Newsletter, May 17, 2013

As I begin this newsletter, I’m waiting for news on whether the Governor has signed LB 407 into law. LB 407 is this session’s legislation determining how much overall state aid is provided to our public schools and how that state aid is distributed.

While I’m relieved and pleased at having reached this point, it’s been a long and difficult process to get here. To a certain extent, it’s only right that the process should be tedious. State aid to schools represents a nearly one-third of the total state budget. With LB407, the state will provide $906 million and $940 million in state aid for the next two fiscal years. This is an approximately 5.5% average increase over the two years.

Crafting state aid legislation is always a challenge. Nebraska has 249 very different school districts stretched across a state that is extremely diverse in terms of population and other demographics. The TEEOSA (Tax Equity and Educational Opportunities Support Act) formula attempts to respond to that diversity and meet the specific individual and unique needs of 249 school districts while also considering the burden placed on taxpayers.

In its simplest form, the TEEOSA formula is: “Needs” minus “Resources” equals “Equalization Aid”, but that’s where simplicity ends. Oddly enough, LB 407 was intended to simplify the formula. Early in the process, an intense lobbying effort, led primarily by lobbyists representing large school districts, threatened to derail the original bill and the committee amendment.

So began a process of compromise which I entered into reluctantly, but out of necessity because the state budget needs a state aid bill. I regret is that the final compromise does not serve the school districts in District 41 as well as LB 407 in its original form.

In its final form, LB 407 allows all schools the opportunity to grow their budgets. It lowers the local effort rate. The formula uses the local effort rate to determine the level of funding that a district should exact from local property taxes. Dropping the local effort rate can mean more state aid to a district. Beyond these two provisions, other features such as allowances and adjustments were added. In some cases, school districts didn’t benefit from the compromise as much as they’d planned.

The media often portrayed the LB 407 negotiations as a struggle between rural and urban schools. Although I diligently tried to stay away from that portrayal, the negotiations were often just that.

Discussion centered on the misguided notion that, because a rural school district’s levy was low, they weren’t paying their fair share. This is incorrect and overlooks the fact that agricultural land values have skyrocketed in recent years. School districts, particularly those with declining enrollment, have more “resources” (i.e. local property taxes) at their disposal. This explains why 114 school districts are non-equalized and don’t receive any equalization aid because their resources are greater than their needs.

Many a sleepless night passed before the compromise allowing LB 407 to proceed was reached. However, the May 15 passage of the state aid bill is just a temporary stopping point.

As chair of the Education Committee, I introduced a resolution that requires the Education Committee to conduct a comprehensive interim study on how Nebraska finances public education. The Committee will examine every aspect of the current state aid funding formula including alternative funding methods.

Our goal is to achieve stability, simplicity, predictability and most important, equity in funding public schools across the state – rural and urban, large and small. A tall order to be sure, but I’m confident we can meet the challenge.

Newsletter, May 3, 2013

Earlier this week, the Appropriations Committee advanced the $7.8 billion, two-year state budget package to the full Legislature. The budget package embodies a 5.2 percent average annual growth in state spending. The budget package advanced without dissenting votes, however there’s no guarantee that committee members will continue to support the $7.8 billion budget in its entirety.

Last week, the Nebraska Economic Forecasting Advisory Board unexpectedly increased state revenue projections by more than $51 million. The new revenue generated intense discussion among Appropriations Committee members. Chairman Heath Mello recommended that the money go into the state cash reserve fund, often called the rainy day fund. The addition brings the cash reserve balance at the end of the current fiscal year to approximately $625 million, about 14 percent of the state’s budget.

I strongly support the transfer of this additional revenue into the cash reserve. Over the last four years, a healthy state cash reserve fund has helped Nebraska cope with the recession, somewhat like a savings account that helps the state pay its bills when the economy slows.

Although I’m cautiously optimistic about the state’s economic outlook, we must also plan ahead for the unknown – such as whether our current weather pattern will hold and the drought eases its grip on our state. Economists have predicted that state job growth will be modest and farmers’ incomes are predicted to decrease from recent all-time highs – just a few good reasons to save the extra revenue.

