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13-05-2025
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Nebraska's $11 billion budget for 2025-27 advances to final round with $1.1 million to spare
State Sen. Rob Clements of Elmwood, chair of the Legislature's Appropriations Committee. May 12, 2025. (Zach Wendling/Nebraska Examiner) LINCOLN — Nebraska lawmakers gave second-round approval Monday to a series of budget bills for the next two years, moving one stage away from closing a projected deficit of more than half-a-billion dollars. The mainline budget bills, Legislative Bills 261 and 264, dominated debate Monday with a handful of changes. Other budget bills to appropriate additional funds to agencies for this fiscal year (LB 260) and to appropriate salaries for state senators (LB 262) and constitutional officers (LB 263) advanced last week with little debate. Also advancing Monday were LB 513, from State Sen. Carolyn Bosn of Lincoln, to give all judges in the state a 1.5% salary increase in each of the next two years, and LB 534, from State Sen. Kathleen Kauth of Omaha, to cover about $2 million in legal claims against the state. With no further amendments expected, lawmakers will vote one last time on the budget bills Thursday, the final day to pass the budget, and send them to Gov. Jim Pillen, according to a scheduling announcement by Speaker John Arch of La Vista. Lawmakers will have $1.1 million to spare. However, using the one-time fixes in cash fund sweeps and borrowing from the state's 'rainy day fund' to close the budget gap for the next two-year budget mean that lawmakers for the following biennium would be at least $110 million in the hole, current projections indicate. Pillen retains his veto pen, including for line items, which could change the final figures. It takes 30 votes to override a veto. The narrow positive balance will make it difficult to pass other senator priority bills this year with a revenue impact or cost, such as to reduce the state's inheritance tax (LB 468), ban most tetrahydrocannabinol (THC) products in the state (LB 316) or crack down on adversarial nations' 'agents' (LB 644). State Sen. Rob Clements of Elmwood, chair of the Legislature's Appropriations Committee, confirmed the hundreds of millions of dollars moved to close the projected deficit through June 30, 2027 — in cash fund transfers, reduced spending and taking from the state's 'rainy day' fund — is the most he's seen in his ninth year on the committee. He said appropriators shifted hundreds of millions of dollars in 2017, too, but had more time to respond, rather than this year's 'devastating' economic forecast that came in April. 'I'm pleased with the results of the budget,' Clements said after the debate. 'I'm glad that we have a balanced budget again.' When lawmakers returned in January, they faced a projected $433 million shortfall for the next two years, a number that has since grown. Lawmakers have shifted funds or cut spending by $850 million to cover the deficit since it was identified last November. A large part of the deficit, but not all, came because the state's economy, measured by per capita income, is doing well compared to other states. As a result, the federal government pulled back on the percentage of Medicaid costs it covers in Nebraska, passing on a cost of about $55 million this fiscal year and nearly $300 million next year. Blame for the remaining deficit largely differs by political ideology in the Legislature, with conservatives blaming shaky economic forecasts and progressives, such as State Sen. Danielle Conrad of Lincoln, blaming 'inequitable, unaffordable tax cuts' passed in 2023. By Jan. 1, 2027, Nebraska's income tax rate for corporations and for individuals making $18,000 or more will fall to 3.99%. At that point, there will be three individual tax tiers, rather than four. Conrad blamed Pillen and his legislative allies for the tax cuts, stating the economic forecasts are not like a 'weather forecast' and that economic projections are lower 'not by fluke, not by accident, not by surprise, but by design.' She said 'chickens are coming home to roost.' State Sen. Machaela Cavanaugh of Omaha, a member of the Appropriations Committee, alleged Clements and other committee members didn't do their work or properly vet all the proposals before the Legislature. Instead, she said, senators gave a 'rubber stamp' to many budget cuts and fund transfers that Pillen and his staff requested. 'We have cooked the books,' Cavanaugh said. 