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Sen. John Kuehn

Sen. John Kuehn

District 38

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Public hearings are an important part of the legislative process. In Nebraska, every bill that is introduced must have a public hearing. The hearings allow every citizen the opportunity to provide their insight and expertise to legislators, as well as give voters the chance to voice their opinion on legislation directly to senators. However, bill hearings held during the legislative session are not the only public hearings conducted by the Legislature.  Although the Legislature is not currently in session, hearings on Interim Study Resolutions are currently underway. You can find the list of the public hearings, including their topic, date, and time on the Nebraska Legislature website.

Interim Study Proposals are introduced by senators or standing committees during the legislative session. Designated with the “LR” prefix, each study is referred to one of the standing committees using the same criteria when referencing legislation. Following adjournment of the legislative session, legislative staff and committees begin working on the various study topics introduced. Committee Chairs prioritize the resolutions assigned to their committee and determine whether a public hearing will be held. This year 109 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. Studies introduced this year include examination of specific statutes or programs, such as the Property and Casualty Insurance Rate and Form Act and the One-Call Notification System Act. Others are more general in nature, like the availability of the affordable housing or the school finance structures. 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. Legislative staff, which may or may not have expertise in the specific topic being addressed, are typically responsible for the research and production of the interim study report.

Public hearings are not required and are at the discretion of the chair. Whether or not the hearing will be open for public testimony is also at the discretion of the Committee Chair. Frequently, hearings are conducted with invited testimony presented by special interest groups with a specific interest in the study topic. The purpose of a study is as variable as their specificity. 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.

While Legislative Resolutions and their associated interim studies do not result in a change in policy or law, they are worthy of public attention. Interim studies are frequently cited in bill hearings and during floor debate of bills. The scope and topic of studies provide insight into the interests of individual senators, as well as the priorities of Committee Chairs. Most important, interim study topics frequently appear as bills in subsequent sessions.  

If you have an interest in any interim study topic and would like to submit comments or participate in the hearing, please contact my office for assistance.  Citizen engagement in all of the public hearings is important.


The legislative, executive, and judicial branches in Nebraska function through a system of checks and balances. Nebraska law outlines the procedures by which one branch of state government can check the actions of another, ensuring compliance with the Constitution and laws of the state through accountability.

Thousands of your tax dollars are paying private attorneys as some state senators seek to obtain a judicial ruling that Nebraska state senators and their staff have absolute immunity from legal action. If successful, the legislative branch would not be subject to any injunction or oversight by the courts should the Unicameral break the law. I oppose these efforts and believe elected officials and their staff should be subject to Nebraska law. Nebraska voters expect state senators to follow state law and be subject to the same checks on power as other branches of government.  

On the last day of the legislative session Judiciary Chairwoman Laura Ebke brought a subpoena request from seven members of the Judiciary Committee to the Executive Board for approval. In the request, Senator Ebke sought authorization to subpoena Corrections Director Scott Frakes to a hearing called by the Judiciary Committee. At the time of her request for subpoena, Director Frakes had not even had an opportunity to respond to her request that he appear before the committee. The hearing in question was not the product of an investigation authorized by the Legislature, but rather requested solely by the Judiciary Committee. Five of the eight members of the Executive Board voted to authorize the subpoena.  

Under Nebraska Law, specifically Section 50-406, the Legislature has the ability to issue a subpoena to compel testimony to exercise oversight. The opening section of the statute states clearly: “In the discharge of any duty imposed by the Legislative Council, by statute, or by a resolution of the Legislature” a committee may issue subpoenas with approval of the Executive Board. A committee cannot exercise subpoena power in an investigation or hearing unless the investigation itself has been authorized at some point in time by a majority vote of the entire Legislature.

The logic is clear. A rogue committee and a small group of senators should not be able to launch an investigation and gain authority to issue subpoenas without the knowledge and consent of the Legislature as a whole. As is seen in this case, only 11 of the 49 senators among two committees have been able to exercise the subpoena power and drag the Nebraska taxpayer into legal proceedings.