As advanced, the Appropriations Committee’s budget prioritized education with a $66.5 million increase in funding to the University of Nebraska and state colleges which includes an increase for the University of Nebraska that keeps a two-year tuition freeze in place. There’s a $146.3 million increase in K-12 school funding and $8 million in funding for early childhood programs. The budget also contains more funding to serve people with intellectual disabilities on the state waiting list and to increase payment rates for child welfare and health care providers. There’s also $47 million for a new Central Nebraska Veterans’ Home and $230 million for property tax relief.

If you’d like to review the state budget in detail, it’s available on the Nebraska Legislature’s home page at www.nebraskalegislature.gov under Recent Legislative Information. It’s also on the Fiscal Division Report page at http://www.nebraskalegislature.gov/reports/fiscal.php. These are the same documents that senators will use when budget debate begins May 7.

LB 344, the bill I discussed in my April 19 newsletter, was passed by the Legislature on May 1 on a 46-0 vote with three senators excused and not voting. LB 344 was delivered to the Governor’s Office and was signed into law on May 7.  As I mentioned before, the passage of LB 344 may allow some rural communities to re-establish a long-term care facility without going through the certificate of need process or purchasing expensive long-term care beds on the open market.

Newsletter April 19, 2013

Good news for rural Nebraska! The Legislature advanced LB 344 to select file on Friday. LB 344 creates a specific narrow exception to a moratorium on new long-term care beds in small communities.

Hindsight is 20/20. In 2009, the Legislature passed a bill that allowed owners of long-term care beds to sell those beds outright or transfer them to other facilities owned by the same company.

Although there was no opposition to the bill’s passage four years ago, rural communities were negatively affected by the bill’s provisions since then as their long-term care facilities closed. Our actions in 2009 continue to exact a toll on rural Nebraska.

A long-term care facility in my district closed in 2011. The beds were transferred to other facilities owned by the same company. The closure left my community without any long-term care and had a negative impact on the local economy since the facility was a large employer.

Since 2011, the community has actively explored their options to rebuild or replace and reopen a long-term care facility. Community leaders said the statutory moratorium on licensing of new long-term care beds in NRS §71-5829.04(1)(b) is the largest obstacle blocking any community from proactively meeting their long-term care needs locally. I introduced LB 344 in direct response to their statements.

LB 344 eliminates that obstacle by creating a statutory exception that applies only to facilities developed and licensed by a political subdivision or nonprofit organization in a second class city or village. The exception applies only when all long-term care beds in a second class city or village were sold or transferred outside a 25 mile radius from the city or village – resulting in no long-term care beds within the corporate limits of the second class city or village.

The number of new beds cannot exceed the number of beds sold or transferred. New beds can’t be sold for five years after first occupancy. Additional beds can’t be added under subdivision (2) of NRS §71-5829.03 for five years after first occupancy. Any long-term care facility developed under the exception must comply with all state and federal licensing and code requirements.

As legislators, we must never be afraid to examine and reassess our past decisions. With LB 344, some rural communities may be able to re-establish a long-term care facility without going through the certificate of need process. It’s a good result for the unintended consequences of our 2009 actions.

Newsletter April 5, 2013

 The first full week of all day legislative debate is completed and the Legislature is entering the busiest portion of the 2013 legislative session. At the beginning of the week, Speaker Greg Adams laid out his management plans to maximize the use of legislative time during the final two months of the session.

Speaker Adams announced a three-phase approach to the legislative work that must be completed including the state budget and priority bills yet to be debated. Starting this week, the Legislature will work into the early evening most days. On the final day of the work week, we will work through the lunch hour and adjourn in early to mid-afternoon. We will be working into the late evening on Mondays and Wednesdays beginning April 22. Once the calendar turns to May, every night will be a late night.

Nebraska Educational Television broadcasts the Legislature live, even after we move into the evening hours. Their live broadcast provides ample opportunity for citizens to watch their government at work.

Although being a senator can be stressful at times, it also allows me to indulge one of my greatest joys. I truly enjoy meeting and speaking with the many teachers, students and parents who come to the Capitol on field trips during the spring. I particularly enjoy visiting with the District 41 students whenever I have the opportunity.