'This isn't real. This isn't real money.' Echoing Cavanaugh, State Sen. Ashlei Spivey of Omaha, a freshman on the Appropriations Committee, cautioned that one budget-balancing measure — sweeping an estimated $24 million in unspent agency funds by this June 30 — also isn't reality. She said at least $7 million of those funds intended to be swept from the Nebraska Department of Education are already obligated and will be spent. However, State Sen. Mike Jacobson of North Platte told colleagues not to get 'too carried away' on what he termed as 'demagoguing' of 'the sky is falling.' He pointed to possibly rosier forecasts in the state's future that opponents rejected as natural wage growth. Clements, too, has said lawmakers knew getting to 2027 would be a 'pinch point.' 'Let's focus on real numbers. Let's focus on the numbers we know,' Jacobson said. Conrad, a former eight-year member of the Appropriations Committee, said she was 'intimately familiar' with the budget and told Jacobson and others she would 'not be mansplained by anybody in this body how the state budget works.' State Sen. Ben Hansen of Blair described what he viewed as a federal 'carrot becoming a stick' for state spending cuts and that lawmakers should be looking at 'tightening our belts as best we can.' He noted federal proposals in Congress to cut spending, particularly to Medicaid. 'It's not about tightening our belt, as it is, we might be having to lop off limbs in order to help pay for our budget,' Hansen said of the future. Cavanaugh has suggested lawmakers might need to come back for a special session, which some Republicans rejected publicly but quietly acknowledged is possible. If state revenues don't bounce back, lawmakers who are set to adjourn in less than a month could be back sooner than next January. After the budget bills pass, Pillen has set his sights on additional property tax relief that, with the final budget balance, would likely only come with increased sales or 'sin' tax revenue, such as through currently exempt goods or services, a proposal that failed to gain traction last summer. Throughout Monday, the budget deficit fluctuated as lawmakers approved final cash transfers and additional spending. Lawmakers closed the last remaining gap by taking $5 million more from the state's 'rainy day' cash fund. 'It's the 'rainy day' fund, and folks, it's raining,' said State Sen. Rick Holdcroft of Bellevue, who secured $3 million more for the Nebraska Supreme Court. Holdcroft framed his proposal as investing in the Nebraska Supreme Court's 'core judicial services that are delivering results' and uplifting public safety, such as problem-solving courts and probation services that court officials said could be in jeopardy without additional funds. Problem-solving courts are intensive court programs bringing individuals and families together with one-on-one interactions with judges, prosecutors and defense attorneys, law enforcement, court officials and more to help Nebraskans. This includes Adult Drug and DUI Courts, Veterans Treatment Courts, Reentry Courts, Juvenile Drug Courts, Young Adult Courts, Mental Health Courts and Family Treatment Courts. Each year, it costs the state about $4,400 per participant in problem-solving courts, Holdcroft said, compared to $41,000 for incarceration. Clements and State Sen. Rob Dover of Norfolk said the courts had enough funds for the next year, citing the Legislative Fiscal Office, but that if the courts needed additional funds, officials could request more funding in January for the following fiscal year. State Sen. George Dungan of Lincoln, an attorney, said that even if that was true, the fiscal office doesn't make policy. He told senators to listen to county attorneys and others 'who are running around like their hair is on fire' to promote a 'need,' not a 'want.' Holdcroft said he understood that all senators were looking for ways to close spending but that they needed to distinguish between 'cost savings' and 'cost shifting,' which he said would fall to county jails, emergency responders, the Nebraska Department of Correctional Services and families or communities 'already under stress.' If the programs were cut, Holdcroft said, the people who need the programs 'don't disappear.' 'They simply fall through the cracks into more expensive and less effective systems,' Holdcroft. 'If we let that happen, we are not saving the state money. We are making the problem worse and paying more for it down the line.' State Sen. Bob Hallstrom of Syracuse also made a deal to take $8 million out of the state's Affordable Housing Trust Fund to preserve $4 million each in the Middle Income Workforce Housing Fund and the Rural Workforce Housing Fund. Hallstrom said some projects in the workforce housing funds were put 'in limbo' with the pending cuts, echoing Dover that 'a house built today is much better than delaying the building of that house until a later time.' 