Last week, we were all saddened by the news of the Bovee Fire near Halsey, NE. The fire destroyed about 19,000 acres of forest and grassland in and around the Nebraska National Forest. In addition to the damage of the forest and grassland, the Bovee Fire also devastated the nearly 60-year-old Nebraska State 4-H Campground. Sixteen of the seventeen buildings were destroyed, with only the staff house remaining intact. Thousands of Nebraskans, including my wife and children, have fond memories of this amazing facility having either stayed there as a 4-H camper, Rotary Youth Leadership Awards camper, or someone who attended a wedding reception or conference held in that facility.

Last Wednesday, I was able to see the damage first-hand and receiving a briefing with other local officials. It was an emotional event for all those present to see the damage. I have also been in touch with the leaders of the Nebraska 4-H Foundation to determine the amount of the loss and their next steps. Although the Nebraska State 4-H Campground buildings were insured, it’s unlikely insurance payments will cover total replacement of the facility given the age of the buildings. As your District 42 State Senator, I will work with the Foundation and other volunteers to help find the additional funding to replace this State treasure.

Julie and I also made the drive to Dunning, NE on Friday to attend the funeral of Mike Moody. A long-time assistant fire chief and businessman, Mike lost his life while working to contain the Bovee Fire. I had the opportunity to meet Mike several years ago when he was working as a loan officer at the Purdum State Bank. He was a truly giving individual who enjoyed living life and serving others. He was a great role model for all of us to follow.

Mike’s funeral was held in the Sandhills High gymnasium and still required many to stand. Firefighters, first responders, paramedics, and law enforcement officials were there from the entire region. It was an amazing tribute to the heroism of Mike and every other firefighter. I want to express my condolences to his wife Cheryl, daughter Hollie, son Jack, and stepsons Jeff Pflaster and Jared Pflaster and their families. Mike was a person who made a difference and will be truly missed.

With the dry conditions throughout the region this year, rural volunteer fire departments have been going virtually non-stop to protect the lives and property of our residents. It often goes unnoticed that these courageous people volunteer their time to get training, are on call at a moment’s notice, often drive personal vehicles to the station or fire, all to put their lives on the line to protect us. Mike’s family has requested that memorials be directed to the Purdum Rural Fire or Thedford Volunteer Rescue Squad. I encourage everyone to make a contribution, if you are able.

I look forward to hearing from constituents about issues impacting you. Please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729.

Water is the lifeblood of rural Nebraska. Not only do we need clean drinking water for our communities, farms, and ranches, but water is essential for the crop and animal production that drives so much of our economy.

Unfortunately, it is not as simple as preserving the water resources located in our state. River flows require Nebraska to manage water in partnership with up- and down-stream states like Colorado and Kansas. Many are probably most familiar with the Republican River Compact, which requires careful water-use management in southwest Nebraska. This management requires expenditures by area ag producers, including costs to complete the N-CORP project.

More recently in the spotlight is the South Platte River Compact, an agreement entered into by Nebraska and Colorado in 1923 and consented to by Congress in 1926. The compact establishes two minimum flows of water coming from Colorado into Nebraska’s Western Irrigation District in the South Platte River Basin. During irrigation season (April 15 to October 1), a minimum flow of 120 cubic feet per second (cfs) is required. One cfs is equivalent to 448.8 gallons of water flowing per minute. The compact also establishes a 500 cfs minimum flow during the non-irrigation season into the Perkins County Canal (which has never been built).

This past week, I had the opportunity to join eight of my legislative colleagues on a tour of the proposed Perkins County Canal site. I was especially encouraged that three were urban senators who wanted to see firsthand why this project is so critical. It will take urban and rural Senators working together when the time comes to fund this project.

When the Compact was signed, there was no deep-well irrigation and the front range of Colorado was much less developed. Today, the water demand in Colorado had increased significantly and the flow of water in the South Platte River has diminished to levels well below Compact compliance. Further, the development in Colorado is accelerating to the point that summer flows from the South Platte River could stop entirely in dry years.