This week I spent time with 31 fourth graders from Centura, their teachers and parent sponsors. The students were quiet and attentive. They asked pertinent questions and listened closely to my responses. What a great group of children!

Thousands of Nebraska FFA members and teachers were in Lincoln this week for their annual meeting. I met with District 41 FFA members on Wednesday in the Capitol Rotunda and then joined the entire group for breakfast the next day.

Next week, FCCLA (Family, Career, and Community Leaders of America) students will be in Lincoln with their teachers. At the end of the week, I will speak to the family and consumer science teachers at their annual meeting. The following week I will visit Mr. Larsen’s seventh grade government class at Neligh Oakdale Public Schools.

I’m always impressed with the young people I meet at these events, particularly the students from our part of the state. They are informed, articulate and optimistic.

I draw on my positive experiences with students for inspiration when legislative debate is contentious and our days are long. So much of what we do here in the Legislature directly affects these children. As senators, we are bound by our oath of office to meet our constitutional duty “to provide for the free instruction in the common schools of this state”. I believe that providing a solid education for Nebraska’s future leaders is one of the most important functions we carry out at the state and local levels of government.

Newsletter March 8, 2013

It’s amazing how fast time passes when you’re busy! The Legislature completed our 40th day today. The halfway point of the session is March 19th.

The Speaker’s Office is accepting committee and senator priority bill designation letters. Priority bills selected by senators, committees and the Speaker receive priority scheduling for the rest of the session.
Each senator designates one bill each session as their priority bill. Committee chairpersons may designate two bills in their committee as committee priority bills. The Speaker may designate up to 25 bills as Speaker’s Priority Bills if the sponsor submits a letter outlining the reasons for the legislation.

The deadline for priority selection is the end of next week. Committee and priority designations must be turned in prior to adjournment on Friday, March 15. Speaker priority request letters must be turned in before the end of the day on March 14. Debate on priority bills is scheduled to begin on March 18. Bills without priority status might not be taken up during the remainder of the session.

What are my priorities this year? As Education Committee chair, my focus must be on issues such as state aid, reorganization incentives, school budgets and early childhood education.

With the priority deadline looming, I’m also hoping for committee action on my personal legislation. These bills are important to me but their future depends on the standing committees to which they were assigned.

LB 241 authorizes voters to change election of county offices from partisan to nonpartisan in counties of 10,000 or less. It’s in the Government, Military and Veterans Affairs Committee. LB 258 prohibits the use of hand-held cell phones by school bus drivers while the vehicle is in motion. It’s in the Transportation and Telecommunications Committee. LB 344 creates an exception to the moratorium on new long-term care beds. It’s in the Health and Human Services Committee.

LB 295 redefines a term under the Local Option Municipal Economic Development Act to allow funds to be used for relocation incentives. LB 295 was advanced by the Urban Affairs Committee, is now on select file and appears headed for passage this session. I’ll talk more about LB 295 in a future newsletter.

Public hearings end March 21 for all committees except the Appropriations Committee. We’re tentatively scheduled to move to full day debate the first week in April. Time will speed up once again as we enter the second half of the legislative session and spend all day on the legislative floor.

After tremendous negative public input over the last month, the Revenue Committee voted Wednesday afternoon to kill LB 405 and LB 406, the Governor’s tax reform bills. Our focus has now shifted to an in-depth study of Nebraska’s tax system and tax policy. The vehicle for the study looks like it will be LB 613 which creates the Tax Modernization Commission.

If the Executive Board amends LB 613 as proposed, the bill will establish parameters for tax discussions in 2013. As proposed, the Commission includes the Revenue Committee and the chairs of the Education, Health and Human Services, Appropriations, Agriculture and Planning committees. As a member of the Revenue Committee and Chair of the Education Committee, I’ll be deeply involved in the study.

The Commission also includes the State Tax Commissioner, the State Property Tax Administrator and the Legislative Fiscal Analyst as non-voting ex-officio members and will have authority to utilize legislative staff in addition to staff from the Nebraska Department of Revenue and other experts in carrying out its duties.

