07-05-2025
Nebraska lawmakers debate budget-balancing maneuvers into the night, advance key spending bill
State Sen. Rob Clements of Elmwood. Aug. 13, 2024. (Zach Wendling/Nebraska Examiner)
LINCOLN — Nebraska lawmakers on Tuesday began grappling with key state budget bills, debating into the night on preferred ways to cut or preserve funding to state agencies and programs.
Legislative Bill 261, based on a financial package put forth by Gov. Jim Pillen, is a mainline appropriations bill that dominated floor debate and assigns dollars to areas such as education, courts and economic development, along with state agencies.
A budget book for Nebraska's fiscal years between 2025 and 2027 sits on a lawmaker's desk. (Juan Salinas II/Nebraska Examiner)
After about eight hours, a 37-6 vote moved that amended legislation to the second of three rounds of lawmaking debate.
State Sen. Rob Clements, chair of the budget-writing Appropriations Committee, said LB 261 holds 'flat' allocations to most agency operational budgets but allows for increases to employee salaries.
It recommends about $11 billion in spending over the biennial. That's an average two-year spending increase of 1.5% over the current budget year.
Financial challenges
The Elmwood lawmaker spoke of challenges, including federal rate changes to Medicaid and a late dire report by the Economic Forecasting Advisory Board. The state was hit with $630 million in revenue reductions, he said.
Going into Tuesday's debate, lawmakers faced a nearly $262 million projected budget deficit over the next two years. That includes all initial Appropriations Committee recommendations by mid-April, as well $136 million in changes to annual school retirement contributions and business incentives.
'We have absorbed those without making drastic cuts,' Clements said while encouraging support for the budget. 'So we're protecting our employees and then asking agencies to get by until revenues are increased.'
Upon questioning by a few lawmakers, Clements acknowledged that the financial proposal, as is, does not present a balanced budget as required by the state Constitution. The Appropriations Committee plans an amendment for the second round of debate that will shore up an additional $135 million in reduced spending or additional cash fund transfers, and $132 million will be infused into the state's general fund pocketbook from the state's 'rainy day' cash reserve fund.
Dual enrollment programs are helping Nebraska high school students earn college credit and in some cases associates degrees before graduation. Shown is the downtown Lincoln campus of Southeast Community College. (Aaron Sanderford/Nebraska Examiner)
'We're not even at the baseline question yet,' said State Sen. John Cavanaugh of Omaha, a nod to work that lies ahead to rightsize the state budget before the session ends, as required.
Ten bills were folded into LB 261, including one that would direct $10 million to nonprofits that provide food assistance and another $10 million over two years from general funds so community colleges can provide more dual enrollment programs that help high school students earn college credit.
Halt to projects
Progressive-leaning lawmakers advocated for less funding for major state initiatives such as construction of the Perkins County Canal and a new state prison. They argued to spend more elsewhere, to avoid cuts to needed programs and services, including problem-solving courts aimed at keeping more Nebraskans stable and out of the court system.
The appropriations proposal includes a $16.9 million increase to the Supreme Court and the state court system over two years, and Clements noted that the courts and other agencies could come back next year to request a bump. 'I do like those problem solving courts,' he said.
The University of Nebraska, while set to get $13.1 million more over the next two years than it currently does, would be funded at less than requested and anticipated. NU President Dr. Jeffrey Gold has predicted possible tuition increases.
A banner near the University of Nebraska-Lincoln campus on Mar. 16, 2025. (Juan Salinas II/Nebraska Examiner)
Upon questioning by State Sen. Danielle Conrad of Lincoln, Clements said the Nebraska Promise tuition-free assistance program for undergraduates still exists for families with very low incomes. Conrad lauded that program generally open to Nebraskans with family incomes of $65,000 or less, but said it does not apply to a major portion of students.
She criticized the proposed sweep of one-time cash funds from multiple agencies to prop up the state's financial picture.
'This budget is cobbled together with bailing wire and bubble gum,' said Conrad. 'It limps us along … with no clear plan for the future and no answers as to what this means for our state's leading institutions like the university.'
'Would you run your family business like this? Would you run your family budget like this?'
Hurting 'everyday people'
Conrad joined other Democratic lawmakers, including State Sen. George Dungan of Lincoln, who pushed back on factors they said created a service-slashing environment he said would hurt 'everyday people.'
