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For many taxpayers, understanding how their total property tax bill is determined can be confusing. When property owners receive notice that the assessed value of their property has been increased by the county assessor, sometimes substantially, they are understandably concerned. In most cases, the valuation increase means a tax increase.
Your property tax bill is determined by two factors: the assessed valuation of your property and the total tax levy rate set by the local political subdivisions in which you live. Neither of these numbers remain constant over time. Local political subdivisions establish a budget based on their spending plan. They then look at the total assessed value of property within their taxing district. The levy rate is set, within the bounds of levy limits, to generate the amount of revenue to pay for the predetermined budget.
Your property tax bill may go up, but the levy rate may stay the same or even decrease. If this occurs, the assessed valuation on your property has been increased. For many property owners, increases in the assessed valuation of their property has driven a significant rise in their property tax bill. For agriculture land owners, rapid valuation increases have created a dramatic and unprecedented shift in the total property tax distribution. That shift has most notably impacted the school equalization aid formula, TEEOSA, resulting in the majority of rural school districts in Nebraska receiving no state equalization aid.
The Nebraska Constitution requires property to be valued uniformly and proportionately. The value is determined based on an assessment of the market price of the property, or an estimation of what the property would be sold for if offered for sale in the open market between a willing buyer and a willing seller. Equalization is the process by which the assessed value of your property is adjusted to reflect the market value of similar properties for the purposes of determining your property tax.
When property owners feel the value placed upon their property for the purpose of taxation is in excess of market value, they can file an official protest with the county clerk using Form 422A. They then must appear before the County Board of Equalization or their assigned agent to demonstrate why their valuation is not accurate.
Protesting your property valuation is a time consuming process. For many taxpayers, it means time away from work and family obligations to prepare for and attend the hearing. The standards for the information a taxpayer needs to provide to support their claim are unclear and vary from county to county. Taxpayers are often only given a few minutes to make a case that can have a significant impact on their family budget. For many the protest process is intimidating. Even after the protest hearing is complete, there is no consistent standard by which the Board of Equalization has to accept or reject the valuation.
When the county increases the valuation of your property for the purposes of taxation, it represents an increase in taxes. The burden for justifying the increase should lie solely with the government entity. It should not be the responsibility of the taxpayer to prove the value of their property.
Buffalo County provides an excellent example of the burden placed on property owners by the current system. Last year 1,972 valuation protests were filed with the County Clerk. That is an amazing investment of time and productivity by taxpayers to defend the valuation of their property, and it is down from an all-time record high of 2,566 in 2016. The result of those protests was a total decrease of $66.92 million in assessed property value, out of the original $283.69 million proposed. That amounts to 23.5% of the total valuation increase that was reversed following taxpayer protests.
Taxpayers should never be left wondering “why” their valuation increased, nor should they bear the burden of disproving a positive claim made by the government. In response to this need, I have introduced LB 905, which would require that at any hearing of the county board of equalization on a protest regarding real property, the burden of proof is on the county assessor to show that his or her assessed value is equitable and in accordance with the law.
I encourage county officials to proactively communicate with taxpayers, in detail, about why their property values increased. Every valuation increase should be made with understanding it is the responsibility of the county, not the taxpayer, to defend the increase. Clear, consistent, and objective standards of evidence should be available to taxpayers who wish to protest their valuation. The burden of proof for any government action, including taxation, lies with the government, not the citizen.
The trust and confidence of the public in the integrity of their government is critical. Pew Research Center data shows historical lows in public trust of the federal government, with only 18% of respondents indicating they believe Washington will do what is right “almost always” or “most of the time”. Public confidence in local government is much higher. Gallup research shows much stronger trust in state government, at 62%. Local governments have the highest level of public trust, with 71% of respondents in the Gallup survey having a “great deal” or “fair amount” of trust in local government to solve problems.
Public confidence in government is maintained when public officials develop policy in an open and transparent manner. When citizens do not feel heard, or, even worse, perceive they are intentionally excluded from important discussions by public officials, their trust in government is compromised.
In 1975 the Nebraska Open Meetings Act established the guidelines under which public policy in local government would be conducted. “It is hereby declared to be the policy of this state that the formation of public policy is public business and may not be conducted in secret. Every meeting of a public body shall be open to the public in order that citizens may exercise their democratic privilege of attending and speaking at meetings of public bodies”. If you have ever attended a public board meeting, you have likely heard the chair open the meeting with reference to the law and where to find it posted in the meeting room.