The Attorney General, in an unprecedented move, filed a motion to quash the subpoena on the grounds that it was not issued in compliance with state law. Executive Board Chairman Dan Watermeier and Judiciary Chairwoman Laura Ebke, without a meeting of the Executive Board, filed a countersuit, claiming absolute immunity for the Legislature from legal action. District Court Judge Lori Maret agreed with the Attorney General that the subpoena was not in compliance with Nebraska statute 50-406 in a ruling on August 8 and quashed the subpoena.

In a motion that passed only with a simple majority of five votes, the Executive Board of the Legislature has now filed an appeal to the District Court ruling, again arguing absolute immunity for legislators. The foundation for their assertion lies in the Speech and Debate Clause of the Nebraska Constitution, found in Article III Section 26. The Constitution reads: “No member of the Legislature shall be liable in any civil or criminal action whatever for words spoken in debate.”

As Vice Chairman of the Executive Board and governing committee of the Legislature, I am one of the fifteen senators named as defendants in the legal action brought by the Attorney General that the Legislature is currently appealing. However, I did not vote to authorize the illegally issued subpoena that is the initiating cause of the lawsuit, nor have I voted to authorize the legal challenge and current appeal. It is my strong conviction that members of the Legislature, acting in their official capacity, must follow state law when exercising their oversight function.

Constitutional protection for senators to be able to speak freely in the course of debate without fear of legal action for their political viewpoint is appropriate, and even essential for free government. However, no member of the Nebraska government should be immune from following the law. A legal argument that Legislative Committees cannot be held accountable by the courts for failure to follow the law does not align with the principles of transparent, accountable government. These five individuals, a small minority of senators, are using your tax dollars in an attempt to use the courts to prevent you, the voters, from being able to place any check on legislative power. Everything about this countersuit and appeal is wrong–what it seeks and how it was authorized–and I will continue to fight it.

For centuries psychics and crafty showmen have been exploiting a psychological phenomenon known as the “Forer Effect” to take advantage of unsuspecting marks. Vague, general statements are made to an individual under the guise that they are specific to that person. In reality, the statements are so broad they could apply to anyone and any circumstance, as they target universal human qualities we all value. Due to their open ended nature, each person interprets the comments based on their own experience and values, giving it their own meaning. The statements are perceived to be true, even though they are mere platitudes.

Legendary showman P.T. Barnum so successfully used the phenomenon to dazzle patrons at his circus shows that “Barnum Statements” is the term applied to the use of such comments. Horoscopes and mediums use Barnum Statements to exploit the Forer Effect and make their random, generalized predictions appear precise and targeted.

With two months remaining until the General Election, candidates for elected office are making their promises to voters. Special interest groups are using op-eds and community meetings to advance their agendas. In the coming weeks, your mailbox will start to fill with these messages. By November, you will not likely be able to listen to the radio or watch the evening news without being bombarded by campaign promises. Scrutinize them carefully.  Don’t find yourself the target of a Barnum Statement.

Like late night infomercials that promise quick, easy solutions for your weight, your acne, and your bank account, there are no shortage of bold promises to fix property taxes, college tuition, and your health care costs. As a voter, dig deeper. Ask candidates to identify specifically how they will approach each of these issues. Nobody expects a candidate to have all the solutions, but their responses will give you, the voter, a better sense of what they believe and how they will vote in office than any campaign mailer full of generalized statements ever will.

Specifically, I hear a lot of promises for increased spending for virtually every government program. Few things make a voter feel heard and valued more than a promise for more money coming to their favorite cause or interest. Like Oprah Winfrey enthusiastically moving throughout her audience, candidates love to proclaim: “You get more school aid! And you get free health care! And you get workforce housing! And you get economic incentives! And you get new roads! And we ALL get property tax relief!”. Unlike Oprah’s generosity, which was funded by advertisers and not the audience members who received the gifts, the bill for generous political campaign promises gets paid by you, the taxpayer.

Voters need to ask themselves what they are willing to pay from their pockets for each of the expanded services promised to them. Local journalists need to ask the follow-up questions and press candidates and interests groups to be specific about their approach. Everyone should be asking the “who” and “how” the state will pay for “solutions”. As well-crafted Barnum statements, campaign promises appeal to the desire all of us have to make Nebraska better. However, effective government must be more that the same principles that guide horoscopes and circus tricks.