Public input is an important component. A minimum of five public hearings will be held across the state. Two hearings will be held in the first and second congressional districts and three hearings in the third congressional district. There will be a public tax summit and online access will be required.

LB 613 was designated a senator’s personal priority bill. Revenue Committee Chairman Galen Hadley has said the Commission will begin its work once LB 613 passes.

Personally, I believe this is a much better approach on the important and far-reaching issue of state tax policy. It allows time to review tax studies by previous legislative committees and pertinent academic tax research in addition to soliciting public input. Tax reform won’t be an easy task but the Legislature agrees that it must be done thoughtfully, carefully and professionally. LB 613 allows this process to unfold in a planned manner with the interests of the state at the forefront.

The Education Committee continues to craft a state aid proposal. Our new committee members have worked diligently to educate themselves on state aid formula basics and philosophy. This week I spoke to the Nebraska Rural and Community Schools Association at their annual Legislative Forum. In the past few weeks, I’ve also visited with the Nebraska Association of School Boards and the Nebraska Council of School Administrators. It’s great to see so many dedicated, knowledgeable District 41 superintendents and school board members at these meetings!

This week, the citizens of Nebraska spoke and the Revenue Committee listened during two days of public hearings on the Governor’s tax reform proposals. As a member of the Committee, I was truly impressed by the turnout for the LB 405 hearing which began at 1:30 and ended at approximately 11:00 pm. Wednesday. The LB 406 hearing began at 1:30 on Thursday and lasted three hours.

On both days, the first few hours were allotted to the introducers including the Governor and the Director of the Department of Revenue. The Committee then heard more than 12 hours of testimony from approximately 100 testifiers over the two days. The beauty of Nebraska’s process was evident – patient citizens presented their testimony directly to the Committee.

The Governor outlined his over-arching intent which, in his words, was to have a conversation about tax reform because after 50 years, it’s time to do so. The Governor said LB 405 and 406 were his vehicles for that discussion.

Along with public testimony, I’ve also considered the comments from my constituents. I have unanswered questions and concerns about the bills – the same concerns expressed by citizens who testified in opposition at the hearings.

LB 405 and 406 are heavily weighted against agriculture and manufacturers. The term pyramiding was used – a tax term meaning a product is taxed at the pre-retail stage and the tax is imposed on successive buyers and sellers rather than just at the final sale to the ultimate consumer. The imposition of a tax on a tax raises serious policy issues including transparency, efficiency, equity and neutrality.

I’m all for tax relief but these bills don’t provide tax relief for middle or low income citizens. Imposing sales tax on insulin, prescription drugs and durable medical equipment will hit the poor, the disabled and those on fixed incomes the hardest. Imposing sales tax on energy used by hospitals will increase health care costs for all. The trade off for elimination of personal and corporate income taxes may well be an increase in the total taxes we pay if most sales tax exemptions are eliminated.

These are the questions. Are the bills job creators or job killers? What’s the best way to craft comprehensive tax reform? Can we talk tax reform without including property tax? If our goal is to build the state’s population, does tax policy drive that and if so, how much?

I can’t predict the Revenue Committee’s direction, but my goal is comprehensive, fair tax policy that helps businesses (including agriculture) and individuals thrive in our state. I will keep you informed on our progress.

As we finish out the second full week of the legislative session, we have also reached the end of bill introduction. The last day to introduce new legislation was Wednesday, January 23. A total of 655 bills, six constitutional amendments and several legislative resolutions were introduced by the 49 senators. Public hearings in some committees began on January 22 and continue through the end of March.

The beauty of our unique Unicameral system never ceases to amaze me. We’re different than any other state in a very good way. Each and every one of these bills will have its day – a public hearing before one of the 14 standing committees. Also, in Nebraska, citizens have an opportunity to testify before the committees during public hearings in favor of or in opposition to a bill or in a neutral capacity. Citizens don’t have this opportunity in other states, but I think it’s one of the most valuable parts of our legislative process. It allows each of us to take part in the legislative process – in person and on the record.