The Nebraska Open Meetings Act recognizes the importance of citizen access and public input to the decisions of public officials. Citizen participation in public meetings is a two-way process. Officials have the opportunity to hear from their constituents before making decisions that impact the public. Additionally, open meetings provide an opportunity for the public to gain information, data, and background that inform board member decisions. Public officials have an obligation to listen to the public. Citizens also have an obligation to educate themselves about important policy issues.
Open communication between government and the public is achieved through many means. Rules about public notice, agendas, and minutes are not procedural boxes to be checked. They are essential elements to insure the public is aware of what government is doing and have ample time to engage in the process if they so choose. Work and family commitments often limit how a voter may be able to physically participate in a public meeting. In such cases, detailed agendas published with adequate notice and comprehensive minutes of official actions are critical.
Nebraska’s Open Meeting Act is to be interpreted in favor of openness to the public. Making difficult and potentially unpopular decisions are not easy as an elected official. However, the more controversial a policy, the greater the need for an open dialogue between public officials and citizens. Public trust is not doing only what is popular or not upsetting people. Open communication and meetings allow even those who disagree to have a voice in the process and make decisions from a common set of facts.
Citizen apathy undermines the effectiveness of representative government. All too often I hear from local elected officials who tell me nobody attends their meetings or asks questions about their decisions. Our civic duty does not end at casting our ballot. It extends to a responsibility to remain engaged in the public process, even when it becomes routine and mundane.
On the other hand, when a controversial issue emerges–like wind farm developments, nursing home closures, or bond issues–hearing rooms are suddenly packed with vocal constituents. While public disagreements can challenge a community, citizens engaging in the policy process is a good thing. When the public cares enough to engage, they are taking ownership of their community. Better public policy will result.
As 2017 draws to a close a new legislative session looms on the horizon. The second session of the 105th Nebraska Legislature will convene on Wednesday, January 3, 2018. This marks the second year of the biennium. A “short session” lasting 60 legislative days, the Legislature is currently scheduled to conclude its work and adjourn in early April.
The first ten legislative days are the only opportunity for senators to introduce new legislation. During that time, new bills will be submitted and referenced to their committee of jurisdiction to schedule public hearings. It is expected that several hundred new pieces of legislation will be introduced.
Because it is the second year of the biennium, legislation that was introduced last year but not indefinitely postponed by Committee or during floor debate remains active. Floor debate this session will begin by debating bills that remain on General and Select File from the previous year. The website of the Nebraska Legislature contains a link to the end of session worksheet which details the status of every bill introduced the last session.
As new bills are introduced, they will be added to the worksheet and their status updated daily as they progress through the system. As bills make their way through the committee and floor debate process, I encourage voters to use the Nebraska Legislature’s website to identify bills of interest, track their progress, and access voting records. A wealth of resources are available at nebraskalegislature.gov for voters to access, including the daily activities of the Legislature.
A biennial budget was created and adopted in the last session to cover the July 1, 2017 through June 30th, 2019 budget cycle. However, actual tax receipts were below the forecast projections during the first three months of the new fiscal year. On October 27, the Nebraska Economic Forecasting Advisory Board revised the revenue forecast. A downgrade of the revenue forecast in the amount of $100 million in the current fiscal year will require modification of the budget adopted last session.
Known as a “deficit budget bill”, this process will make budget adjustments to match the lower revenue forecast and address any additional requests for new spending. The state is constitutionally required to balance its budget. It is also worth noting that receipts for the first month following the revised revenue forecast, November, fell $4 Million short. The budget situation will have a significant impact on the nature of the legislation introduced this session. Any bill that requires an appropriation will need to have a funding source.
Voters should not lose sight of the $235 Million in one-time cash transfers funding state spending in the current fiscal year, and the additional $131 Million of one time money in the second year. The statutory minimum reserve was also temporarily lowered, which has a $35 Million impact. That $400 Million hole, just under 10% of the General Fund budget, will need to be filled with new revenue in the budget to be crafted in 2019.
As in prior years, it is expected that bills will require a priority designation in order to receive floor debate, even if they have been advanced from committee. There will be four afternoons of floor debate before public hearings begin on January 16 and fill the afternoon schedule.
If you are in Lincoln while the Legislature is in session to testify at a bill hearing or observe the process in action, don’t hesitate to contact my office. Public engagement is the foundation of Nebraska’s unicameral process.