Colorado is planning for its future as its population grows. There are plans for approximately 300 projects and over $10 billion in expenditures to ensure no “excess” water leaves Colorado. These plans would cause a nearly 90% reduction in flows coming into Nebraska along the South Platte. Already this year, a large portion of the water users within the Western Irrigation District were unable to obtain adequate water flows for irrigation, thanks to the reduced water flows from Colorado. Additional reductions could also impact downstream irrigation and drinking water access.

Colorado is out of compliance with the Compact. They are allowing junior water users to access water that should be flowing into Nebraska. However, Colorado has taken the position that unless and until the Perkins County Canal Project is built, they have no obligation to supply the winter flows of 500 cfs.

If the Perkins County Canal Project were built, it would begin near Ovid, CO, where the official meter is located. It would then stretch south of the South Platte River in Keith County and ultimately deliver water back in to the South Platte River. The Project would also likely include mechanisms for holding winter-time flows until the water could be released in the summer to augment the South Platte River water flows and help supply the water needs for Lake McConaughy, hydropower and power plant cooling, environmental flows, agricultural use, and ultimately municipal supplies for Lincoln and Omaha. It is estimated that the amount of water stored and released from the Project could fully replace the current summer irrigation water released from Lake McConaughy today.

Project costs are estimated at nearly $500 million. This year, I voted to authorize a $53.5 million expenditure to complete a feasibility study and obtain land “options” to ultimately purchase the land necessary to construct the Canal and water-holding structures. Although this will be a multi-year project, delays will only empower Colorado to continue approving new water-use projects that decrease Nebraskans’ access to the South Platte water supply.

If you would like to learn more about the South Platte River Compact and the Perkins County Canal, I encourage you to check out the Nebraska Department of Natural Resources’ website at https://dnr.nebraska.gov/perkins-county-canal.

As your State Senator, I will continue to fight to make certain that we do not lose critical access to water in the South Platte River merely by failing to act to claim our rights to this precious water from Colorado. The economic and personal impact is huge and we must act now.

If you’d like to discuss water rights or any other issue, please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!

What’s with the pink card that I got in the mail titled, “NOTICE OF PROPOSED TAX INCREASE”?

If you have received a large pink card in the mail recently, your taxes might be going up. Under recent “Truth in Taxation” legislation, a political subdivision (city, county, school district, community college) whose proposed budget exceeds the 2% growth rate plus the political subdivision’s real growth percentage must notify taxpayers on a postcard and hold a mandatory joint hearing explaining why they are increasing your taxes. The cards will outline the 2022 tax assessed value of your property compared to the 2021 value and estimate changes in your property tax based on the new valuation and the “old” mill levy. It is shown as an estimate because the new mill levy will not be set until all taxing authorities have approved their budgets.

The joint hearings are your opportunity to voice your opinion of the political subdivision and their proposed budget. Political subdivisions will not finalize their budgets until after these hearings. Once budgets are approved, then the new consolidated mill levy will be set and the actual tax bill will be determined.

As I mentioned in prior columns, property taxes are only levied by local political subdivisions. The State has no ability to levy a property tax. So, controlling property taxes means holding the line at the local level. The Legislature does, however, have some ability to indirectly reduce property taxes in a couple ways.

First, the Legislature must avoid imposing any “unfunded mandates” on local political subdivisions, whose implementation would need to be paid for with local property taxes. Second, the Legislature can make changes in the TEEOSA formula which distributes funds to local school districts. The formula is based on each district’s “needs” as determined by the number of students and other factors, and is also based on “resources,” meaning the value of the property in the school district. As a result, the formula is designed to distribute more funds to the larger cities and forces the rural areas of the state that have large agricultural land bases to pay their own way. Many of the school districts in District 42 are considered “equalized,” which means they get no funding from TEEOSA. This is unfair and simply wrong!

