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Recently, I had the opportunity to serve as a panelist at the 2015 Platte Institute Legislative Summit. Our panel was entitled “Grow Nebraska with Tax Reform.” Governor Ricketts has indicated he would introduce a tax reform plan that offers broad based relief on both property and income tax in the near future.
First, I want to say that I highly endorse periodic efforts to review and debate our state’s tax posture as to “fairness” and “competitiveness.” I applaud the Governor for his leadership role in this effort.
I believe that the people of Nebraska expect government to be efficient, effective and accountable. Those three elements are my guiding principles when reviewing budgetary issues. When the Governor talks about limiting the size and scope of government, I think that really resonates with all of us.
I am curious to see if we, as a state, can limit the growth of government spending to 2% to 3% in light of what I see as historic challenges over the last 20 years. For example, corrections and the court system have grown at 5.9% and 7.7%, and we still have considerable issues to confront. Aid to individuals, which includes Medicaid, has been increasing at 6.1% annually, with major cost drivers such as aging, developmental disabilities and increasing demand for mental health. I believe these issues must be addressed in a comprehensive way inclusive of utilizing a 4.75% average annual growth factor in light of what appears to be a long term pattern of slow growth and low inflation.
Lastly, the state’s cash reserve, referred to as the rainy day fund, serves as a stabilizer for unforeseen economic events. It is essential that as we add risk to our model, the size and use of this fund should also be a subject for discussion.
In light of the current projected revenue shortfall, efforts in broad based tax reform may be delayed. However, I am excited to see what the Governor’s plan entails and to see what is possible to help grow Nebraska.