Said Lincoln State Sen. Jane Raybould: 'There can be no denying that when we passed the accelerated income tax rate reductions in 2023, we were setting ourselves up for a structural imbalance.'
State Sen. Jane Raybould of Lincoln talks with State Sen. Stan Clouse of Kearney. (Zach Wendling/Nebraska Examiner)
She said she pointed out to colleagues then, and during the more recent Pillen-backed property tax relief push, that such efforts were not sustainable. 'There was no revenue to supplant the revenue lost.'
To alleviate the budget shortfall, Raybould suggested reducing by $100 million the amount headed toward the Perkins County Canal, pausing for two years the new prison build and freezing phased income and corporate tax reductions (as proposed by Legislative Bill 171 by State Sen. Tom Brandt of Plymouth).
Several lawmakers, including State Sen. Mike Jacobson of North Platte, defended funds earmarked for the western Nebraska canal, which would transport water from the South Platte River in Colorado into Nebraska and has spurred water rights debates between the two states.
'Let's be clear: We're taking away the state's future to water rights if we take money out of that fund,' Jacobson said. 'If we flinch now we will never get this built. No one will take us seriously.'
State Sen. Christy Armendariz of Omaha called the canal project a good long-term investment.
'Water is the current gold, from what I hear,' she said. 'Taking the money away from it is just robbing our future.'
State Sen. John Cavanaugh advocated for cutting back the canal fund over slashing a water conservation fund that benefits such efforts as irrigation reuse pits and water ways.
Meals on wheels
Part of the morning debate focused on what turned out to be a controversial amendment proposed by State Sen. Glen Meyer of Pender to direct $4 million to senior centers and Meals-On-Wheels programs across the state.
No senator voiced opposition to the boost for the aging, but several objected because tying the Meyer bill to the budget package essentially killed his previous version that had included an amendment from State Sen. Terrell McKinney of North Omaha.
State Sen. Terrell McKinney of Omaha. (Zach Wendling/Nebraska Examiner)
That McKinney amendment included his priority legislation that funds a pilot program designed to help keep at-risk youths out of jail.
McKinney, angry about what he called political maneuvering to sidestep his priority bill, vowed to be a 'disruptor' of the remaining days of the session if his Family Resource and Juvenile Assessment Center pilot did not survive. Subject to available funds, it aimed to use up to $1 million annually for five years from a Medicaid cash fund.
An amendment by State Sen. Dunixi Guereca of Omaha, which passed on a 29-7 vote, was the day's only change. Guereca proposed directing $300,000 to the Special Olympics from the health care cash fund, which is filled by the tobacco settlement fund.
The move was opposed by senators including Clements, who said he is still uncertain how an earlier $500,000 award to the group was used.
State Sen. Merv Riepe of Ralston called the Special Olympics an excellent cause and said such funding would be fine if the state 'were rolling in cash.' He said hospitals and philanthropists should supply those dollars.
'This is not one of our primary core businesses,' he said.
State Sen. Rob Dover of Norfolk, in a nod to an often contentious and continuing budget-setting process, said: 'We are divided by party and by urban and rural. But hopefully we can respect each other and have a good debate.'
Major changes
The budget advanced by the Appropriations Committee two weeks ago has the following major changes compared to November:
$193.6 million less spending than originally projected.
$160.4 million in sweeps of various cash funds or other transfers to the state's main pocketbook (such as $27.7 million from the Water Recreation Enhancement Fund, $20.5 million from the Economic Development Cash Fund, $15 million from the Economic Recovery Contingency Fund, $13.5 million from the Site and Building Development Fund, $12 million from the Intern Nebraska Cash Fund, $10.2 million from the Youth Outdoor Recreation Fund, $8.6 million from the Health and Human Services Cash Fund, $7 million from the Vehicle Title & Registration System Replacement Fund, $4.4 million from the Jobs and Economic Development Initiative (JEDI) Fund and $4 million from the Lead Service Line Fund).
$50.3 million in investment earnings (such as from the Perkins County Canal Fund, Inland Port Authority Fund, 911 Service System Fund, Economic Recovery Contingency Fund and the Nebraska Capital Construction Fund).
$39.6 million in fewer transfers to existing cash funds ($22 million less to the Water Sustainability Fund, $16 million less to the Education Future Fund and $5 million less to the Property Tax Credit Fund, but $2 million more to the Public Advocacy Cash Fund).
Nebraska Examiner reporter Zach Wendling