California State psychology professor Michael Birnbaum is a leading researcher of the Forer Effect and Barnum Statements. His work focused widely on why people fall prey to these cons when they can be so readily exposed. His admonition for those who may find such showmanship entertaining is good advice for taxpayers this election season.  Professor Birnbaum said: “Be skeptical and ask for proof. Keep your money in your wallet, your wallet in your pocket, and your hand on your wallet.”


I collect quotations and passages. Usually scribbled on a scrap of paper when first encountered, they find their way into decor in my home and office, tucked into books to be found years later, and even into a Google Doc that is a running “cut and paste” of bits of wisdom I accumulate for some unknown future reference. Walking from my desk to my kitchen for a coffee refill while writing my column for this week, one such passage I had crafted into a wall hanging captured my attention.

Last week I wrote about the tax incentives report released by the Nebraska Department of Revenue. The report laid out the fiscal details of one of the most discussed programs of state government, the Nebraska Advantage Act, and its companion corporate incentive programs. State law requires a public hearing of the members of the Appropriations and Revenue Committees to answer questions and provide context to the data. My intention was to follow last week’s rather long and very data heavy column with context and specifics gleaned from the public hearing.

However, the hearing did not provide any information that could not be obtained by simply reading the report. Senators, including myself, asked a few questions about items not included, and the Department of Revenue will provide written follow up in the coming weeks. Some senators had read the report in detail, while it was not apparent others had. It was obvious that some senators did not have a command of how the incentives programs that were the subject of the hearing even work.

Nebraska’s corporate tax incentive programs are significant by any measure. With $905 million of state tax credits earned, over $6 billion in personal property exempted from taxation, and a projected net loss of $996 million to Nebraska taxpayers by 2027, these programs should command intense scrutiny and public attention. We have no evidence to support the claim that the programs advance Nebraska, and attempts to collect that evidence have faced opposition and apathy. There has been talk about improvements and changes to the programs during my entire term in the Nebraska Legislature. All the talk has yielded little result. My struggle comes in how to provide greater context and insight about these programs that is of value to taxpayers who read this column.

The passage on my wall that caught my attention while writing this column about the tax incentives hearing has been with me since 1994 when I printed it with my dot-matrix printer and posted it on my dorm room wall. When the edges became tattered, I mounted it into a frame, and it has accompanied me everywhere I have lived for the past 24 years.

For my 20th birthday, a friend gave me a copy of Robert Pirsig’s 1974 book “Zen and the Art of Motorcycle Maintenance”. Written as a fictionalized autobiography with diversions into some philosophical discussions, the book isn’t a quick read and didn’t teach me anything about motorcycle mechanics. Nevertheless, it has become one of my favorites. Like the book’s narrator, I too take great interest in knowing the specifics and details of how things work. In contrast to those who think in broad strokes and themes, I want to take things apart and see how they are made.

The policy of tax incentives is based on noble themes. “Economic development” and “business growth” are laudable goals that are difficult to disagree with. I, however, cannot help but want to pop the hood and look deeper into how the programs work. It is a source of frustration for me when others do not have the same desire to dig down into the specifics. To my mind, even the best intended public programs require scrutiny and attention to the details of their operation. But, like the narrator in “Motorcycle Maintenance”, I have come to realize there is a sharp distinction between those like me who crave to know the inner workings and those who have no interest in knowing them at all. Politics and political messaging does not lend itself to the details, but rather the best sound bite or slogan sways public opinion.

I close with my favorite passage from Pirsig’s book, the one that I have kept on my wall for the past 24 years and caught my attention when writing this column. It has greater significance to me based on my experience in state government. As you think about the myriad of programs that government operates, including corporate incentives, it may resonate with you as well.

Pirsig writes: “If we are going to reform the world, and make it a better place to live in, the way to do it is not with talk about relationships of a political nature or with programs full of things for other people to do. That kind of approach starts at the end and presumes the end is the beginning. Programs of a political nature are important end products of social quality that can be effective only if the underlying structure of social values is right. The social values are right only if the individual values are right. The place to improve the world is first in one’s own heart and head and hands, and then work outward from there.”