Merry Christmas and Happy New Year to all!
Money has a significant influence on politics and public policy. The public has a legitimate right to be concerned about money that flows to legislators and elected officials. Campaigns are expensive. Costs for legislative and regents races can easily exceed six figures. Donations from individuals, political action committees, and businesses to the campaigns of candidates and elected officials are filed with the Nebraska Accountability and Disclosure Commission and are publicly available. Regular media coverage of these reports make sure voters are aware of how campaigns are funded.
Voters are likely unaware of a much more substantial and influential source of money whose donors the media do not cover: the nonprofit group. In Nebraska the influence of nonprofit foundations and the groups they fund is particularly pervasive. Millions of dollars are spent annually by a handful of private foundations to influence legislation, run campaigns for political issues, and even employ elected officials. Look closely at any major policy issue in Nebraska and you will find a handful of interconnected nonprofit groups engaged in it.
If government is to be transparent and accountable to citizens, voters need to have a clear view of the money spent by 501(c)3 groups to influence policy. Nonprofit groups that identify themselves as “think tanks” or “advocacy groups” are actively engaged in the legislative process. In addition to public testimony at legislative hearings, paid staff of these agencies lobby senators, write legislation, and orchestrate extensive media and public affairs campaigns. Untangling the web of money that funds these endeavors is no easy task.
A nonprofit foundation is often used as a tool to shelter wealth from taxation and public scrutiny, while directing a substantial fortune for specific purposes, often political. Nonprofit groups, unlike political campaigns, are not required to publicly disclose their donors. As private organizations, their boards are not subject to transparency requirements. IRS Form 990 provides some detail about how a foundation may spend its money, but public access information is several years old.
In Nebraska, no single foundation has greater influence on public policy than the Sherwood Foundation, the private foundation funded by the wealth of mega-billionaire Warren Buffett’s daughter, Susie Buffett. The Sherwood Foundation supplies millions of dollars annually to a number of political nonprofit groups. OpenSky Policy Institute, a “think tank”, received over half its operating expenses in 2015 from the Sherwood Foundation. Groups that receive substantial funding from the Sherwood Foundation also employ state senators. Nebraska Appleseed, a politically advocacy group, employed Senator Kate Bolz and received over $700,000, while Nebraskans for Civic Reform, the group run by Senator Adam Morfeld, received $164,000 from Ms. Buffett’s foundation. One World Community Health Center, whose foundation employs Senator Sara Howard, received over $900,000. Center for Rural Affairs, Voices for Children, and other advocacy groups receive six figure support for their operations.
It is not uncommon for foundations to donate to other nonprofits, which may in turn fund additional nonprofits, effectively laundering donor money and removing it several steps from public view. Have you ever wondered who funds Nebraska Loves Public Schools? Founded in 2011 by the Sherwood Foundation, several Sherwood-funded groups also provide financial and logistical support to the organization. Thus, voters may have to look back through several layers of financing to identify the true source of funds.
It is in the public interest to be able to evaluate how a $1,000 campaign contribution may influence an elected official. It is of even greater importance for the public to evaluate how six-figure donations to an elected official’s employer and policy groups impact votes and policy choices. When Dorothy pulled back the curtain in the classic movie The Wizard of Oz, the Great Oz exclaimed “pay no attention to that man behind the curtain”. Nebraska voters and the media would be well served by pulling back the veil that shrouds millions of private dollars flowing into the Nebraska political process to identify who might be pulling the levers.
Compared to many states and the federal government, Nebraska has relatively few laws regarding conflicts of interest, reporting of interactions between elected officials and lobbyists, and rules regulating the influence of special interest on lawmakers. 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.
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.
Nebraska voters have the expectation that their interests are being represented by their elected officials, not those of paid special interests and lobbyists, and free of quid pro quo arrangements. Statutes and rules that reflect that intention are conspicuously absent. Additionally, the public assumes there are rules and a procedures in place for ethical conduct, even though none exist. Public confidence in the legislative process necessitates greater transparency in the ethical expectations of state senators.
Among the ethical issues unaddressed in current Nebraska law is known as the “revolving door”. This is the practice of elected officials and senior staff becoming paid lobbyists directly after leaving office. Immediately leveraging the influence and insider knowledge gained in public service is prohibited by 34 states and the federal government. Nebraska has seen two high profile examples of the revolving door in action in recent months, as former state senator Heath Mello has been hired as chief lobbyist for the University of Nebraska, and former director of the Department of Economic Development, Courtney Dentlinger, has been hired as the chief lobbyist for the Nebraska Public Power District.