'I will pledge to use whatever is at my disposal to try and avoid the ultimate transfer a couple years down the road from this fund,' Hallstrom said. Conrad said lawmakers budget for two years, not one, and shouldn't 'backfill.' Another major change, but not to the state's bottom line, came in Bosn earning support for $3 million in each of the next two years to support domestic violence services for survivors. Bosn said the 'life-saving interventions' are required under state law but that it has been a 'critical funding failure' as a previous 'fix' fell short in actually getting dollars to survivors. She said federal funding in this area has also been cut. 'This amendment is about making sure survivors are not turned away,' Bosn said. Conrad, in a tense exchange with Bosn, asked whether she voted for Trump and envisioned the cuts coming. Bosn said she did vote for Trump but didn't expect the cuts. State Sen. Jason Prokop of Lincoln had brought similar legislation this year, LB 348, seeking to find a long-term fix for domestic violence services. The solution fell on the Medicaid Managed Care Excess Profit Fund, a cash fund that collects excess Medicaid dollars for use in other areas, such as supporting new moms and babies. However, that's the same fund that Clements and a majority of his committee targeted for $10 million to help rightsize the budget. Taken together with Bosn's changes and others this session, fiscal estimates show the fund would be depleted next fiscal year for a variety of services. In other changes to the state's main budget, State Sen. Wendy DeBoer of Omaha clarified that lawmakers could sweep only $4 million in unspent funds for work on broadband, rather than a planned $5 million transfer. Clements and State Sen. Mike Moser of Columbus, chair of the Legislature's Transportation and Telecommunications Committee, confirmed the situation. DeBoer identified the error Monday morning after continuing to review a last-minute 'murder sheet' of additional cuts last week. 'If this was a road, I'd be all over it,' Moser said, praising DeBoer. State Sen. Dave Murman of Glenvil restored $264,488 of a larger planned cut to Educational Service Units in a 42-0 vote. An earlier amendment from Murman that didn't specify where the funds would come from failed 17-26 before he refiled the amendment to use general funds. Murman, chair of the Education Committee, said ESUs might have made up the cut by increasing property taxes. Dover secured $1 million for the Robert B. Daugherty Water for Food Global Institute at the University of Nebraska 'to support water and agricultural research and existing collaborative initiatives to implement best practices in water conservation.' A vote to preserve the funding in committee stalled 4-4, with Dover missing the vote for a doctor's appointment. State Sen. Brad von Gillern of the Elkhorn area, chair of the Revenue Committee, said the state funding was critical in the public-private partnership to not 'run-off' private investors. Clements said that NU could find the funding elsewhere as he noted its set to get more than $13 million more in the next biennium, which is less than the NU Board of Regents requested. NU President Jeffrey Gold has said tuition increases could be in the future. Lawmakers rejected an amendment from Conrad, to restore $500,000 in a Nebraska State Patrol cash fund for equipment, and State Sen. Terrell McKinney of Omaha, to continue diverting at least $20 million in interest from the proposed new state prison and proposed Perkins County Canal to economic recovery. McKinney said the previous deal was transferring interest for three years, not two, and that 'a deal is a deal and a deal should be honored.' SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
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07-05-2025
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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
Yahoo
06-03-2025
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Decrease in federal share of Nebraska Medicaid costs increases state budget shortfall
State Sen. Rob Clements of Elmwood, right, talks with Speaker John Arch of La Vista. July 26, 2024. (Zach Wendling/Nebraska Examiner) LINCOLN — The federal government is again planning to decrease the percentage of state Medicaid costs it will cover for Nebraska, leaving state lawmakers on the hook for an additional $90.3 million this budgeting cycle. State Sen. Rob Clements of Elmwood, chair of the budget-writing Appropriations Committee, announced the revision Thursday, one day after legislative staff found the overlooked Federal Medical Assistance Percentage (FMAP) revisions from January. That oversight will eat into the progress of a recently amended two-year economic forecast, which decreased an initial $432 million shortfall at the start of the session to $267 million. That's because of an additional $65 million in projected tax revenue over the next two fiscal years. Lawmakers also have the option of accessing an additional $100 million in revenue from this fiscal year that went automatically to the cash