LINCOLN — Nebraska lawmakers opted to give out larger property tax credits instead of stashing away money for a rainy day before easily advancing a two-year, $9.3 billion budget plan on Wednesday.
By a vote of 28-8, senators amended the budget package to add $51 million a year to the state’s Property Tax Credit Fund.
Lawmakers’ action drew praise from Gov. Pete Ricketts, who had proposed that level of increase in his budget recommendation. The money would boost the tax credit fund by nearly 23% and bring it to $275 million a year. Money for the transfer comes from state tax collections.
The Appropriations Committee budget had halved the proposed increase in the tax credit fund. The committee’s package would have added $26 million to the tax credit fund and put $25 million a year into bolstering the state’s cash reserve.
State Sen. John Stinner of Gering, the Appropriations Committee chairman, argued that the cash reserve needs to be built up to help Nebraska weather the next economic downturn. He hearkened back to a fall symposium, during which lawmakers had named rebuilding the cash reserve as their top priority.
With a $25 million a year infusion, the fund was projected to be at $372 million by June 30, 2021, or about 7.5% of annual state revenues. Experts have recommended 16% as an ideal target.
“It’s political expediency,” Stinner said of the amendment. “It’s the worst kind of politics; it’s pandering to the taxpayer.”
Sen. Lou Ann Linehan, the Revenue Committee chairwoman, led the charge to claim the whole amount for property tax relief.
She pointed to the debate about property taxes that filled Tuesday afternoon, as lawmakers pondered a major tax and school aid measure aimed at addressing a key concern of constituents. The tax measure relied on higher tax credits for part of its funding.
“If we’re serious about property tax relief, we need to make sure this $51 million goes into the Property Tax Credit Fund,” Linehan said. “I don’t think it is a perfect solution, but it definitely is something.”
She and other senators took aim at the rest of the budget, questioning why money for the cash reserve should be taken from the tax credit fund instead of from other spending items.
Sen. Dave Murman of Glenvil acknowledged the state’s depleted cash reserve, but he said property tax relief is a bigger need, particularly for farmers and ranchers.
“We can’t afford to do nothing about the property tax problem,” he said.
But Sen. Ernie Chambers of Omaha predicted that the increased property tax credits may be the only property tax relief passed this year. He has vowed to fight the tax and school aid package because it would increase the sales tax rate and apply sales taxes to a number of services. The bill faces an uncertain future.
The tax credits turned out to be the most contentious item in the budget package, which would increase state spending by an average of 3% over the budget period ending June 30, 2021.
Lawmakers advanced the main-line budget bill by a 42-4 vote, but not before a couple of senators complained about a funding increase being provided to the University of Nebraska system.
Bayard Sen. Steve Erdman, a frequent critic of the university, passed out a graph that showed Nebraska ranked No. 3 nationally in per capita support for higher education in 2017, providing $478 per capita. The budget provided a 2.2% increase for NU salaries and a bump of 2% for utility costs, but Erdman said there were plenty of places the university could cut its budget to provide tax relief.
“We can fund the University of Nebraska above and beyond what the governor recommended, but we can’t find $5 million to keep our elections safe,” Erdman said, referring to a request from the Nebraska Secretary of State’s office for new voting machines.
Brainard Sen. Bruce Bostelman also questioned why the lights and video scoreboard are left on at Memorial Stadium in Lincoln when he drives by early in the morning on non-game days. Senators, he said, need to stop looking at the university’s spending “through rose-colored glasses.”
But Lincoln Sens. Anna Wishart and Kate Bolz, who sit on the Appropriations Committee along with Erdman, defended the added spending on NU. Bolz said the state’s current spending on the university system is actually 8.5% lower than it was in 2016-17, and Wishart said the spending is an investment in the state’s future that will help keep tuition rates reasonable.
Stinner, who chairs the committee, said he “gets that some people want to bash the university.” But he said that the NU campuses all spend less than their peer institutions and that a 3% overall hike in the budget “was marginal.”
“If that’s too much, I’ve got a problem with that analysis,” he said.
Earlier, lawmakers gave first-round approval to several capital construction projects, including a $49 million, 384-bed prison addition in Lincoln for the state’s most unruly inmates. Corrections officials said the facility would allow high-risk inmates to be moved from the Tecumseh State Prison to Lincoln, where it’s easier to hire corrections officers.
Senators also gave an initial OK to providing $2.4 million extra to expand five “problem-solving courts” across the state for veterans and drug offenders. Such courts cost the fraction of incarcerating an offender in prison.
The budget package provided funding for the first nine months of voter-approved Medicaid expansion and included money to boost payment rates for Medicaid, child welfare and other Health and Human Services providers.