In keeping with my firm belief that the lawmaking process in Nebraska should be transparent, responsive, and devoid of undue influence by special interest groups, I have introduced legislation to close the revolving door each of the past two years. My legislation would prohibit elected officials from taking a job as a paid lobbyist for two years after leaving office. The Governor, Lieutenant Governor, Attorney General, State Treasurer, Secretary of State, Auditor of Public Accounts, and members of the Legislature, Public Service Commission, State Board of Education, and Board of Regents of the University of Nebraska would be required to have a two year “cooling off period” before being paid to lobby. Their staff would be prohibited for one year.
The language of my bills mirror the federal statute passed in 2007. In Washington, D.C., varying revolving door statutes have dated back to as early as 1872. In addition, 34 other states have enacted “cooling off periods”, yet Nebraska has none. For a body that prides itself on transparency, we are failing when it comes to public expectation in this regard. The chairman of the Government Committee, John Murante, has failed to bring the bill to vote by the committee in either year. I am not the first senator to introduce a bill requiring a cooling off period before lobbying. In 2008, Senator Bill Avery introduced similar legislation which did not advance from the Government Committee. Four of the members of that committee later went on to lobby after their time as senator.
Influencing policy is big business in Nebraska. In 2016 over $16.7 Million was spent lobbying Nebraska lawmakers. Establishing a clear distance between those trusted to make laws and those paid to influence them reduces the opportunities for quid pro quo arrangements. Even the perception of impropriety degrades public trust in our government and the integrity of elected officials.
Since 1790 the Federal Government has conducted the decennial census every ten years. Originally established as a mere head count of residents of each of the states for the purpose of apportioning members of the U.S. House of Representatives, the census has grown into a comprehensive effort that collects data on a number of characteristics of Americans. That information influences distribution of federal funds based on population as well as serves as the major federal data set for policy analysis during the next ten years.
In the year following each decennial census, states use the population information collected to evaluate the population residing in different electoral districts to determine if they contain relatively equal numbers. These include not only Nebraska’s three members of the U.S. House of Representatives, but more significantly legislative districts for representation in state government, as well as districts for the University of Nebraska Board of Regents, Public Service Commission, and State Board of Education. As shifts in population occur, apportioning equal numbers of voters into each district may require redrawing district boundaries. This process is known as “redistricting”.
Residents of District 38 are quite familiar with the consequences of redistricting. In 2011, LB 703 created new boundaries for the district following the 2010 census. Kearney County was moved into the district, and Harlan County was moved into District 44. Clay County has also moved among different Legislative Districts through different iterations of legislative redistricting.
With the shift in population to Douglas, Sarpy, and Lancaster counties, the redistricting process will continue to have significant implications for representation of rural Nebraska in the Legislature. In 2011, the movement of District 49 from western Nebraska to Gretna created an important change in the Legislature. Of the 49 seats, 25 are now held by representatives of the Omaha and Lincoln urban areas. Current population projections would indicate two additional seats will be shifted away from rural Nebraska to the Omaha/Lincoln area. That magnifies the urban dominance in the Nebraska Legislature from a simple majority to a 27/22 split.
While most rural states also face this population shift, the impact on the representation of rural areas in state government is not as extreme. In a two-house state legislature, the population shifts impact rural representation in the state House of Representatives, while geographic representation remains in the Senate. As the only unicameral in the nation, the loss of legislative seats in the single legislative chamber means a direct loss of representation in state government.
The consequences of this political shift can be enormous for rural Nebraskans. There is no better example than the dysfunctional school funding system that has left rural districts paying for public education almost exclusively with local property taxes, while urban districts consume almost a billion dollars of state equalization aid. Appeals to fairness by rural senators and rural citizen groups have fallen on deaf ears of urban senators, whose support is required to restore equity to the system. The problem has been recognized for almost a decade, with little action to resolve it.
The Nebraska Constitution specifically assigns the responsibility for apportionment and redistricting with the Nebraska Legislature. In advance of the anticipated redistricting process in 2021, several legislative proposals have emerged that attempt to divert the redistricting process to unelected commissions based on party registration. I opposed the first redistricting bill to come to the floor for a vote, LB 580 in 2016. Two additional bills, LB 216 and LB 653, were introduced in this past session and remain in Executive Committee, of which I am Vice Chair. I oppose the creation of any unelected advisory committee for redistricting on a partisan basis, and thus will not support either current bill for advancement to General File.