Each year the Nebraska Department of Revenue submits a report of the financial details of Nebraska’s tax incentive programs. Although the Nebraska Advantage Act is the largest, the report provides the benefits paid to companies participating in seven distinct programs. This year’s report identifies the fiscal impact to Nebraska taxpayers of 132 qualifying projects that have received benefits under one or more of the seven programs.

The Annual Report contains specific, detailed information about the benefits participant companies have received and will continue to receive from the program. To date, a total of $905 million in tax credits and $187 million in sales tax refunds have been given, with another $37 million in sales tax refunds pending approval. While sales tax refunds are paid to the company when earned, the tax credits represent a cumulative liability to Nebraska taxpayers.

Of the nearly $1 billion in tax credits earned, less than half of them have been used. When a company qualifies for the tax credits, they can apply the credit in a number of ways. They may use the credits instead of paying state income taxes, apply the credits as a refund for sales taxes, use the credits to pay the employer’s share of tax withholding on employee salaries, or obtain a state refund for their real estate property taxes paid. In some cases, companies can continue to collect on incentives as long as 16 years after they were attained.

A common misconception among taxpayers is that if the current tax incentive programs ended, so would the payouts. That is not correct. If no further applications were accepted or corporate benefits approved, Nebraskans are still on the hook for $484 million of tax credits earned that still remain to be paid.

In addition to the tax credits and refunds that reduce current and future state taxes paid by participating companies, certain projects are granted exemption from personal property taxes. To date, over $6 billion in personal property has been removed from local tax rolls, meaning no property taxes are paid to local governments. To put that in perspective, that is the equivalent of 40,000 homes valued at $150,000 each, or alternatively, 7,500 quarter sections of $5,000 per acre farm ground not paying property taxes. In comparison, the total taxable value of all ag machinery and equipment statewide was $4.1 billion in 2017, while the total taxable value of commercial and industrial equipment was only slightly higher than the cumulative exemption for incentivized companies at $6.5 billion.

While the costs to Nebraska’s taxpayers are known to the dollar, information about the benefits and economic activity created by the credits are estimates at best. For example, the report estimates a cumulative number of new jobs, although that number does not represent a new position created and filled by a previously unemployed Nebraska worker. In fact, the estimated number does not even reflect jobs, but rather “full time equivalents”. Any accumulated increase of 40 work hours per week is counted as an “FTE”. So 10 employees getting 30 hours of work per week instead of 20 would be counted as 2.5 new “jobs”, even though not a single full time job was created.

Additionally, we have no means by which to accurately evaluate the wage levels of the expanded employment. Estimated annual wages are calculated for the report, but they represent only an average wage that FTE’s created.  For example, if a company created one $100,000 management position, two $75,000 supervisor positions, and 10 $30,000 laborer positions, the average salary would be reported as $42,000. The few high wage jobs skew the average, even though almost all of the jobs created were relatively low wage positions.

The report includes a fiscal analysis that uses economic modeling to project the net benefit to Nebraska tax revenue through taxpayer subsidy of participating companies. According to Department of Revenue calculations, the total tax revenue gained by the economic activity created statewide by the incentives programs will be 25% less than the amount of state taxes not paid by participating companies. That is a net annual loss to taxpayers of $32 million in 2018. The Department of Revenue projects that annual loss to grow to $87 million by 2022 and peak at $93 million by 2025. Property taxes not paid are not included in that total loss.

The tax advantages to a handful of companies in Nebraska are clear to see. As a state senator and taxpayer, I have difficulty seeing the public benefit of the current programs, even when those benefits are calculated using optimistic estimates. That lack of measured data on outcomes is troubling. Despite my personal efforts to advance legislation that would provide information for taxpayers, companies receiving the public benefits resolutely opposed greater transparency.  A public hearing on the Tax Incentive Report will take place on Wednesday, August 15.