reserve. The change Clements discussed this week determines federal matching funds to offset state Medicaid costs, meaning the recent decrease in federal funds leaves the state needing to pay for more. The initial decrease in the federal share of state Medicaid costs from October passed $235 million in Medicaid costs back on to Nebraska. That was before the January adjustment. Clements' committee issued a preliminary budget Feb. 18 that identified $171 million toward closing the shortfall. However, some of those items, including a $14 million cut to the University of Nebraska, will be fought in committee and, if advanced, during floor debate. With the Medicaid changes but without the committee's recommended cuts, the state budget shortfall for the 2025-27 fiscal years is $357 million. Including the committee's changes, the shortfall would be about $189 million, according to the legislative fiscal office. Clements said it will be 'a tougher year than we thought' to balance the budget. 'We all need to work together to balance the budget,' he said. 'It's not just the Appropriations Committee's budget. It's the Legislature's budget, and we're required to balance it.' Nov. 20 — $432 million shortfall, identified by Tax Rate Review Committee, nearly $490 million below recent expectations. Feb. 18 — $261 million shortfall, if all cuts in preliminary Appropriations Committee budget are adopted by the full Legislature. Feb. 28 — $99 million shortfall, identified by February Nebraska Economic Forecast Advisory Board revisions wiping $65 million from the shortfall from the next two fiscal years and estimating a boon of $100 million than initially anticipated this fiscal year that could be applied to the shortfall, and if all preliminary budget cuts are adopted. March 6 — $189 million shortfall, including a $90.3 million increase in state share of Medicaid costs after federal funding decrease, economic forecast revisions and preliminary budget cuts. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
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06-03-2025
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Decrease in federal share of Nebraska Medicaid costs increases state budget shortfall
State Sen. Rob Clements of Elmwood, right, talks with Speaker John Arch of La Vista. July 26, 2024. (Zach Wendling/Nebraska Examiner) LINCOLN — The federal government is again planning to decrease the percentage of state Medicaid costs it will cover for Nebraska, leaving state lawmakers on the hook for an additional $90.3 million this budgeting cycle. State Sen. Rob Clements of Elmwood, chair of the budget-writing Appropriations Committee, announced the revision Thursday, one day after legislative staff found the overlooked Federal Medical Assistance Percentage (FMAP) revisions from January. That oversight will eat into the progress of a recently amended two-year economic forecast, which decreased an initial $432 million shortfall at the start of the session to $267 million. That's because of an additional $65 million in projected tax revenue over the next two fiscal years. Lawmakers also have the option of accessing an additional $100 million in revenue from this fiscal year that went automatically to the cash reserve. The change Clements discussed this week determines federal matching funds to offset state Medicaid costs, meaning the recent decrease in federal funds leaves the state needing to pay for more. The initial decrease in the federal share of state Medicaid costs from October passed $235 million in Medicaid costs back on to Nebraska. That was before the January adjustment. Clements' committee issued a preliminary budget Feb. 18 that identified $171 million toward closing the shortfall. However, some of those items, including a $14 million cut to the University of Nebraska, will be fought in committee and, if advanced, during floor debate. With the Medicaid changes but without the committee's recommended cuts, the state budget shortfall for the 2025-27 fiscal years is $357 million. Including the committee's changes, the shortfall would be about $189 million, according to the legislative fiscal office. Clements said it will be 'a tougher year than we thought' to balance the budget. 'We all need to work together to balance the budget,' he said. 'It's not just the Appropriations Committee's budget. It's the Legislature's budget, and we're required to balance it.' Nov. 20 — $432 million shortfall, identified by Tax Rate Review Committee, nearly $490 million below recent expectations. Feb. 18 — $261 million shortfall, if all cuts in preliminary Appropriations Committee budget are adopted by the full Legislature. Feb. 28 — $99 million shortfall, identified by February Nebraska Economic Forecast Advisory Board revisions wiping $65 million from the shortfall from the next two fiscal years and estimating a boon of $100 million than initially anticipated this fiscal year that could be applied to the shortfall, and if all preliminary budget cuts are adopted. March 6 — $189 million shortfall, including a $90.3 million increase in state share of Medicaid costs after federal funding decrease, economic forecast revisions and preliminary budget cuts. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
