State budget debate begins this week

LINCOLN — Debate on the two-year state budget begins Wednesday, and it might come down to a decision about what’s more important, tax cuts or spending on things like provider rates and child care.

The budget-writing Appropriations Committee gave final approval of its proposed budget last week, leaving just over $700 million to spend on tax cuts, increased school aid and other priorities.

But that’s about $100 million less than has been projected to be expended by the two packages of bills that provide for cuts in state income taxes and increases in tax refunds for property taxes paid.

One key senator, Lou Ann Linehan, who chairs the Revenue Committee, said that the budget provides plenty of money for the top priorities of Gov. Jim Pillen. Those include cutting the state’s top personal income and corporate tax rates to 3.99%, eliminating taxes on Social Security, boosting state property tax credit, and establishing a $1 billion educational “future” fund.

Cutbacks needed

But some other proposals might need to be cut back, the senator said, mentioning a $35 million tax break on child care, tax credits for research and development and possibly the $80 million set aside to increase provider rates for hospital and nursing home workers.

“The question will be, ‘Can we do anything else?'” Linehan said, besides the governor’s priorities. “Will we spend more money, or cut taxes?”

Two members of the Appropriations Committee, Sens. Anna Wishart of Lincoln and Myron Dorn of Adams, discussed the budget proposal during a webcast Monday sponsored by the OpenSky Policy Institute.

Both said the proposal budget for the next two fiscal years was crafted with a goal of making sure Nebraska’s fiscal position remains strong four years from now.

Wishart said some caution was in order because part of the state’s unprecedented surplus of revenue was due to an influx of federal funds designed to sustain the economy during the COVID-19 pandemic. So, she said, the committee wanted to avoid creating too many long-term spending obligations.

Never had this much revenue

“We haven’t had this kind of revenue ever,” said Dorn.

The committee opted for spending increases that averaged 2.3% over the next two years, slightly higher than a 1.5% increase offered by Pillen. The main difference was setting aside $80 million extra for providers of Medicaid services and hiking the proposed increase for the University of Nebraska system from Pillen’s proposed 2% to 2.5%.

Wishart defended the committee’s decision to provide provider rate increases of 3% and 2% a year, in the next two years, as a “must investment.”

The senator, who had argued for larger increases, said providers of services for the developmentally disabled, the elderly and the poor are struggling with significant staffing shortages. Increased funding is needed so providers can match salaries that have risen in the private sector, Wishart said.

Floor debate will be key

Linehan said floor debate on the budget will determine where the Legislature turns to close the $100 million gap.

She said one Pillen priority that she will defend is the state tax credit for donations toward scholarships for private and parochial K-12 schools. The bill has an initial fiscal impact of $25 million a year.

Linehan said the governor’s education plans call for creation of a $1 billion education future fund, another $250 million a year outlay for increased state aid and increased aid for special education costs.

“There’s plenty of money,” she said, to fund the so-called “Opportunity Scholarship” bill, as well as the governor’s other education priorities.