The third thing the Legislature can do is return your money to you through other state tax mechanisms. This year, I was pleased to support the greatest property tax benefit afforded to Nebraska property tax payers in history. In addition to reducing the highest income tax rate and eliminating the tax on Social Security and military retirement, LB873 significantly increased the amount of income tax credit available based on property taxes paid to fund public schools and community colleges.

The LB873 tax credits will ramp up over the next few years. In the 2020 tax year, the state income tax credit was approximately 6% of the amount paid to fund your local school district. In the 2021 tax year, this amount grew to 25% of the amount you paid toward your local public school district. For the 2022 tax year, you will receive approximately a 30% income tax rebate of the property taxes you paid for your local school district and your local community college.

The income tax credit is paid regardless of your state income tax bill; however, you are required to apply for the credit to receive the refund. If you did not apply for the credit when you filed your 2021 income tax return, it is not too late! Simply complete the form available on the Department of Revenue’s website: https://revenue.nebraska.gov/about/nebraska-property-tax-credit

I encourage all property owners in District 42 to apply for the income tax credit, and attend public budget hearings held by your local political subdivisions. Political subdivisions want your input on how they can best serve you.

If you’d like to discuss taxes or any other issue, please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!

Now that fall has arrived, the attention of ag producers has turned to harvest.

Ranchers have completed their hay harvest and are preparing for the winter-feeding season once the grazing season comes to a close. The areas of the Sandhills that got some good rainfall this summer should have enough hay production to allow those ranchers to meet their needs this winter and hopefully build their hay supplies for future years when rain is not as plentiful. Unfortunately, many did not receive necessary rainfall and may need to cull some of their cow herd to make available hay and grass supplies stretch if they are not able to find additional hay supplies.

Meanwhile, the crop farmers in the southern half of District 42 prepare to harvest fall crops. For many farmers, the fall harvest will be much shorter than normal as severe drought crippled production on non-irrigated acres. Even those receiving some rain may experience low yields in their fields and be required to harvest the limited bushels produced. In many cases, the cost of harvest will exceed the economic value of the crop. Although most carry Federal Crop Insurance to protect against crop failures, no producer wants to earn their revenue this way. Further, the Federal Crop Insurance Program pays claims based on a producer’s 10-year average and fields with no or low yield will negatively impact future averages and thus reduce the future safety net.

Both ranchers and farmers in District 42 are facing a delicate economic situation with many moving variables. On one hand, calf prices are near record levels. Corn prices are also high, which is good for the farmers who have corn to sell. However, low hay yields and high corn prices mean the cost to background calves and ultimately bring them to finish weights will cost much more than previous years. Likewise, farmers face high production costs as fertilizer, seed, and energy costs rise. Within the larger economy, labor is still in short supply and supply chains continue to be slow to return to pre-pandemic efficiencies. Inflation continues to strain the wallet of everyday Americans and the ability of cattle and crop prices to stay high will depend on the degree to which the consumer is willing (and able) to pay more at the grocery store. This will, of course, depend upon the economy avoiding a deep recession.

The stage is set for tougher years ahead. Everyone in agriculture will need to prepare for leaner times ahead and manage their finances accordingly. We have seen this scenario play out too many times in the past.

Unfortunately, the Nebraska Legislature has little control over the variables mentioned above. However, one input the Unicameral can help reduce is the burden of how land is taxed. Ranching and farming both demand producers utilize a tremendous amount of real estate. Far too many of my colleagues do not recognize that the tremendous capital investment and risks that farmers and ranchers take on. And, unlike many industries, significant capital investment does not always translate to profits.

The amount of land for even a modest ag operation is large and in an inflationary environment, ag producers are seeing non-producers push up land values as they search for “safe places” to invest funds. Although land values may rise, ag producers will only realize the gain in value if they are ready to sell. The public needs to remember that these farms and ranches work more like “factories” that allow the producer to grow their crops and livestock. Unfortunately, higher land values lead to higher property taxes, even if profitability stays level or falls. Many homeowners experience the same situation. They bought the home to live in, not to sell. Homeowners, especially seniors living on fixed incomes, see their property taxes rise simply because the home they live in went up in value, yet they have no additional income to make up the difference. Some are ultimately forced to sell the home because they cannot afford the higher tax bill.