The term “local control” reflects Nebraska’s priority of self-governance at the community level. Each school district, city, natural resource district, and the thousand miscellaneous government bodies are governed by local officials who establish policies specific to their locale. With the ability to set policy comes the ability to spend tax money, which must be generated from Nebraska taxpayers.

The result of the historical emphasis on local control has been the establishment of 2,659 different local governments across Nebraska. The cost of so many different governments is far more than the half a billion dollars spent annually for general administration costs. With so many different governments, operational duplication is inevitable. Local governments collect 56% of the total taxes in the state and spend 64% of all your taxes paid.  

The annual taxing and spending of local governments in Nebraska only tells part of the story.  Local governments in Nebraska have issued over $9 Billion in public debt obligations. Regardless of any changes in tax policy or spending rates, those debt obligations remain for you and your children. Local government debt equates to $4,820 for each and every Nebraskan, and is equal to 85% of the annual spending by local governments.

The burden of local government debt is not only on future taxpayers. Putting the immediate fiscal cost in perspective with the other priorities of Nebraskans is shocking. According to U.S. Census Bureau figures, Nebraska’s local governments spend in excess of $200 million annually to cover the interest expenses alone, a cost of over $100 per Nebraskan each and every year. Annual interest costs on local government debt exceed the value of the state Property Tax Credit Relief Fund. Interest on debt exceeds 5% of the total value of property taxes collected by local governments each year.

How did a population with a reputation for “pay as you go” and a general public sentiment against debt accumulate $9 Billion of local government debt? Through the collective actions of thousands of individual local government boards, none of whom are required to consider the tax burden or debt obligations any other government is placing upon a single taxpayer in their district. For a taxpayer, it is almost impossible to assess the entire scope of the current and future tax obligations being assessed them by the dozens of local governments.  

One of my biggest surprises over the past four years in the Nebraska Legislature is the degree to which local governments view themselves as entities unto their own, without coordination with the larger policy goals of their community, county, region, or state. Coordination is almost non-existent. When the Legislature discusses policy that impacts local governments, the “local control” principle becomes front and center.

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 unto 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.

Local governments choose how to implement state authorized taxing authority, set priorities for how to spend tax dollars, and constitute the majority of the tax burden on Nebraskans. With that local control must come local accountability.

At minimum, all local governments in a county should be required to hold a joint public hearing when setting budgets and tax rates. First, members from all boards and councils taxing citizens and spending tax money would be made aware of the totality of the tax burden placed upon their constituents by their fellow governments. Taxing and spending decisions made in isolation have led to the high local tax burden. Second, a single community hearing would allow for greater transparency for taxpayers and more effective voter engagement. Allow citizens to see a comprehensive picture of all the spending decisions, and the taxes that fund them, in a single public meeting.

I do not advocate for consolidation of more power in Lincoln. I do believe the coordination and cooperation among all local governments should be the operating standard. Program redundancies and turf wars raise the cost of government without improving service to the public. Local control will work best for Nebraskans when all local governments, and the state, work together.


With its wide open spaces, vibrant local communities, and a world renowned worth ethic, Nebraska would not appear to be dominated by government. Despite superficial appearances, the actual numbers tell a very different story. State and local governments in Nebraska collectively spend over $16 Billion annually. In terms of each of Nebraska’s 1.9 million people, that is over $8,500 per person each year.

Every 10 years the United States Census Bureau conducts a census of governments. Data from the last decennial census of state and local governments in Nebraska presents some startling facts. Despite ranking 38th in the nation for population, Nebraska’s 2,659 local governments place us in the 14th spot for absolute number of local governments. As a state, we rank high in the number of city, county, and township governments. However, almost half of the total number of local governments in Nebraska are classified as “special government districts”. These include Natural Resources Districts, Country Fair Boards, Sanitary and Improvement Districts, Educational Service Units, and the myriad of other local government entities that approach 1,300 in number. Nebraska law creates over 30 different types of political subdivisions, all of which have authority to spend tax dollars. Most have the ability to levy property taxes. The area of Douglas County alone contains 214 different governmental entities.

