The Legislature’s budget chairman says he has left no stone unturned in his search for fixes to Nebraska's state revenue crunch.
“I have looked at every possibility,†Sen. John Stinner of Gering told a panel of fellow lawmakers Tuesday, outlining stopgap proposals to help bridge the state’s $287 million projected shortfall.
He came up with less than he’d hoped for.
At Stinner’s request, members of the legislative Revenue Committee are considering suspending a trio of tax breaks for two years beginning in 2018. One exempts businesses, farmers and others from paying taxes on their first $10,000 of personal property. The other two are tax credits for angel investors and child care providers who help prepare children for their first years of school.
Legislative staff predict suspending the programs would save the state about $45 million total over the next two years. Stinner said he was aiming for $40 million each year.
People are also reading…
“I’m going to have to scramble around,†he told committee members during a public hearing at the Capitol.
Tuesday’s testimony showed even his existing ideas face friction.
Stinner himself acknowledged that eliminating the personal property exemption could be considered a tax increase, which Gov. Pete Ricketts is “probably not going to like.â€
“I don’t want a tax increase either,†Stinner said. “It’s not just the governor. I haven’t met anybody that says, ‘Raise my taxes.’â€
And child care providers turned up in force to defend their tax credits, which just became available this year, describing them as a critical incentive to help boost their workforce and ease the sometimes-astronomical cost of child care for working families.
Susan Snow, director of Morning Star Preschool and Child Care Center in Omaha, said she made more money 12 years ago working the perfume counter at a Younkers than she does now. Her business charges about $1,400 per month for infants and still struggles to pay staff more than minimum wage.
“We’re scrambling for funds right now for paint,†Snow said. “If we had an extra $25, I could use it.â€
John Cavanaugh, a former U.S. congressman from Omaha and chief operating officer at the nonprofit Holland Children’s Movement, said combining suspension of the credits with a separate proposal to freeze the state’s child care subsidy rates amounts to “an assault on quality child care in the state of Nebraska.â€
He questioned whether the state would see much savings from suspending the credits, which go to providers and their employees who meet certain qualifications under a state program called Step Up to Quality.
“There’s no money in this program,†Cavanaugh said, calling the proposal “pound foolish.â€
“This isn’t even penny wise,†he said.
Cavanaugh said raising the state’s cigarette tax would raise more money and be a more popular option among Nebraska voters.
Two committee members, Sens. Burke Harr of Omaha and Paul Schumacher of Columbus, suggested Stinner focused more on avoiding the appearance of tax hikes than on crafting sound policy.
“We’re dealing with a lot of semantics, and at the same time we’re dealing with real money in the budget,†Schumacher said.
Stinner said tax credits aren’t automatic and recipients must qualify every year, so suspending them is different from raising taxes or eliminating other tax breaks.
He called the angel investment credits and school readiness credits “close to my heart,†having supported both during his time in the Legislature.
But the state must temporarily dial back its spending, particularly since its coffers could experience yet another blow through an updated revenue forecast that will come before the final budget is passed, he said.
Stinner worked on the proposals with Revenue Chairman Jim Smith of Papillion, who is himself searching for ways to enact income and property tax cuts this year while protecting the state budget.
Last week, Smith said Stinner’s proposal could help with that effort. On Tuesday, however, he said that is no longer his plan and that he has other ideas to generate revenue. He called the tax-cut talks “fluid†but declined to offer more detail.
Revenue Committee members could take further action on the proposed tax cuts as early as Thursday. They didn’t vote Tuesday on Stinner’s proposal, introduced as an amendment to an unrelated revenue bill (LB233).
Lincoln accountant John Cederberg offered neutral testimony on Stinner’s proposal Tuesday on behalf of the Nebraska, Omaha and Lincoln chambers of commerce, which support Smith’s effort to reduce income taxes.
Cederberg said the chambers aren’t happy about the idea of suspending tax exemptions and credits, but understand the state’s budget situation.
“If we must go this way, for goodness sake don’t let it become permanent.â€