My experience in the Nebraska Legislature has reinforced the common expression that Nebraska’s greatest divides are not by party, but rather rural versus urban. Low commodity prices have had a direct and significant impact on state revenues, demonstrating that rural Nebraska remains the economic engine of our state and state government. Even with this reality, critical rural needs, such as school funding reform, remain unaddressed despite years of focus and discussion.
Rural Nebraskans should carefully watch and evaluate the redistricting process that will be taking shape in the coming years. To date the focus has been on concerns of political parties, not on the impact of the accelerating shift of representation to urban areas. Voters of District 38 should get engaged: the very nature of your representation in state government rests with the outcome.
The Nebraska Department of Corrections recently notified convicted death row killer Jose Sandoval of the four drugs that will be used as a lethal injection protocol to carry out his execution. This notification is in accordance with state regulations, which is required at least 60 days before the Attorney General can request an execution warrant from the Nebraska Supreme Court.
The four drugs that will be used by the state have been used medically for decades. Their mode of action, onset of activity, and clinical effects are well known and documented. Each is currently used in a wide variety of medical applications in practices across the state. It is highly likely you or a family member have been administered one or more of the compounds during routine anesthesia. Nevertheless, death penalty opponents have mischaracterized the combination as “untested” and “unproven” in an attempt to create doubt about their use. Regardless of one’s opinion about the death penalty, distorting the pharmacological facts about approved, widely used anesthetics to achieve a political end is unethical.
The four drugs in the protocol are diazepam, fentanyl, cisatracurium besilate, and potassium chloride. Diazepam is a sedative medication that is commonly known by its trade name, Valium. It has a wide variety of clinical uses, including for anxiety, seizure control, resolution of muscle spasms, and as a sedative before administration of general anesthesia. It is included on the “List of Essential Medicines” compiled by the World Health Organization (WHO), which is considered the standard of care for safe and effective medicines in a healthcare facility. Approved in 1960, an article in the journal ACS Chemical Neuroscience on diazepam states it “set the standard for pharmacotherapy in terms of potency, onset of action, and safety”.
Fentanyl is also a widely used and well known opioid. Also introduced in 1960, fentanyl is available in a wide variety of formulations for uses as a potent pain medication. In addition to its use as an injection and tablet, fentanyl is available in patches, which administer the drug through the skin. Fentanyl patches are also included on the WHO List of Essential Medicines. Fentanyl lollipops are used by the US military as an effective way of delivering pain relief to injured troops in the field. Its onset of action is within five minutes, and a single therapeutic dose provides over 30 minutes of effect. The effects of fentanyl overdose are well documented. Illegal use of fentanyl as a street drug by opioid addicts has led to the deaths of tens of thousands in the U.S. since 2000.
Cisatracurium is a paralytic agent used by anesthesiologists in addition to general anesthesia during routine surgery. Paralytics are required when using a mechanical ventilator, such as heart surgery. Some anesthesia protocols also routinely use cisatracurium to relax the muscles of the head and neck to allow placement of an endotracheal tube in the airway. Atracurium is its parent compound, and has been in use since 1974. A 2014 study published in the Journal of International Medical Research details a double-blind randomized trial that demonstrated cisatracurium effectively prevented pain associated with the injection of propofol, a common injectable anesthetic agent. The pain prevention was as effective as administering lidocaine, the commonly used local anesthetic.
Potassium chloride is a salt that is added to intravenous fluids to treat low blood potassium. At high doses the potassium causes paralysis of the heart muscle and cardiac failure. Potassium chloride has been used as the third drug in lethal injection protocols that have satisfied judicial review. Accidental overdose of undiluted or improperly calculated potassium chloride via intravenous fluids is a well-documented medical error leading to sudden death in hospitalized patients. The journal Pharmacy and Therapeutics published an article in 2011 titled “Potassium Chloride Injection Still Poses Threats to Patients”, documenting steps health care facilities needed to adopt to address “lingering problems associated with concentrated KCl”.
It is true that the combination of these four drugs has not been used in an execution. That does not mean their clinical effects, when used alone or in combination, are unknown. Their use at therapeutic levels is common and well-studied. The fatal effects of overdose of each of these compounds, either accidental or intentional, has been documented.