According to Census Bureau data, just the general administration costs alone to maintain each of these government bodies costs each Nebraskan $275 a year. Education expenses by far constitute the largest portion of government spending at 38%. In comparison, transportation is fourth in proportion, making up 9% of the total, while public safety, at 7%, ranks fifth.

After education, the second largest piece of state and local spending is public welfare at 17% of the total, more than roads and public safety combined. Spending on hospitals and health also outranks traditional government roles at 10% of the total reported by the Census Bureau. Of the total statewide tax expenditures, 63% of the spending is by the 2,659 local governments.

Nebraska’s tax policy is inextricably linked to the spending decisions made by elected and appointed officials managing thousands of governments across Nebraska. Each spending decision must be backed by a tax. While the central focus of tax policy is on the Legislature and state budget decisions, the simple numbers indicate the largest proportion of taxing and spending decisions are made by local governments.

The vast network of local governments make it difficult for taxpayers to see the total, transparent picture of tax policy. It also makes setting priorities impossible, as each local entity has their own priorities that do not have to align with the spending decisions of any other local government. Rather, it is up to each individual government, and elected or appointed public official,  to evaluate its role in the total tax asking of Nebraska taxpayers. Every spending decision by even the smallest local district contributes to the $8,500 per person annual total.

The justification for so many different governments in Nebraska is often described as “local control”. However, the privilege of local control comes with accountability for those decisions. Evidence based spending decisions are as important by local boards as they are the state government. Recognizing the magnitude and scope of government in Nebraska is only the first step. Next week I will examine some policy option for improving the transparent and accountable use of all of the $16 Billion spent by state and local governments in Nebraska.


One way Nebraskans pay to fund government without using the word “tax” is to rename revenue a “fee”.  Of the $2.3 Billion annually appropriated in several hundred state Cash Funds, many are funded by a myriad of different fees paid by Nebraskans. These fees are, in theory, intended to fund a specific program or cover the costs of their administration. The Brand Committee, for example, is a small cash funded agency that charges an inspection fee to cover the costs of enforcing Nebraska’s brand inspection laws. If you do not own any cattle in a brand inspection area, then you do not pay for the cost of the program.

If you work in one of the 43 occupations that require a state credential, you must pay a fee to maintain your license. For example, every two years I pay $168 to the Department of Health and Human Service Credentialing Division to renew my license to practice veterinary medicine in the state of Nebraska. In the last fiscal year Nebraskans paid over $9 million in occupational licensing fees for professions from acupuncture to well drilling. The revenue was used, in part, to pay for the $5 million spent by the various boards that oversee the individual licenses.

The permit fees for hunting, fishing, and other game activities totaled almost $16 million per year, while entry fees and taxes at Nebraska’s state parks and recreation areas totalled another $27 million. The revenue is used by the Game and Parks Commission, a noncode state agency managed by an independent board of commissioners, for a variety of purposes. Administrative costs use about $4.2 million, while enforcement of hunting and fishing laws is about $5 million, and the operation and maintenance of parks costs over $17 million. Research and education use much of the balance of the funds generated.

If you look at your phone bill closely, you will notice a number of additional fees. One such fee is the Enhanced Wireless 911 fee, assessed at $0.45 per phone line. You will also see the Universal Service Fee, which is 6.95% of the cost of the intrastate portion of your phone bill. Both of these fees are intended to subsidize the expansion of specific telecommunications services across the state. Administered by the Public Service Commission, a constitutionally established noncode agency with independently elected commissioners, Nebraskans pay $8 million annually to enhance wireless 911 technology and an additional $38 million into the Universal Service Fund every year.

Over time, both of these PSC funds have accumulated significant surplus balances by collecting substantially more in fees than they spend. At the end of the last fiscal year, there was over $14 million surplus in the Wireless 911 Fund and a $43 million cash balance in the Universal Service Fund after the year’s expenditures. These are not isolated examples. Many cash funds carry significant cash balances.  

The existence of these balances leads to a number of policy questions. When balances accumulate, they become targets for being “swept” to other spending. In the current budget, over $200 million in excess balances was transferred to the state General Fund to offset declines in sales and income tax revenue. In some cases, funds accumulate and are then redirected into other cash funds or projects rather than their intended use, as has happened repeatedly with the Affordable Housing Trust Fund.

