30-04-2025
School retirement, tax incentive reductions pass, narrow Nebraska deficit by $136 million
State Sen. Brad von Gillern of Elkhorn, center, flanked by State Sens. Beau Ballard of Lincoln and Mike McDonnell of Omaha. Aug. 20, 2024. (Zach Wendling/Nebraska Examiner)
LINCOLN — Lawmakers gave wide final approval Wednesday to two measures designed to shrink the state's looming budget deficit by $136 million.
The two bills are Legislative Bill 650, from State Sen. Brad von Gillern of the Elkhorn area, related to trimming business incentives, and LB 645, from State Sen. Beau Ballard of Lincoln, related to scaling back school retirement contributions based on how well funded the pension plan is.
LB 650 passed 40-7. LB 645 passed 45-2.
LB 650 from von Gillern, who chairs the Legislature's Revenue Committee, would reduce or defund various tax incentives with savings this biennium, including:
Buyer-based exemption for construction contractors to purchase materials tax-free if appointed to do so by a client ($12.9 million).
Credit for retailers collecting sales taxes (reduced, $11.7 million savings).
Renewable Chemical Production Tax Credit Act for local businesses producing renewable chemicals (defunded after 2025, $8.5 million savings).
Nebraska Relocation Incentive Act offering tax incentives for relocation expenses (reduced, $8 million savings).
Nebraska Advantage Rural Development Act for individuals or companies that increase economic activities intended to benefit rural Nebraska (reduced, $6.8 million savings).
Nebraska Biodiesel Tax Credit Act for retail dealers who sell and dispense biodiesel at a taxpayer's retail gas station (reduced, $1 million savings).
Creating High Impact Economic Futures (CHIEF) Act for charitable contributions to community assistance or services helping to alleviate areas of chronic economic distress (defunded after 2025, $900,000 savings).
Nebraska Shortline Rail Modernization Act to offset railroad infrastructure maintenance and capital improvements for Class III railroads (reduced, $500,000 savings).
Food donation income tax credit for grocery stores, restaurants or agricultural producers that donate food to a food bank, food pantry or food rescue (defunded after 2025, $500,000 savings).
Cast and Crew Nebraska Act for qualifying film companies, productions and actors (defunded after 2025, $500,000 savings).
Reverse Osmosis System Tax Credit Act for the one-time installation of a reverse osmosis system at a taxpayer's primary residence (reduced, $250,000 savings).
Urban Redevelopment Act designed to grow small businesses and generate investment in Nebraska's urban cores (defunded after 2025, $101,000 savings).
LB 645 from Ballard, who chairs the Legislature's Nebraska Retirement Systems Committee, would reduce annual contributions to the state's school retirement pension plan — for all employees outside Omaha Public Schools, who have a separate retirement plan — depending on the actuarial funding level of the pension plan. The school plan is currently 99.91% funded.
The state currently gives 2% of statewide payroll for employees covered under the plan. School employees contribute 9.78% of their monthly payroll, while school districts match that at 9.88% of the eligible employees in their district.
Under the amended LB 645, contribution rates would change each July 1 for all three groups depending on whether the plan is:
Less than 96% funded (employees 9.75%, employers 9.85%, state 2%).
Between 96% and 98% funded (employees 8.75%, employers 8.84%, state 0.7%).
Between 98% and 100% funded (employees 8%, employers 8.08%, state 0.7%).
100% funded or more (employees 7.25%, employers 7.32%, state 0%).
Multiple senators said the tiered system could offer a 'cushion' in hard economic times.
Teachers and other school employees could see an immediate take-home pay increase, and school districts could have a property tax reduction. However, if the plan's funding level falls, closing the gap would fall back to the state, employees and school districts.
Ballard, at the urging of State Sen. Danielle Conrad of Lincoln, earlier this week put in language to LB 645 protecting the state's continued contributions of 2% of payroll for Omaha Public Schools employees to the separate district retirement plan each year. That amendment also said it isn't the Legislature's intent to pick up 'any financial responsibility or liability' for the OPS pension, which the state now manages.
With the passage of LB 650 and LB 645, and with Gov. Jim Pillen's expected support — he included both measures in his January budget proposal — the state's projected budget deficit would fall by $136 million. The state also would save $187.24 million in the following two-year budget cycle, based on current projections.
Lawmakers still would need to find $259.4 million over the next two weeks to balance the budget and meet a statutorily required reserve limit, according to estimates from the Legislative Fiscal Office.
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