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19-02-2025
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Preliminary Appropriations Committee budget unveiled, includes Pillen cuts to NU
State Sen. Rob Clements of Elmwood, left, and Keisha Patent, director of the Legislative Fiscal Office, address lawmakers at a pre-session legislative retreat in Kearney on Friday, Dec. 13, 2024. (Zach Wendling/Nebraska Examiner) LINCOLN — The Legislature's Appropriations Committee on Tuesday unveiled a preliminary committee budget, a key early step before Nebraska lawmakers pass a two-year budget by mid-May. Led by State Sen. Rob Clements of Elmwood, one of the committee's biggest tasks this year is closing a projected $432 million budget shortfall, which the preliminary budget takes steps toward closing. The committee has gone through all state agencies at least once, in addition to the budget recommendations that Gov. Jim Pillen outlined in his Jan. 15 address to the Legislature, advancing some in the preliminary budget. Pillen's recommendations would close the projected $432 million budget shortfall with more than $63 million in the positive direction. Meanwhile, the committee's preliminary budget closes approximately $171 million of the projected shortfall, leaving another $262 million to find either through increased revenue or reduced spending. 'It's going alright,' Clements said of the process. 'It's still going to be a challenge to get the budget balanced.' State Sen. Machaela Cavanaugh of Omaha, a new face on the Appropriations Committee, said it is 'not best practice' to make substantial policy changes through the budget. She described the in-progress 'moral document' as one that still has the potential for more 'devastating cuts,' such as to direct support or assistance to vulnerable populations, which she said she would work to protect. Cavanaugh sees a 'manufactured crisis' from stair-stepped reductions in income and corporate tax cuts, passed in 2023, that won't be fully implemented until 2027 and continued steps from her colleagues to do 'anything and everything' for property tax relief, even when the state doesn't set property tax rates. 'I'm concerned that there's a lot of cutting off our nose to spite our face in this budget,' Cavanaugh said. One key cut included in the preliminary committee budget: an annual $14.3 million cut from the University of Nebraska, approximately 2% of what the state spends on NU from its main checkbook. The committee narrowly advanced that cut with opposition from the committee's three Democratic members and State Sen. Rob Dover of Norfolk, a Republican. The NU Board of Regents in August requested a 3% increase, partly for research, expanded scholarships for top students and employee compensation. This is on top of uncertainty with federal research dollars, potentially leaving the regents to dig out of a fiscal hole, after just doing so last summer. The preliminary budget doesn't address whether to give $100 million in promised cash funds to NU for Project Health, a significant $2.19 billion public-private investment in expanded health care training, research and more in Omaha. Dorn and Clements said those funds would be added back. Pillen had included that funding in his budget recommendations. The anticipated Project Health spending has 'broad support' among the committee, Dorn said, noting NU also has ongoing funding for multiple capital construction projects. He said the committee also advanced keeping $6 million in NU's share of the Nebraska Tobacco Settlement Biomedical Research Fund. Pillen recommended removing all of NU's $11 million share of that settlement research fund. The hearing on NU's budget is in one week, where President Jeffrey Gold and other NU advocates have promised to testify about the need for continued state support for the university. 'The University strives to be a good partner with the state,' Gold said in a Jan. 17 statement. 'But cuts of this magnitude would significantly impact the university at a time that our mission of research, teaching and extension and engagement is critically important to the state.' Cavanaugh said she plans to ask a lot of questions next week on what the cuts would mean to NU, including the University of Nebraska at Omaha in her district. She noted the solution, if the state won't step in, is raising tuition and fees or cutting programs and jobs, hurting NU's 'workforce ecosystem.' Clements said it is still 'too early to tell' the impact of changes in federal spending, but he noted NU already has hundreds of millions in cash reserves that are also bringing in interest. 