While there are legitimate reasons for accumulating some excess balance for proper management, in some cases the accumulated balances indicate a failure of the program to function as intended.  In others, it may mean the fees and taxes charged are set too high, relative to the needs of the program or agency. Regardless of the cause, you should not assume that the fee you pay is necessarily going only toward the function which it was statutorily intended. Money collected by state government, whether as taxes or fees, is often fungible between fund types and budget areas.

Because fees collected typically exceed the annual appropriations, it is difficult to arrive at a reliable total of the various fees paid by Nebraskans. Regardless of what they are called, the $2.3 billion of Cash Funds appropriated annually are a significant part of the overall tax burden that funds state and local government in Nebraska.

My grandpa, known for his Hereford cattle and team of Belgian draft horses, once said “I’ve never lost money feeding cattle, but I’ve sure fed a lot of pretty cheap corn”. By assigning a lower price to the corn he raised and fed, his cattle operation always showed a profit.  In his characteristically practical way, my grandpa was illustrating an important fiscal concept: fungibility. Dollars are mutually interchangeable. Currencies work because the individual units are identical and can be substituted with equal value. To illustrate, $100 has the same value whether it is a single $100 bill, five $20 bills, 400 quarters, or a legal check for $100.

When applied to a budget, fungibility means that all the dollars available to spend are interchangeable, regardless of the source. If your family has a single joint checking account that you deposit all salaries and incomes into for paying expenses, you recognize the principle. If you divert some of your salary to contribute to a retirement account, each of those dollars are interchangeable with the rest of your wages. Each dollar earned by two working spouses, even if applied to different areas of the family budget, is equal in its purchasing power and value.

Over the past nine weeks I have been providing you with information about many different sources of taxes collected by state and local governments in Nebraska. Although they come from many sources, vary widely in amount, and are deposited into different fund accounts, the dollars are still fungible. The doc stamp tax you pay when you purchased your home is interchangeable with the state income tax withholding from your paycheck.  Although, the former goes into several cash funds and the latter into the state General Fund, both are spent by the Department of Economic Development. Additionally, from the perspective of your family budget, both are dollars you no longer have in your pocket to spend as you choose.

Almost every aspect of state and local government is paid for with multiple revenue streams. There is only one source of that revenue: taxpayers. How you perceive what you pay is a function of psychology, not economics. Each dollar paid for that single property tax check is identical to the income tax dollar withheld from your bi-weekly paycheck to the sales tax line on your oil change receipt to the state park entry fee your family paid to go camping to the gas tax paid that is not even itemized when you filled up your car. However, those different taxes don’t “feel” the same. The large, lest frequent sums hurt. The small, frequent taxes don’t seem very burdensome. The ones you do not even see cause no consternation at all.

It is common for constituents to contact me with requests to revise Nebraska’s Supplemental Nutrition Assistance Program, commonly known as food stamps. During a trip to the grocery store, they will see someone use their SNAP benefits card to pay for groceries, then use their cash to purchase alcohol or tobacco. The taxpayer feels wronged that they are subsidizing an unhealthy habit with their hard earned tax dollars. In that instance, taxpayers understand the concept of fungibility and apply it to policy.

Why then, do we not equally apply the fungibility of revenue in university spending, local city budgets, or economic development programs? Why do we behave differently with general funds versus cash funds versus federal funds? The interchangeability of the dollars has not changed. The fundamental principle of currency remains, regardless of the account it is placed in or the manner in which it was collected.

Failing to take into account the totality of revenue to fund state and local government spending leads to dysfunctional tax policy. Not scrutinizing the judicious use of cash funds in the same way as general funds leads to waste and inefficiency. Acting as if federal funds did not come out of the pocket of Nebraska taxpayers ignores reality. Using psychological manipulation to deceive taxpayers with non-transparent taxes and spending is just plain wrong.

