Last Thursday was Day 80. We passed the budget and will now focus on any remaining priority bills that are in various stages of passage.

The budget was very challenging to balance this year because we continued to deal with a moving target. When the special session ended last summer, the budget was balanced with nearly $70 million to spare. Then, the Nebraska Economic Forecasting Advisory Board met in October and reduced the forecast, taking the budget to nearly a $350 million deficit. Much of the deficit was caused by the federal government reducing the state’s FMAP (Medicaid) funding by approximately the same amount. The Forecast Board met again in April and reduced the revenue forecast by an additional $195 million. This cut ultimately caused the final budget to rely on an approximately $135 million transfer from the state’s Cash Reserve Fund (rainy day fund) in addition to transfers from other cash funds. In the end, we avoided raising taxes, did not cut essential services, and held spending increases to 0.9% over the budget period.

Although there was much debate on the floor regarding cash fund transfers, I do agree with the concept of removing excess funds from most cash funds that were funded by General Fund dollars and not already committed to projects. However, cash funds generated by specific taxes or fees outside the General Fund need to be carefully considered. One of those funds was the Rural Workforce Housing Fund, which had already been committed to specific projects, including a North Platte project. I intend to work with Senator Hallstrom to try to restore as much of those funds as possible from the Affordable Housing Trust Fund to preserve the funds that were swept.

I do, however, agree that uncommitted funds lying around generally get used by lawmakers to fund other bills they sponsor that don’t have a funding source. One example was the successful attempt by Senator Justin Wayne two years ago to reappropriate the investment earnings from the Perkins County Canal project to fund a North Omaha project. We clawed back those funds this year to balance the budget and directed future investment earnings from cash funds to the General Fund.

The agenda for Monday includes LB170, introduced by Senator Brandt; the original bill deals with making pop and candy subject to sales tax. However, several amendments are proposed. One would remove candy from the list, but add many of the other items such as pet grooming, charted flights, dry cleaning, dating services, interior design, lobbying services, limousine services, telemarketing services, Teleflora services, golf and dance lessons, sightseeing services, swimming pool services, travel agency services, massage services, tattoo or body modifications (except for medical reasons), skin care services, weight loss services, as well as pop and energy drinks. The bill would also raise the cigarette tax from $0.64 per pack to $1.36 per pack, which would make our tax equal to Iowa’s. If passed as proposed, the cigarette tax increase would generate $42 million per year.

An amendment added to the bill includes Senator Hughes’ LB712, which creates a uniform 40% tax on electronic nicotine delivered systems or vapes. This part of the bill would generate an additional $15 million per year.

Senator Wordekemper also included his bill, LB212, which closes a loophole to requires out-of-state online sellers of cigars to pay a 20% excise tax on cigars. Today, only in-state sellers are required to collect taxes, making them less competitive with out-of-state online sellers.

The total package could generate $100 million per year, which could be used to further reduce property taxes.

It will be an interesting debate since it will be hard to make the argument that many of these taxes impact lower-income earners and are regressive. They also avoid taxing business inputs.

It is a privilege to represent you in the Nebraska Legislature, and I look forward to hearing from you regarding issues that are important to you. I can be reached at 402-471-2729 or by emailing me at mjacobson@leg.ne.gov.