability. Non-profit organizations such as the MacArthur Foundation and Pew Charitable Trusts have championed best practices and assisted states with implementation of evidence based budgeting policies.

In order for lawmakers to appropriate tax dollars based on evidence of their effective use, knowing how your tax dollars are spent is a basic requirement. The third largest expense in the Nebraska General Fund budget is the appropriation to the University of Nebraska system. As such, Nebraska taxpayers deserve the same level of accountability and transparency about how tax dollars are spent by NU as is provided by all other state agencies.

Unfortunately, the University of Nebraska cannot detail how over half a billion dollars of state funds are spent each year.  During the deficit budget and biennial budget process in 2017 I came to understand that state General Fund dollars appropriated to the University of Nebraska are not tracked beyond the level of the campus to which they are allocated. I learned this through communication with University administration. Requests by my office for further specificity concerning how state tax dollars have been spent resulted in only estimates to the level of college and major unit.

Simply put, of the $583 million appropriated to the University system from the General Fund in the last fiscal year, the only transparency for the specific use of those tax dollars was that $266 million was allocated to UNL, $153 million to UNMC, $66 million to UNO, $40 million to UNK, $28 million for system wide administration and computing, $27 million for university-wide activities and legislative earmarks, and $3 million for NCTA in Curtis. Beyond that level, tax dollars are mixed with other revenue, including tuition. No tracking of your tax dollars for transparency and accountability is done beyond that point.

Every other state agency is subject to full scrutiny of how taxpayer dollars are used. Recent reports by the State Auditor of small, cash funded agencies such as the Tourism Commission and Brand Committee detailed how public funds were used inappropriately, specifying specific purchases of goods via individual receipts and actual miles traveled in a state vehicle for personal use. The response of the Assistant Vice President of Budget & Planning as to why there was no data on how your tax dollars were spent by NU that “it’s really no different than the joint checking account” used by he and his spouse in their home does not pass even the basic standard of accountability.

In light of tax receipts falling $34 million below projected forecast levels for the conclusion of the 2016-2017 fiscal year, full accounting of all state dollars is even more important. As spending across state government is scrutinized, the University system must provide equal transparency regarding the use of public tax dollars.

Furthermore, the lack of data confounds the ability of lawmakers to effectively appropriate tax dollars. Over the course of the next 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. With no tracking of tax dollars to their point of use, it is impossible to evaluate the impact of either reductions or increases in state appropriations on University programs. Sound principles of Evidence Based Budgeting cannot be followed.

The significance of the University of Nebraska to our state is indisputable. Nebraska taxpayers value affordability of higher education, research, and the cultural contributions of a vibrant university system. Legislators have shown a commitment to the University of Nebraska with generous General Fund appropriations in excess of half a billion dollars annually. Additional tax dollars are provided through various Cash Funds, the Capital Construction budget, and specific earmarks. In fact, Nebraskans underwrite higher education at the University of Nebraska at a level unmatched by most states. Public confidence in that investment and effective decisions about future appropriations require full transparency and accountability of how taxpayer dollars are spent.


Transparency and public access to voting records and the legislative process is my top policy issue. Open discussion of the votes of elected officials is essential for voters to make informed decisions at the ballot box. Citizens need objective, factual information to empower them to effectively engage in their government. Every recorded vote of a state senator is available to the public on the website of the Nebraska Legislature at

Special interest and lobby groups routinely publish “scorecards” and rankings of votes on specific issues. While the intent and motivation of these scorecards is to promote the interests of the particular lobby group, they provide another opportunity for voters to see how their senator voted on specific bills. For voters to glean useful information from these special interest publications, careful attention should be paid to how the information is presented, which issues and votes are considered “record votes”, and the methodology used to calculate voting percentages and rankings.

To illustrate the challenges in understanding exactly what is presented in these scorecards, I will use the recently released Nebraska State Chamber of Commerce 2017 Legislative Voting Record as an example. The report is based on ten record votes of interest to the Nebraska Chamber of Commerce and calculates an annual and cumulative voting percentage of specific votes selected by the Chamber.

To begin, the information published in the table of recorded votes is not straightforward. It identifies issues only by number, 1 through 10, with the senator’s vote recorded as a “+”, “-”, or “?”. Contrary to what a voter my initially think, a “+” does not mean a “yes” vote, nor does a “-” indicate a “no” vote. Rather a “+” refers to a vote, either yes or no, that is the same as the position of the State Chamber, while a “-” reflects a vote in opposition. Thus, if the State Chamber opposes a bill, a “no” vote would be listed as a “+” on the voting record. In order to determine how their senator voted on a particular issue using this table, a voter would need to know first which bill the number on the chart refers to and what motion the vote was for. Next, what the State Chamber’s position was on the motion, then interpret what the “+” or “-” means.

Voters also need to carefully examine which votes are selectively determined as “record votes” by the special interest group publishing the scorecard. Of the hundreds of votes taken, and many on a single bill, groups may pick a procedural vote or a vote on an amendment, not necessarily the vote on final passage of an entire bill. For example, on the State Chamber scorecard, they include two different votes on a single bill, LB 461, among their ten record votes. Both are motions to return the tax reform bill to committee, one during General File debate, the second during Select File debate. If a voter were only to look at the voting percentage, they may not realize the total is weighted heavier by the same vote on the same motion on two separate rounds of debate on a single bill.

Remember, the votes selected for scorecards are not objective. They are intended to present a particular special interest point of view. Votes can be selected with the intent of making specific senators look favorable or unfavorable to target audiences. The information is presented to lobby and persuade, not to inform.

I encourage voters to go to the Legislature’s website and examine all of my votes on any bill. If you have questions about why I voted how I did on any motion, please contact my office. Whether you agree or disagree with my vote, I am happy to explain my position. I do not cast my votes in obligation to any special interest group or in hope that it may produce a favorable ranking or scorecard, but in my assessment of the best long-term policy interest of District 38 and the state of Nebraska.

Sen. John Kuehn

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