Misrepresenting the science of the drugs for a political end has far reaching implications. Both diazepam and fentanyl are WHO Essential Drugs, as is another anesthetic, sodium thiopental. Activism and misrepresentation of sodium thiopental has virtually eliminated the drug from the global market, at the cost of untold lives. Accurate, evidence based information and reporting will hopefully prevent a similar fate for these medications.
As Thanksgiving marks the start of the holiday season, families across the nation gather to give thanks and celebrate. These end-of-year holiday gatherings give us an opportunity to reflect on the year that has passed, as well as focus on our goals and priorities for the year ahead with family and friends.
We have much to be thankful for across District 38 and throughout Nebraska. A survey of local newspapers from across the district demonstrates many of the great things happening every day in our local communities. Student success in a wide variety of school activities, including academic, co-curricular, and athletic, have great support from parents and residents. Our churches, civic organization, and local business groups are engaging citizens and responding to local needs as is the rich tradition of our rural communities.
Although this fall’s harvest encountered many challenges posed by Nebraska’s ever changing and unpredictable weather, for the most part yields were good. Current drought monitor indexes show normal moisture conditions across the district going into winter. Although commodity prices remain low, significant economic distress as has been seen in prior decades has not developed.
It is easy to fall into a pattern of only seeing the challenges that lie before us. With my focus on policy solutions, I personally do not always take the time to step back and fully recognize the successes happening every day and the opportunities before us. The upcoming holiday season provides an important reminder of the value of pausing, taking stock, and being thankful.
The coming year, as the years before it, will present a new slate of political challenges, policy choices, and opportunities to address them. As we focus in state government on addressing issues from appropriations to property taxes, the families who will be gathering to celebrate Thanksgiving and Christmas must remain at the forefront of our minds.
The values we share around the holiday dinner table should be reflected in the values we embrace in our policy. It is easy to assume government is a force unto itself. We see neighbors help each other harvest in a time of need, communities line main street to cheer the arrival of newly crowned state champion teams, and community groups hosting benefit suppers to help a family in need. We must celebrate and build upon the strengths that make our rural communities such a great place to live, work, and raise a family.
This Thanksgiving I will personally give thanks for many things. I am thankful for the opportunity to represent my home community in the Nebraska Legislature. I appreciate and value all of the conversations, letters, and calls from constituents who provide valuable feedback and information to inform my decisions. I cannot sufficiently express the full depth of my gratitude to my family, friends, and neighbors who pitch in and help with my responsibilities at home, especially around the farm, that enable me to serve.
Over the course of the coming months there will be ample time and opportunity for discussion about politics, policy, and politicians. It is my prayer that this holiday season finds all Nebraskans in the company of family and loved ones. May we all take stock of the rich blessings that are afforded us by virtue of living in strong communities that value our liberty and our freedom. Happy Thanksgiving to all.
During the last legislative session I was clear with my concerns about spending levels in our state budget. In the face of lagging revenue receipts and decreased revenue forecasts, the Appropriations Committee and Nebraska Legislature balanced the state budget by transferring $173 million from the state Cash Reserve and sweeping almost $194 million from various Cash Funds to pay for ongoing expenses.
I did not vote for those transfers or to advance that budget from committee, nor did I vote for the budget on the floor. As I stated repeatedly, the next budget cycle would require $367 million in revenue growth just to cover ongoing expenses paid for with one time transfers. That is a pretty deep hole to “grow” out of in the midst of a struggling agricultural economy. At the conclusion of the legislative session in May, a group of my fellow senators and I continued to publicly state our concerns, predicting that a sluggish farm economy and its financial impact on our communities would continue to weigh down state tax receipts.
On October 27, the Nebraska Economic Forecasting Advisory Board (NEFAB) met to update the revenue forecast for the current fiscal year and the 2018-2019 fiscal year. Tax receipts, specifically personal income and sales taxes, have not met the forecast levels in any month since the board last met in April and lowered the revenue projections. Thus, it was no surprise that the NEFAB again reduced the projection for tax receipts to the state General Fund, this time by a total of $224 million over the current budget biennium.
A deeper examination of the details behind the declining numbers presents greater concern. For the current fiscal year, FY18, the NEFAB reduced revenue by $100.4 Million. In the second year of the budget cycle, FY19, the revenue level was reduced by $123.5 million. The revenue declines in sales and income taxes are greater in the second year than the first. The economic models used by the NEFAB to project revenue indicated the need for a steeper reduction with the passage of time. There is no objective evidence to support the claim we will “grow” out of the spending hole the Legislature has created any time soon. On a positive note, corporate income tax receipts were revised upward by $50 million over the biennium.