Although the Legislature was able to pass LB873 this past session to provide the largest tax relief package in state history, we still need to do more if we want to make Nebraska’s tax structure fairer and more affordable. I will continue to focus on educating my colleagues on how property taxes affect Nebraskans and help provide solutions to improving our tax system.

If you’d like to discuss this or any other issue, please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!

Over the past few months, much focus has been placed on the new economic development projects in District 42. Each project will bring good paying jobs and economic growth. Growth in the region will increase sales tax revenue and property tax payers, all which should reduce area property tax rates.

Although it is exciting to think about the prospects of new projects, it is equally important we maintain the assets we already have. One prime example is Bailey Yard. This Union Pacific Railroad operation is a huge contributor to the regional economy and has been a long-time provider of quality jobs.

Like any business dealing in goods, our railroads have had to adapt to the peaks and valleys of supply and demand, the expansion of the Internet, new technologies within their industry, and other competition. Changes in the industry and marketplace have shifted the railroads’ employee needs over time. In the past, Union Pacific has responded by implementing a series of furloughs followed by hiring surges. These practices seemed to work in times where workers were plentiful and the wages and benefits were superior; however, we’ve seen a decline in total workers at Bailey Yard since my family moved to North Platte nearly 30 years ago.

Today, railroads face an environment where worker availability has declined and many longtime employees are at or approaching retirement age. Workers at all levels are looking for more work/family balance and have more options than ever before. In a climate where all companies are finding it hard to hire, the railroads must prioritize its greatest asset: its employees.

There are a few key policies that I believe will affect the ongoing economic impact of Bailey Yard, and the first is the internal relationship between Union Pacific and its employees. Railroads and the rail labor organizations have been working to negotiate new employee contracts for railroad employees across the nation. These employees, of course, should be fairly compensated for their work. Conversely, an employee strike could further damage a U.S. economy already facing record inflation and deficient supply chains. I am hopeful that the railroads will enter into agreements that provides employees with the wages, benefits, and flexible schedules they deserve so we can avoid disruptions to the critical transportation services provided by the railroads.

For District 42, while it is important we continue to receive goods and packages, it is imperative that we have a heathy, safe, and happy local workforce. As their State Senator, I support the employees at Bailey Yard and remain available to assist in any way I can to achieve a fair resolution to contract negotiations.

Second, the relationship between the railroad and its communities is also significant. Over the past couple of decades, many of the major railroads have used longer trains to boost productivity, gain more efficiencies, and cut costs. In the past, it was unusual for a train to exceed a mile in length. Now, some have been known to reach up to three miles. Although good for the railroad’s bottom line, longer trains can create risks and logistical challenges for communities when trains are forced to stop and block one or more crossings. Delays in reopening crossings can block access for emergency services, as well as the general public, from accessing roadways. In the case of the first responders, these delays could mean the difference between life and death. It is critical the railroad reengage regarding community crossings, not only for public safety, but to maintain community support of railroads.

Finally, there has been a movement by the railroads to eliminate the two person crews and substitute them with one person or autonomous alternatives. As a lawmaker, how do we balance efficiencies with safety? In many ways, train crews are first responders. Technology is not infallible and we need real people on board in the case of an emergency or mechanical problems, particularly for long trains. Moreover, technology cannot fully account for human error and it is important to have railroad personnel on hand in case of an accident. In addition, it takes two people to cut a train blocking a crossing needed for emergency measures. Two-man crews are essential for worker and community safety and must remain in place.

Union Pacific is a key employer for District 42 and America’s railroads are a critical resource, moving approximately a third of U.S. exports and critical food, agricultural, chemical, and construction materials through the country. As your State Senator, I support the retention and growth of quality jobs at Bailey Yard.

If you’d like to discuss railroad operations or any other issue, please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!

