This will be an important week in the Nebraska Legislature since individual and committee priority bill designations are due this Friday. The Speaker will announce his priority bill designations next Monday. Now that there are many bills for the Speaker to schedule for General File debate, it will be much harder to get a bill scheduled that does not have a priority designation. Each Senator can prioritize one bill and each committee can prioritize two bills. The Speaker can designate up to 25 bills. The Speaker’s priority bills are selected from a list of requests submitted to the Speaker by individual Senators.

Last week, we received an update on the budget and where we stood at this point. Unfortunately, we continue to receive bad news regarding federal funding cuts for programs that are mandated for states to administer. As a result, many of us believe that any bills with fiscal notes (funding needs) will likely need to be held and not be approved this year.

It is important to remember how we fund government in Nebraska. Political subdivisions (counties, cities, school districts, etc.) are the only entities allowed to collect property taxes. The state collects income taxes and sales taxes as their primary income sources. Various state agencies also collect fees for services. Counties also collect fees for various services and collect inheritance taxes. Cities also collect fees and “local option” sales taxes to enhance their revenues. School districts receive funds in the form of state and federal aid, but local property taxes provide a huge portion of their funding needs.

Like any entity that employs people, the state and its various political subdivisions also experience the increasing costs of doing business that others face. Government is feeling inflationary pressures, plus the increased costs of providing health insurance and other benefits. Health insurance costs alone are climbing at double-digit rates due in large part to additional insurance mandates and the rising cost of pharmaceuticals.

As a result of our current economic climate, the average annual increase in tax asks by political subdivisions throughout the state is increasing at a rate of approximately $275 million annually. Therefore, the state would need to increase aid to political subdivisions by this amount every year to keep our property taxes flat. The state currently dedicates over $1 billion in direct property tax credits each year and would need to increase those commitments by $275 million annually to offset the rising cost of funding political subdivisions.

I continue to read about ongoing frustrations that the Legislature is ignoring the property tax crisis and that we need a new tax system to fix the problem. The fact remains that no matter how we collect our tax revenue, the cost to support all levels of government continues to climb. There are two ways to fix this problem: reduce spending, increase revenues, or a combination of both. Increasing revenue can come by increasing existing tax rates, expanding the forms of taxation, or growing our state so the tax burden is spread over more taxpayers. The Legislature is focused on spending cuts, diversifying tax revenues, and growing the state.

As a member of the Revenue Committee, I have been shocked to see the number of bills that were heard this year that would increase spending or reduce tax revenues by giving tax credits. I would estimate that the cost to the state if all these bills were approved is over $1.5 billion. I will continue to oppose these bills unless the sponsor can demonstrate a rate of return on investment that outstrips the ask in the bill.

I will be joining a small group of lawmakers on Tuesday to discuss the budget with the Governor and map out the path forward this year. We will also get an update on efforts the Governor’s office has made to substantially reduce state spending by reducing waste and duplication. A company called Epiphany was hired two years ago to do a comprehensive review of state spending. They have found many savings to slow state spending growth. The same must be done at the local level to find ways to reduce property tax needs directly.

I still have not made a final decision on my personal priority bill, but will this week.

I look forward to continuing to hear from you about issues that are important to you. It is a privilege to serve as your State Senator, and I will continue to give my full effort to make a positive difference for the District and the State. You can reach me at mjacobson@leg.ne.gov or 402-471-2729.