LINCOLN, Neb. — Nebraska lawmakers will start sifting through Gov. Pete Ricketts’ budget plan this week with an eye on the state’s projected revenue shortfall and a litany of requests from lobbyists, state agencies and senators.
The governor’s plan relies on spending cuts and a withdrawal from the state’s cash reserve. He also is asking lawmakers to tap into cash accounts held by state agencies and take back money that was appropriated but not yet spent.
The package is certain to generate opposition, particularly a proposal that would end state funding to any clinic that offers abortions. Ricketts also proposed a $35.1 million funding increase for child welfare services and a $5.8 million plan to create a 100-bed corrections dormitory to ease prison crowding.
Here some things to know about the budget:
COULD A DIM OUTLOOK BRIGHTEN?
Nebraska’s current budget crunch stems from a projected $173 million revenue shortfall in the current two-year budget cycle, which led Ricketts to impose a hiring freeze and other cost-cutting measures.
On Friday, the state Department of Revenue reported a sudden surge in net tax collections in December. The state received $37 million more than what state forecasters had predicted, likely because of the federal tax package signed by President Donald Trump last month.
Nebraska State Tax Commissioner Tony Fulton warned the uptick may not be a long-term trend. Fulton said many Nebraska residents prepaid their taxes in 2017 in hopes of maximizing deductions that disappeared this year under the federal tax legislation. If that’s the case, Fulton said the state could see a revenue downturn in January that washes out the December gains.
“You can’t say, ‘Good times are here again,'” he said.
WHAT, SPECIFICALLY, WOULD THE BUDGET CUT?
Ricketts is proposing across-the-board cuts of 2 percent in the current fiscal year that ends June 30, followed by another cut of 4 percent the following fiscal year. The plan would save the state an estimated $77.1 million while excluding some spending priorities, including those in the Department of Correctional Services.
Ricketts also is seeking specific, targeted cuts totaling $25.1 million. The biggest chunk would come from a reduction in K-12 public school aid in the upcoming fiscal year that begins July 1.
The governor would pull $108 million from the state’s cash reserve, commonly known as the rainy-day fund, and draw a combined $16.7 million from 21 different cash funds maintained by state agencies. Money in the agency cash funds often comes from special taxes, fees and fines.
K-12 PUBLIC SCHOOL AID
The budget proposal calls on lawmakers to withhold some of the state “equalization aid” that was approved for Nebraska’s K-12 public schools last year.
The recommendation was made because of the complex formula that determines how the money gets distributed among school districts. Equalization aid is intended to make up the difference between a district’s needs and the revenue it can generate through local funding sources, such as property taxes.
Nebraska’s Department of Education estimated in November that schools would need roughly $977 million in equalization aid in the upcoming fiscal year, based on the current formula. That’s about $19.7 million less than what lawmakers approved last year, and the governor’s proposed budget seeks to keep that money in the general fund to help balance the budget.
Schools get different amounts based on a variety of factors, but less money would create additional pressure to tighten their budgets or raise money through property taxes.
Supporters of the budget note that spending on K-12 education has seen an overall increase of 2 percent in the current two-year budget cycle, compared to a 0.2 percent increase in general spending. Ricketts has identified K-12 education as one of his priorities, despite the budget troubles.
IS METHAMPHETAMINE TO BLAME FOR A COSTLY SURGE IN CHILD WELFARE CASES?
One major expense for the state is the child welfare system, which has seen a sharp increase in numbers. Ricketts is seeking a $35 million increase in funding to address the problem.
In his State of the State address, Ricketts said parents using methamphetamine was a factor in one out of every three cases in which children were removed from their homes. Ricketts announced plans to form a task force to try to confirm the cause and address the problem. Ricketts said the additional money in his budget was necessary to help the roughly 485 new children who entered the system.
“We have to get to the bottom of this disturbing trend and all of the other contributing factors,” he said last week.
VOLKSWAGEN SETTLEMENT COULD HELP THE STATE BUDGET
A national settlement with the German automaker Volkswagen could help buoy the state’s budget.
Volkswagen paid Nebraska roughly $2.8 million in fines last year for repeated violations of state consumer protection laws. In June, the company announced a more than $15 billion settlement related to allegations that it cheated on emissions tests for its diesel-powered vehicles.
The attorney general’s office placed the money in an account designated for state settlement payments, raising the total balance to nearly $6.4 million.
In his budget, Ricketts recommends a one-time transfer of $750,000 from the account to the state’s cash reserve to help balance the budget.
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