This past week, the long-awaited Sustainable Beef project was officially announced and dirt work is underway. Sustainable Beef is a huge project and will take nearly two years to construct. The economic impact will go well beyond the approximate $400 million in construction costs directly attributed to the physical facility. I look forward to seeing the impact this facility will have on the entire region stretching throughout District 42.

Regional cattlemen will be the most direct benefactors of the Sustainable Beef project. By reducing the distance from the feed yard to the plant, the cost of transportation will be reduced, and the cattle “shrink” (i.e., weight loss) associated with transportation will be minimized. The abundant supply of quality cattle in the region will also allow for this new plant to have an ample supply of quality cattle that are located a short distance from the plant.

There will also be many supporting industries that will locate here to meet the ongoing support needs and we are already seeing synergies emerge. For example, the presence of the Wal-Mart Food Distribution Center in North Platte likely played a major role in attracting Wal-Mart’s equity investment in the plant. Conversely, Wal-Mart will be a reliable buyer of the meat product which will reduce Sustainable Beef’s operation risk going forward.

District 42 should take advantage of Sustainable Beef’s two-year construction timeline to ramp up necessary resources and amenities to accommodate the opening of a large business in the region. For instance, Sustainable Beef is expected to employ approximately 800 workers. Future employees will be looking for affordable housing in North Platte and the surrounding communities. Many employees will also be bringing families who must be supported by our school systems. We should use the coming growth to attract developers and educators to the region.

An influx in new residents should also help the area recruit more retailers. For far too long we have heard the concerns that the region has not been growing and that we lack the retail shopping opportunities enjoyed by larger communities. As the owners of the District 177 Mall work to bring more retailers to support their investment, they need to demonstrate that the market will grow shoppers if they want to attract other grocery and big-box stores. Attracting new employers is an important step in proving growth potential.

Finally, we should all anticipate healthier budgets for our local political subdivisions. If we can bring more investments and increase the population in the region, we will bring more taxpayers whose dollars can be reinvested here. By increasing the amount and values of property being taxed, we can reduce the amount of taxes collected from each taxpayer without sacrificing services.

At the state level, I remain highly focused on finding ways to get more dollars invested in District 42. This past legislative session, I was successful in securing $20 million of federal American Rescue Plan Act (ARPA) dollars for the Sustainable Beef project and $30 million of state dollars for the industrial rail park. This is just the beginning. I intend to continue directing funds to business investments in rural Nebraska so we can reverse the out migration of population. As the saying goes, “A rising tide lifts all ships.” Investments lead to a strong economy, and strong economies attract more investment opportunities.

District 42 is primed to grow before the next ten-year census and I am honored to do my part in shifting the region’s economic outlook. Sustainable Beef will be a total game changer for the region and have huge economic impact that will be felt for many years to come.

If you see other opportunities for economic investment in District 42, please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!

Although it may not feel like fall yet, it’s just around the corner. For taxing authorities, fall means the start of budget season. Taxing authorities need a sound budget to determine what their tax ask will be for the upcoming year. Nebraskans pay both state and local taxes. Although there are some city or county sales taxes, the bulk of local tax revenues come from property taxes.

We all want to see lower property taxes and we must understand how property taxes are assessed in order to make meaningful change. Nebraska’s state property tax was abolished via constitutional amendment in 1967. Since then, the state government has been funded by sales and income taxes, with property taxes only being used to fund local governments. Accordingly, property tax rates are set at the local level, not by the Legislature. The Legislature has taken significant steps to offer income tax credits and other tools to reduce Nebraskans’ total tax burden through LB1107 (2020) and LB873 (2022). LB873 alone will provide approximately $548 million in property tax relief. However, the most effective way to reduce property taxes is to start at the local level.

Property tax calculations all begin with your property’s valuation. First, the county assessor determines the “actual value” of real property within their jurisdiction. The actual value of real property is determined as of 12:01 a.m. on January 1 each year and is an estimate of the most probable price (market value) that a property will bring if offered for sale in the open market.

Then, the property is then assessed a valuation. All real property is valued at 100% of actual value, except for agricultural and horticultural land, which is valued at 75% of actual value or special value. Finally, property valuations are combined to determine the total value of property within the taxing authority that can be taxed.