'Everybody's going to have to contribute to fix the shortfall,' Clements said. 'I think they have resources that it's not going to severely hurt them.' Tuesday marked the beginning of public hearings on the budget process, beginning with the budget bills introduced by Speaker John Arch of La Vista at Pillen's request — Legislative Bills 260, 261, 262, 263 and 264. Much of the variance in the two budgets so far comes because Pillen's budget includes requests to other committees, mostly the Revenue Committee, and includes hundreds of millions of dollars in additional investments in state aid to schools, largely for property tax relief. To meet those goals, Pillen is calling to expand the sales tax by eliminating certain sales and use tax exemptions and increasing 'sin' taxes on cigarettes, vapes, gambling cash devices, fantasy sports, spirits and consumable hemp products, estimated to net nearly $500 million over the next two years. This includes net wrap and twine, in Legislative Bill 650 from State Sen. Brad von Gillern of the Elkhorn area, but also taxes about two dozen 'luxury' items, such as lobbying or dating services, that are included in LB 169 and LB 170, from State Sen. Tom Brandt of Plymouth. Pillen's budget also proposes increasing fees, including those through: The Nebraska Department of Motor Vehicles, including to obtain driver and vehicle records (LB 114, State Sen. Mike Moser of Columbus). The Nebraska Department of Agriculture in food establishments (LB 245, State Sen. Barry DeKay of Niobrara) or the sale of certain products by weight, measure or count (LB 394, DeKay). Fireworks display permits and sale licenses, fire alarm inspector certifications, fire safety inspections, heating oil tank registrations and underground storage tank installation permits and registrations (LB 434, State Sen. Dave 'Woody' Wordekemper of Fremont). The governor's recommended budget also calls for an excise tax on electricity for cryptocurrency mining operations (LB 526, State Sen. Mike Jacobson of North Platte) and seeks to reduce the state's annual contribution to school retirements (LB 645, State Sen. Beau Ballard of Lincoln). The committee hasn't yet decided whether to repeal funding for some recently enacted laws, including $500,000 for a yet-to-be-enacted prescription drug donation program and $4.5 million to implement an expanded veterans justice program. LB 650, from von Gillern, would pull funding for multiple tax credit programs in the Revenue Committee, which he chairs. There were also areas where the committee just hasn't yet taken up recommended cuts until the committee holds a hearing for each state agency and agency directors give more information, according to Clements and State Sen. Myron Dorn of Adams, an Appropriations Committee member. Another major exclusion from the preliminary budget is LB 303, from State Sen. Jana Hughes of Seward, which would revamp the state's school funding formula to help stabilize year-over-year state aid to schools. That proposal, which would cost about $120 million over the two years, is in the Education Committee. Another cog in the appropriations machine is the Nebraska Economic Forecasting Advisory Board, which meets again at the end of next week to consider the state's financial health. That Feb. 28 meeting will help guide budget-making conversations, as will a final forecasting board in August. Von Gillern said the preliminary budget offers 'steps in the right direction' and said he's looking ahead to the forecasting board meeting. He and Clements noted revenue trends have been positive since the last forecast in October, before the presidential election. 'That'll help us work backward to a number,' von Gillern said. Cavanaugh cautioned that the latest tax receipts were before President Donald Trump returned to office in the White House and, alongside tech-billionaire Elon Musk, began freezing and implementing cuts to federal programs. Cavanaugh noted those cuts will trickle down to Nebraska. Dorn, in his seventh year on the Appropriations Committee, said he feels a lot more comfortable and understands the process more, though there is a little more of a challenge. 'I keep telling people it's a big puzzle,' Dorn said. 'When we get everything done and made, that puzzle will be complete. It's going to take us a while to get there.' Under the Legislature's current schedule, the Appropriations Committee must advance its budget bills to the full Legislature by April 29 and the full budget must pass by May 15, under the Legislature's rules. Committee hearings for the committee will continue through March. 2025prelimbudget SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