My grandpa, also John Kuehn, understood how fungibility applied to his farm. He made the joke to justify his love of his Hereford cattle. However, at the end of the day my grandma, Lona Kuehn, still had the same amount of money to feed and clothe their five children, even if Grandpa raised “cheap” corn to feed his “profitable” cattle. Regardless of how much complexity and political spin is added to tax policy, a dollar is still a dollar, and it all spends the same.

Each year the various agencies of the state of Nebraska spend $2.3 Billion dollars in taxes and fees that are designated as “cash funds”. Many of the taxes discussed in recent weeks, including the gas, lodging, and documentary stamp taxes, are not accounted for in the $4.4 Billion “General Fund” of sales and income taxes, but rather are directed to special designated cash funds. These various cash funds pay for specific government programs. If you would like to look at the hundreds of different cash funds and the fees that pay for them, you can access a digital copy of the “State Government Cash and Revolving Funds” book on the Legislative Fiscal Office page of the Nebraska Legislature website.

Although almost never mentioned in discussions about tax policy or tax burden, these various cash funds represent a significant amount of money paid by Nebraskans. On a per capita basis, cash fund spending is about $4800 annually for a Nebraska family of four. More taxes are collected annually in cash funds than either sales taxes or individual income taxes.

Understanding where all the tax revenue for cash funds comes from and how it is spent requires a look at an organizational chart of Nebraska state government. We are all familiar with the three branches of government: executive, judicial, and legislative. However, within the executive branch of Nebraska state government are 72 different state agencies. Only 20 of these agencies are known as “code agencies”, which are managed by the Governor.

There are 52 state agencies that are not the responsibility of the Governor, but rather report to independent boards. They are referred to as “noncode agencies”. Their board members, within statutory parameters, set the rates of tax money collected. While the Legislature appropriates the “authority” to spend the cash funds, the budget specifics and spending decisions are the responsibility of the governing boards. While some of the noncode agencies are managed by elected boards, most are appointed with no direct connection to voters.

The Nebraska Constitution establishes 13 of the 52 noncode agencies. Five of these agencies are the constitutional officers elected by the voters of the state, including the Secretary of State, State Treasurer, Auditor, Attorney General, and Lieutenant Governor. The state Department of Education and the Public Service Commission are the most notable large state agencies that are not managed by the Governor. Three constitutionally established noncode agencies deal with higher education–the University of Nebraska, the State Colleges, and the Coordinating Commission for Post-Secondary Education. Two more are quasi-judicial agencies, the Tax Equalization and Review Commission (TERC) and the Commission of Industrial Relations (CIR).

The 39 other noncode agencies, established by statute, are a diverse mix of entities. Six agencies are funded specifically by ag commodity checkoff dollars. Ten are agencies that administer specific professional licenses, such as the Board of Landscape Architects and the Real Estate Appraiser Board. Some agencies oversee specific areas of commerce in Nebraska, such as the Liquor Control Commission, Racing Commission, and Oil & Gas Conservation Commission.

The sheer number of executive branch agencies–72–can be overwhelming. There is almost always a historical, rather than consistent rationale for the existence of many of these agencies. For example, licensing for your health care providers is almost exclusively handled through the Department of Health and Human Services, while land surveyors and abstractors each have separate state agencies. The checkoffs for dry beans and grain sorghum fund state agencies, while beef and soybeans do not. Specific services for the blind and deaf are each provided by independent organizations, unlike other disabilities. The Commission on Indian Affairs and the Latino American Commission are two state agencies administering programs for specific populations.

While several code agencies spend significant cash funds, notably Economic Development and Transportation, most of the noncode agencies operate almost exclusively on cash funds. With no direct connection to either voters or any specific office for oversight, these agencies are frequently overlooked. When a scandal emerges, such as the debacle with the Tourism Commission, public attention is focused on the specific agency. That accountability quickly fades as attention shifts to other stories.

The coming weeks will provide a deeper look into the financial details of some of the cash funds and the agencies that administer them. Paid through a myriad of small fees, the cumulative impact of $2.3 Billion should not be overlooked. They are dollars going out of your pocket to fund government services.


Sen. John Kuehn

District 38
Room #12th Floor
P.O. Box 94604
Lincoln, NE 68509
Phone: (402) 471-2732
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