In a competitive housing market, many see their property valuations increase and worry that it will lead to higher taxes. However, the tax levy (or mill levy) is the second factor in determining your final tax bill. If the levy stays the same from the previous year, then taxes would increase at the same pace as the increase in property values. However, when substantial property value increases occur, you should expect the mill levy to fall. For example, if each taxing authority has a 3% budget increase but property values increase by 5%, then the mill levy should drop.

The levy is a percentage tax rate applied to the assessed value. Each taxing authority (city, county, school district, etc.) sets its budget based upon operating expenses and determines the amount of property taxes needed to fund that budget. The levy is calculated by dividing the portion of the taxing authority’s budget by the taxable assessed value of all property in the area.

It is important to note that taxing authorities have two major components to their budget: the operating budget and the debt service budget. The operating budget pays for the annual operating expenses and the debt service budget is the amount needed to repay any bonded indebtedness. Taxing authorities can sometimes reduce their debt service budget by refinancing outstanding bonds and either obtaining a lower interest rate or extending the term of the bond so payments are smaller over a longer length of time. These changes would reduce annual budget expenses without decreasing spending.

This past year, many taxing authorities were encouraged to take advantage of the low interest rate environment and refinance their bonds. This should allow many taxing authorities to reduce their debt service budgets and therefore their overall tax asking, even if their operating budgets increase. As the old saying goes: The devil is in the details. This is why it is important to look beyond the headline budget ask and understand how the budget is calculated.

Even though the Legislature has little control over property tax calculations, there are some ways state government can support local services and therefore the overall budgets of local governments. In particular, it is important that rural districts – which rely heavily on property taxes from agricultural land – get their fair share of state revenues. I look forward to addressing this issue more in a future article and focusing on solutions during the next legislative session.

If you want to weigh in on ways to reduce Nebraska’s tax burden or have other ideas for 2023 legislation, please reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!

As the month of August ends, schools have reopened and fall sports are now in full swing. This is always a special time of year for me. I remember my time teaching fondly, particularly opportunities I had to make a positive impact on students. Today’s teachers face different challenges than the teachers who came before them. Not only have they been asked to adapt to new technologies and remote learning, but the students have changed too. The Internet has transformed how students access and learn information, and social media has changed how students interact with each other and the world.

Looking back over the past two years, I am reminded of how fortunate we are to have teachers, administrators, and school boards who approached the pandemic with a student-focused mindset. District 42 continued to provide the best possible education opportunities despite facing many challenges. We have a wide variety of school sizes and student populations within District 42 and each school district has its own unique challenges.

McPherson County School District has the distinction of being the smallest public school district in the nation with less than 60 total students, but the next closest school district is about 25 miles away. Many of the students live on ranches that are already a significant distance from Tyron. Long student commutes and small class sizes make teaching in McPherson County a different experience from the urban settings where many future teachers get their first training experiences.

Conversely, North Platte has a much more sizeable school district and faces different challenges. Larger class sizes mean teachers have to make an extra effort to connect with each student. The student population is also more likely to have more complicated social dynamics as students work to find their place in a big school. Moreover, larger school districts tend to be more diverse and may need to spend more resources on language and disability programs.

Regardless of their size, schools play a critical role in preparing youth for the future. Ensuring all schools are properly funded is one way the Legislature can help support quality education. The debate about how to balance state aid to public schools and property tax obligations has been ongoing, and will likely extend far into the future. Many agree that the formula used to calculate state aid (TEEOSA) is no longer serving our students or our property tax payers. Unfortunately, finding a solution is not as easy as identifying the problem. However, I am not deterred just because an answer is not easy to find and will be focusing on how we can more fairly distribute state aid throughout the state.

Meanwhile, I want to thank all our area teachers for their ongoing commitment to education. I believe that if we want to prepare our youth for productive futures, it is imperative that all our schools remain focused on core subject matter that properly prepares students for future careers. Whether a student will go right into the workforce, pursue a trade, or enter into secondary education, teachers are critical to funneling prepared students into the workforce.

