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Awaiting senators as they prepare to return to Lincoln on July 20th for the final 17 days of the 2020 session will be legislation that the citizens of Nebraska expect them to address.
Finalizing the mid-biennium budget adjustments will be a priority. Since this is the second year of Nebraska’s two-year budget cycle, there already is a budget in place which will be followed if the midterm adjustments do not pass this year. As we all know, the revenue outlook has changed since the government put restrictions on our economy due to COVID-19. Prior to COVID, the Appropriations Committee requested $137 million in new spending. There are always unexpected bills we must pay between budget cycles: It seems like a long time ago, but it was just last year that we had major flooding. State and county governments are faced with generating $55.2 million for the matching funds needed, to receive a much larger amount in federal aid. Our state’s ever increasing property tax burden caused an additional $9.1 million in homestead exemption payments to local governments. To mitigate our state prison crisis, the Governor gave prison employees raises amounting to $8 million and spent $5.6 million to mitigate structural deficiencies at the Lincoln Regional Center.
Included in the adjustments is at least $30 million in discretionary spending. The largest expenditures are a transfer of $10 million to the existing Rural Workforce Housing Investment Fund, a $4.14 million increase in mental and behavioral health provider rates and $4 million for the Governor’s career scholarship fund.
But the budget is not done; before we can finalize it, some major issues must be addressed. First up, and the biggest demand by Nebraskans, is property tax relief. LB1106 is the proposal, which offers immediate, long-term relief from our overreliance on property taxes to fund K-12 public education. It offers $97.4 million in property tax relief this year, and increases to over $300 million by year three. There are nearly 20 senators who believe LB1106 is their number one budget adjustment priority and must pass before any other major spending proposals can be addressed. Second behind the property tax issue lies the State Chamber of Commerce’s push for a new economic incentive program: LB720, also known as the ImagiNE Nebraska Act. Its first-year cost is $4 million, but the cost grows rapidly to $125 million annually.
If that is not complicated enough, because of Congress’ changes to federal tax law in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Nebraska faces a loss of an estimated $125 million in tax receipts this year, the majority due to increased corporate tax deductions. We have the ability, when we go back into session, to amend an existing Revenue Committee bill to exempt us from the effects of the federal changes. The Legislature will have to decide what is more important: property tax relief or corporate income tax reductions.
On the other side of the coin, the CARES Act also pumped $10.8 billion in federal aid into Nebraska. The Act states that all of this money must be spent by December 30th. Some of the funds will go toward offsetting additional COVID-related costs to Health and Human Services programs, education institutions, local health department expenses such as testing and other health and welfare-related programs, making it unnecessary for the Legislature to offer additional state funding in these areas. The Governor has also indicated that due to the availability of CARES-Act funds, he will not need the vast majority of the $83.6 million of emergency funding the Legislature authorized him to spend to address COVID-19. If Congress acts, there may even be an opportunity for the Governor to put an appreciable amount of the $1.2 billion in discretionary aid at his disposal into the state’s General Fund.
It is a complicated mess, but it is quite likely that the grand bargain made at the beginning of the session will be achieved, and both LB1106 and LB720 will pass. The only thing stopping success is the possibility of an attempt to drag other legislation into the mix, or a decision, by some that the unreasonable concerns of a few school administrators are of more importance than the economic welfare of Nebraska’s taxpayers and their children.
Contact Sen. Mike Groene: firstname.lastname@example.org or 402-471-2729.