There are numerous ways to follow the progress of bill. As I mentioned in my first newsletter, the Legislature’s website is updated daily when we’re in session. Information about bills, amendments, fiscal notes, hearing schedules and other legislative business is easily accessible at: www.nebraskalegislature.gov

The Unicameral Update is a free weekly publication containing hearing dates, in-depth stories, summaries of debate and other legislative information. The printed subscription may be ordered by calling the toll-free hot line at (800) 742-7456. The Update is also available online.
The hottest topic of conversation in the Capitol and across the state this week is the Governor’s tax proposal as contained in LB 405 and LB 406 introduced by Senator Beau McCoy earlier this week. I’m hearing from a growing number of constituents who are very concerned about the potential effect on agriculture, Nebraska’s biggest industry and the economic driver in District 41.

Keep in mind that the Legislature is at the very beginning of the tax reform discussion. The basic details of the Governor’s proposal are still unfolding and being analyzed. As a member of the Revenue Committee, I will listen closely to the reasoning behind the bills during the Committee’s public hearings. I’ll also have the opportunity to ask specific questions about each bill and its provisions. Also be mindful that tax reform is a huge undertaking which may mean that doing tax reform the right may take more than one legislative session.

As always, my constituents remain my primary responsibility – representing you and your concerns to the best of my ability.

If you have questions regarding this newsletter, legislation or state issues, please call my legislative office at (402) 471-2631. There is Voicemail on my phone so if you get the recording, please leave a message and I’ll get back to you. You may also write to me c/o P.O. Box 94604, Lincoln, NE 68509 or email me at: ksullivan@leg.ne.gov. If you write or email, please include your full name and mailing address.

It’s going to be a challenging and exciting session.

The First Session of the 103rd Legislature was gaveled into order by Lieutenant Governor Rick Sheehy at 10:00 a.m. on January 9, 2013. This is the first year of a two-year session. We are tentatively scheduled to adjourn in early June.

I am pleased to announce that I have been elected Chairperson of the Legislature’s Education Committee. Making sure our young people receive a good education is one of the Legislature’s most important responsibilities. In line with my new role, I will also serve on the Revenue Committee.

My staff and I are located in room 1107 which is on the first floor in the southwest corridor of the State Capitol. Please stop and say hello if you’re in Lincoln when the Legislature is in session.

As has been my practice the past four years, I write a biweekly newsletter during the legislative session. Our local newspapers are kind enough to share the newsletter with you in print form. The newsletter is also posted biweekly on my web page: http://news.legislature.ne.gov/dist41/

Area teachers who are planning student field trips to the Capitol while the Legislature is in session – please be aware that all tours must be scheduled in advance with the Capitol Tour Office at (402) 471-0448. Please call the tour office as soon as possible to reserve your preferred date and time. Tours can’t be booked through my office nor do I have any influence in changing the Capitol Tour Office’s schedule. I strongly encourage teachers to call early and be flexible on their dates.

A toll-free hot line is available from 8:00 a.m. to 5:00 p.m. Monday through Friday to answer questions about bill status and fill requests for publications. The number is (800) 742-7456. The service is also available to the hearing and/or speech impaired.

The Legislature’s website is updated daily when we’re in session. Information about bills, amendments, fiscal notes, hearing schedules and other legislative business is easily accessible at: www.nebraskalegislature.gov

The Unicameral Update is free weekly publication containing hearing dates, in-depth stories, summaries of debate and other legislative information. The Update is available online. A free printed subscription may be ordered by calling the toll-free hot line at (800) 742-7456. Subscriptions must be renewed every January.

Introduction of new bills continues through January 23 with public hearings in the afternoons beginning January 22.

If you have questions regarding this newsletter, legislation or state issues, please call my legislative office at (402) 471-2631. There is Voicemail on my phone so if you get the recording, please leave a message and I’ll get back to you. You may also write to me c/o P.O. Box 94604, Lincoln, NE 68509 or email me at: ksullivan@leg.ne.gov. If you write or email, please include your full name and mailing address.

I look forward to hearing from you AND working hard for you and the betterment of rural Nebraska in our Nebraska Legislature.