Here is the scorecard: the budget passed last session plugs a $367 million hole with one time money. If spending restraint is not exercised to accommodate the $224 million revenue downgrade, it will need to be covered by the transfer of more one time money, primarily the Cash Reserve. The next budget cycle would begin with a $591 million gap to fund ongoing expenses.
If the entire $224 million from the current revenue decrease is taken from the Cash Reserve rather than in spending reductions, it would leave $155 million in the state’s “rainy day” fund. Current revenue models have a greater negative impact with time, and the potential exists for an ongoing revenue deficit almost 4 times the size of the Cash Reserve.
The very fact that personal income tax revenues continue to come in below economic projections indicates Nebraska families and small businesses are not earning as much as expected. Lagging sales tax revenues reflect the decreased spending by Nebraska consumers that accompanies those reduced incomes. Any strategy that increases state revenue by taking it from already strapped Nebraska taxpayers, rather than reducing state spending, is illogical.
I believe in the resilience of Nebraskans. Inherent in that belief is the faith that we can strategically set priorities and responsibly address funding needs using evidence and cost/benefit analysis. A quick recovery of Nebraska’s fiscal health depends on it.
Financial decisions for yourself and your family are a personal choice. How you spend your money is unique to your situation, depending on your priorities and values. You decide your comfort level with risk, personal savings, and future goals. If you make a poor decision, it does not impact the livelihood of your friends and neighbors. Even when we try our best to be rational, it is a natural tendency to let emotion influence our personal decisions. When the consequences are our own, that is acceptable.
Public policy decisions are very different. When legislators make decisions about spending tax dollars, making tax policy, or creating regulations, those choices impact everyone. Far too often policy decisions are “eminence based” rather than “evidence based”. The most coordinated media campaigns or most popular catch phrases become accepted as true, whether or not evidence to support the claim exists. Unfortunately, ideas can become popular and gain support even when evidence contradicts the premise.
My recent columns on tax incentives exemplify the need for good evidence to support policy decisions. The original legislation that created the Nebraska Advantage Act did not require reporting of the many metrics that would allow evaluation of the intended impact of the programs. Supporters and opponents alike make claims about the value of the Nebraska’s tax incentives. In the absence of evidence, it is not credible to say the programs are successful economic tools, just as it is not credible to say they have not been.
Despite common political strategies that use fear, anecdote, and false dichotomies to promote a particular policy, sound governance should use evidence to support decisions that impact the daily lives of Nebraskans. Many popular policies sound reasonable, yet the evidence does not support the claims made. One of the most common arguments in support of expanding Medicaid eligibility is to reduce the use of expensive emergency room services for non-emergency care. The state of Oregon used a lottery system to expand Medicaid to a randomized group of working adults. Use of Emergency Room services increased in those newly covered, versus the same population without Medicaid. Expanding Medicaid had the opposite effect on costs. Nevertheless, the claim continues in spite of the evidence.
Studies examining the long term impact of early childhood education programs have provided evidence that contradicts the popular claims. Research at Vanderbilt University examining Tennessee’s universal public early childhood program and data from Head Start have shown the impact of early childhood education programs, when applied broadly, vanishes in early elementary school. Nevertheless, data from boutique programs are used to advocate for additional investments, while ignoring the more comprehensive evidence.
Cost and benefit analysis of government programs is essential for judicious use of tax dollars. All too often it is assumed that more money spent equates to equal or greater outcomes. There is a basic economic principle that states “there is no such thing as a free lunch”. There is a cost associated with every dollar spent, including trade-offs to other programs. When making decisions to spend taxpayer money, lawmakers have a responsibility to make decisions based on data that supports their decision.
There is no evidence that supports the claim that more dollars spent on education equates to better learning outcomes. The rate of return diminishes with additional investment. Beyond a basic level of funding, there is not compelling evidence to support the claim that students perform better when more money is spent. However, education spending is frequently used as a metric to reflect educational quality.
Using evidence and data to make good policy decision does not mean they are devoid of compassion. Emotional stories and anecdotes are powerful, but they are not evidence. Public decision making is distinct from private choices. The careful balance between the individual needs and public good can be easily influenced by cognitive biases. Good data and careful standards of evidence provide the foundation for sound public policy.
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