Gov. Pete Ricketts took his turn Thursday to talk about spending and tax cut proposals during his State of the State address to the Legislature.
Now, the Legislature digs in to address his adjustments for the second year of the state’s two-year budget and its own priorities.
The Appropriations Committee that recommends spending to the full Legislature will begin next week to weigh its adjustments against the governor's. Their recommendations are due by March 9.
Hurdles lie ahead, said Appropriations Chairman Heath Mello.
Ricketts talked about property tax cuts and needed spending for road improvements and state prisons, and borrowing from the state’s rainy day fund.
There will be considerable debate on those proposals, Mello said.
Also, while the governor’s budget addressed a $110 million projected shortfall, that amount is now closer to $140 million.
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Senators said Ricketts’ proposal provided a solid footing for the decisions the committee will have to make in coming weeks.
"I think that the Appropriations Committee can work with him to get where we need to go in terms of addressing the shortfall and still meeting our state responsibilities," said Lincoln Sen. Kate Bolz, a member of the committee.
Some are questioning the governor's proposed future use of $150 million of the state’s rainy day reserve to help fund an infrastructure bank to pay for needed roads improvements, in particular an expressway system that has been promised for years.
Using the cash reserve in that way may be a challenge if there are economic pressures, said committee member John Stinner of Gering.
“It looks like the caution lights are on, so to speak, about our economy,” he said.
The committee is expecting another downward forecast of tax receipts Feb. 26, when the Nebraska Economic Forecasting Advisory Board meets.
Ricketts proposes addressing the state’s shortfall by taking back $87.5 million that agencies didn't spend, particularly in Medicaid funding.
He would also reduce new spending by $5.7 million, spread over a number of agencies. And he would move $8 million in each of the two years from two cash funds to the general fund.
Sen. John Kuehn of Heartwell said he was pleased the governor had followed the lead of the committee in proposing to use, rather than carry over, certain funds.
“It’s good to see that both branches took the same fundamental approach,” he said.
In his speech, Ricketts emphasized controlled spending so the state can give tax dollars back to Nebraskans.
To get those tax cuts, he would tighten limits on budget growth and tax levy increases for all local governments, and slow the rise in government-assessed cropland values across the state.
The valuation change would trigger millions of dollars in additional state aid to school districts, Ricketts said.
Sen. Mike Groene of North Platte said Ricketts’ proposal to cap valuation increases at 3 percent to get some property tax relief doesn’t go far enough.
“That doesn’t do anything for the homeowner in Lincoln or a businessman in Omaha or North Platte,” he said.
There’s too much of a burden on property taxpayers, he said. More pressure needs to be on the state for funding education, which is 49th in the nation in aid to education.
Appropriations Committee member Tanya Cook of Omaha said she would hesitate to sacrifice public education in pursuit of property tax cuts. Kids living in poverty require more resources to learn and compete.
“I would have to read the proposal, but my immediate response is: Not on the backs of school children,” Cook said.
Ricketts didn’t mention income tax cuts.
“I’m surprised, honestly, he didn’t talk about income tax relief. Not one word,” said committee member Dan Watermeier of Syracuse.
In the past, Ricketts had said income tax cuts would be a priority, along with property tax cuts, Watermeier said. He could miss the support of senators who want both.
“It’s fair game to talk about income tax relief,” he said, because a certain group of the population just doesn’t benefit from property tax cuts.
The governor took a swing at Medicaid expansion, saying it is one of the biggest long-term risks the state faces. He said the most recent proposal would cost the state $158 million over six years.
Lincoln Sen. Kathy Campbell disagreed, saying Medicaid expansion for about 77,000 Nebraskans, most of them so-called working poor, would infuse $2.1 billion of federal funding into the state over the next five years and create 10,000 sustainable jobs.
The governor said the state couldn’t rely on the federal government to keep its commitments on funding for expansion.
But, Campbell said, she doesn’t hear the same mantra about the federal government not living up to its promises on roads funding.
“Thirty-two cents of every dollar in the Nebraska budget comes from the federal government,” she said.
