The Appropriations Committee presented their recommendations to the Legislature on April 21 and debate began on the budget bills this past week. The Appropriations Committee faced an approximate $900 million projected budget gap at the beginning of this legislative session.
At the end of February, the Nebraska Economic Forecasting Advisory Board lowered its estimate of state revenue by approximately $150 million. On Wednesday, the board lowered revenue projections by another $55 million, meaning that the total budget shortfall was over $1 billion. The Appropriations Committee has recommended significant spending cuts, but will now have to develop additional recommendations to reduce spending even further.
The budget deficit was primarily due to revenue growth averaging less than 1% in the current biennium. This represents the third lowest back to back revenue growth years in more than 35 years. The Appropriations Committee responded with recommendations for 0.3% and 1.7% growth in spending over the next two years, signifying the third lowest growth in the last 17 biennial budgets.
The proposed spending cuts were supplemented with “one-time” higher than normal transfers of cash funds to the General Fund and a $173 million transfer from the Cash Reserve Fund to the General Fund.
With an additional $75 million transfer to pay for the Department of Correctional Services Reception and Treatment Center project, it leaves $379.6 million in the Cash Reserve Fund, which represents about 7% of revenue, compared to a recommended 16% level. Although the purpose of this fund is to save it for a rainy day - and it is now pouring - some senators would prefer to leave a higher balance.
The priorities in the budget were property tax relief, state aid to school districts (TEEOSA), justice reinvestment funding and funding for the Department of Correctional Services. The Property Tax Credit program was fully funded, including the additional $20 million beginning this year for agricultural land owners.
Although the appropriation for TEEOSA was less than the formula would have calculated without alteration, it still represents the largest increase in spending in the budget recommendations. The Department of Corrections will receive funding for additional positions and to continue salary adjustments.
Senators discussed amendments that would have lowered the gas tax for one year, lowered the state’s contribution to the school retirement plan, and restored the current method regarding the distribution of federal funding for health centers. None of the amendments were successful.
A motion by Senator Lou Anne Linehan of Elkhorn to pull LB 651 from the Education Committee has been on the agenda and will be discussed soon. LB 651, Senator Linehan’s priority bill, has not received the necessary 5 votes to advance from committee.
Her bill would require school districts to develop individual reading improvement plans for students in kindergarten through 3rd grade when a deficiency in reading is identified based upon state-approved local or statewide tests. If a student’s reading deficiency is not remedied by the end of 3rd grade, the student must be retained if they don’t meet one of the exceptions specified in the bill.
The Executive Board approved the Speaker‘s request to designate 4 budget bills as Speaker’s Major Proposals. This gives the speaker more flexibility to control the scheduling of these bills and the order of the amendments and motions.
The Legislature is beginning to meet into the evening in order to finish our work during this 90-day session. I encourage you to contact me with your opinions on the bills we are discussing. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402) 471-2733.