School is also a place for students to become leaders and well-rounded individuals. I look forward to watching some competitive sports teams, band competitions, FFA contests, and other extra-curricular activities that help shape the leadership skills of our youth as the school year progresses.

I look forward to hearing from constituents about issues impacting you. Please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729.

Educational opportunities are critical to building and growing a healthy economy. This week, I was able to appreciate two facets of the education sector in District 42.

First, District 42 is welcoming two new FFA chapters this year! Hershey and Maxwell are both opening new chapters and I was pleased to attend the Hershey FFA kick-off meeting at the Hershey Public School this week. I was a former FFA President at Sutton High School and had the opportunity to serve as the State FFA Secretary. I attribute my experiences in FFA for setting the direction for my career. I applaud both school boards for having the vision to bring these programs to their schools and look forward to seeing them shape future leaders in our region.

I also had the chance to host First Five Nebraska and a group of local daycare and early-learning providers to begin an open discussion regarding their challenges and possible solutions. District 42 is blessed with many quality K-12 institutions. However, education goes beyond the classroom. Our daycare and early-learning providers serve our communities by providing safe spaces for children, opportunities for socialization, and supplemental education when children need it most. Unfortunately, many of these providers continue to face pandemic loses.

When the pandemic hit, workers went home, schools closed, and childcare became more complicated for many who could once rely on school and daycare routines. Now, even those who have been able to keep their doors open are struggling. Workforce shortages have hit every sector. No matter who you talk to, or what profession you are discussing, everyone needs people to work. Many employers are offering increased wages and benefits to try and lure workers to their business, and daycare providers have been forced to raise wages to compete. Meanwhile, licensed daycare providers are faced with many regulations and training requirements that further add to their costs to operate. However, their ability to pass those costs and increased operational expenses on are limited.

Access to quality, affordable childcare is an essential component in enabling more parents to enter or return to the workforce. In many cases, couples who have more than one child in daycare have found it more cost effective to have one parent stay home and care for their children as opposed to staying in (or entering) the workforce. Moreover, daycare and early-learning providers provide much needed developmental services to the approximately 75% of all young Nebraska children who grow up in homes where all parents work.

As both an employer and a Senator, I have had the opportunity to meet with several daycare professionals. They all are very passionate about their role in exposing children to social settings at an early age and helping them to get a head start in school. In an effort to help daycare and early-learning providers be more competitive and attract a stable workforce, I introduced a Legislative Resolution (LR 415) which conducts an Interim Study that explores opportunities to help licensed daycare providers access group health insurance plans so they can compete with other employer benefits at a reasonable cost. This week’s meeting was the first of several to be conducted statewide prior to the next Legislative session to explore ways the State can support daycare and early-learning providers and I am grateful for everyone who participated.

If you are a daycare or early-learning provider, or you have faced challenges accessing these providers, I would appreciate your input on how the Legislature can help you. Please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729 about this or any other issue. My door is always open!

This week, I want to discuss the state of the economy. Although it can be a dull subject, I am hearing a lot about the impact inflation is having on your wallets. Some will remember the effects of inflation from the 1979 energy crisis, but for many working people and young families this is their first experience with a significant spike in inflation.

As background, inflation can be simply defined as a general increase in prices that decreases the purchasing power of money. There are two metrics most often used to determine the extent of inflation: the Consumer Price Index (CPI) and the Personal Consumption Expenditures Price Index (PCE). The CPI is consumer-based and essentially determines the changes in price in relation to the cost of living by measuring the difference in out-of-pocket expenditures by urban households from month-to-month. Conversely, the PCE measures changes in the price of consumer services and goods using business and supplier data.

Since the early 1980s, inflation has usually hovered around 2% to 4%. In June 2022, the increase in CPE from June 2021 was 6.8% and the estimated CPE for 2022 is 8.6%. Needless to say, this rate is unsustainable.

So, how did we get here and where do we go from here?

The COVID pandemic placed our global economy in a precarious position. Although government mandates on the workforce varied from state-to-state, the initial economic impact was relatively uniform nation-wide: safety protocols slowed supply chains and manufacturing; many people left the workforce either temporarily or permanently; and numerous service industries saw significant decreases in demand.

The federal government responded in several ways. Some of the early programs, like the Paycheck Protection Program, provided critical loans to businesses so they could maintain their payrolls as revenues declined, essentially helping to maintain the status quo. However, even as people began to return to their jobs and many businesses began to normalize, the federal government continued to inject trillions of dollars of stimulus into the economy.

Economists have boiled down the path to high inflation into three main events. First, the pandemic shifted consumer demand away from services and towards goods, but producers were unable to keep up with demand. Anyone who was looking for an outdoor pool, camping or outdoor gear, exercise equipment, and cleaning supplies in the summer and fall of 2020 will remember. This caused prices to rise. Then, stimulus money increased consumer buying power and caused the demand for goods to rise even further, even though factory closures and supply chain shortages continued to stall producers’ ability to meet demand. And so, prices rose again. Finally, Russia’s invasion of Ukraine caused a spike in oil prices, which increased the cost of both manufacturing and shipping, and forced up the price of agricultural products and other commodities. Closer to home, costs for corn, soybeans, and wheat were already rising as drought conditions reduced the supply these and other crops. Increases in the costs of manufacturing and delivering goods, and higher than normal food prices, both from weather and Russia/Ukraine conflict, sent the CPE up even further.

You can see how easily we reached a state of high inflation. The path back to a more balanced economy is less clear, but there are a few simple things we can do.

The first thing we need to do is follow the old saying, “If you find yourself in a hole, stop digging.” Injecting more stimulus dollars into the economy now is akin to putting gasoline on a fire, especially when labor is still in short supply and supply chain, manufacturing, and transportation sectors are continuing to rebound.

To be clear, stimulus money is not the only thing that contributed to our current inflation and inflation is a natural side effect of economic expansion. As businesses grow, they hire more workers, unemployment falls and households have more money to spend, so demand for goods and services increases, which causes prices to rise. However, money typically enters the market at a slower pace than it did during the pandemic. The Federal Reserve Bank of San Francisco has estimated that government stimulus may have added 3% to the national inflation rate and we can’t afford to continue artificially introducing more money into the economy.

The second step we must take is to encourage supply and demand to come back into balance. Right now, supply is insufficient to fill the current demand which has caused prices to rise and inflation to increase. If supply can begin to meet or exceed demand, then prices will fall and inflation will decline.

The Federal Reserve responded to high inflation by quickly raising short-term interest rates with the goal of slowing the demand for goods by making it more expensive to borrow money for vehicles and homes. Typically, this would reduce inflation, slow economic growth, and move us into a recession. The Federal Reserve would then lower interest rates to stimulate the economy to grow once again.

However, this cycle is facing some unusual challenges. The greatest challenge to solving the inflation problem in the current environment is that the supply chain is still not fixed and many businesses are still hiring (at elevated salaries) to find qualified people to fill open jobs. Historically, recessions begin with job layoffs due to oversupply, but we are not seeing that at this point. Similarly, higher interest rates are impacting the affordability of housing and slowing housing demand, but the ability to access affordable housing was a challenge even when interest rates were low.

As the Federal Reserve focuses on decreasing demand by increasing interest rates, I believe we made the right move at the state-level by investing in supply. The Legislature used federal American Rescue Plan Act dollars to invest in infrastructure, housing, businesses, and services that will increase the supply of goods, services, and labor in Nebraska. In addition, we have used record state revenues to return money to the taxpayers both directly and indirectly.

Time will tell if we are indeed in a recession and whether interest rate hikes will lower inflation, but Nebraska is in an excellent fiscal position in comparison to many states. The Legislature wants to keep serving Nebraskans through responsible fiscal policy and economic programs that make a real impact on our communities. If you have ideas for 2023 legislation, please reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!