Lawmakers gave first-round approval this week to three components of the state’s $10.7 billion budget package. The state budget is structured on a two-year basis, with the budget enacted during legislative sessions held in odd-numbered years.
As introduced, the Appropriations Committee budget proposal would result in a projected ending balance of almost $715 million above the 3 percent required minimum reserve. This amount would be available to fund proposals pending before the Legislature this session.
The state’s Cash Reserve Fund — often referred to as the “rainy day” fund — would have a balance of almost $990 million.
Elmwood Sen. Robert Clements, chairperson of the committee, said the budget package reflects a two-year average spending growth rate of 2.3 percent and would leave approximately 16 percent — or two months’ worth — of the state’s annual expenditures in the Cash Reserve Fund as a buffer against potential future economic downturns.
Lincoln Sen. Anna Wishart, committee vice-chairperson, expressed pride in the priorities chosen by the committee, including focusing on key infrastructure projects to support a second water source for Lincoln, a water project in northeast Nebraska and a sewer project in Sarpy County.
“We prioritized water,” Wishart said. “I don’t know if there’s anything more basic in terms of needs than access to water.”
Sen. Lou Ann Linehan of Elkhorn also spoke in support of the overall budget package, pointing to the inclusion of $1 billion in state general funds to provide foundation aid and additional special education funding for K-12 students through creation of the Education Future Fund.
“We funded a lot of good programs,” Linehan said, including hundreds of millions of dollars for economic development aid to east Omaha and increases in Medicaid provider rates.
“I’m tired of hearing that we don’t take care of people here,” Linehan said. “The largest part of our budget is aid — by far and away.”
LB814, introduced by Speaker John Arch on behalf of Gov. Jim Pillen, is the mainline budget bill. An Appropriations Committee amendment, adopted 37-4, replaced the bill and contains recommendations for state operations and aid programs.
Among the measures included in the committee amendment were provisions of the following bills brought by lawmakers:
• LB80, sponsored by Grand Island Sen. Raymond Aguilar, which would authorize transfers of $4 million in each of the next two fiscal years from the Veterans’ Aid Fund to fund construction and improvements to a state veterans’ cemetery in Grand Island;
• LB609, sponsored by Omaha Sen. Mike McDonnell, which would appropriate $2.5 million in general funds in FY2023-24 to the state Department of Veterans’ Affairs to award a grant to a nonprofit to help complete a memorial to the nearly 400 Nebraskans who died in the Vietnam War;
• LB712, sponsored by Gering Sen. Brian Hardin, which would transfer $10 million from the Cash Reserve Fund to the Site and Building Development Fund in FY2024-25 to fund grants to aid panhandle communities as they prepare for an influx of contractors to upgrade the area’s aging ICBM missile system;
• LB741, introduced by Omaha Sen. Tony Vargas, which would transfer $20 million in FY2023-24 and FY2024-25 from the Cash Reserve Fund to the Rural Workforce Housing Investment Fund and the Middle Income Housing Investment Fund; and
• LB817, introduced by Arch on behalf of the governor, which would appropriate funds for reaffirmed and new capital construction projects.
Sen. John Cavanaugh of Omaha offered an amendment during general file debate May 3 that would strike $14 million in transfers from the Nebraska Environmental Trust Fund to the Water Resources Cash Fund over the next two fiscal years.
Cavanaugh noted that the Nebraska Environmental Trust Fund was created in 1992 and receives 44.5 percent of the state’s lottery proceeds under a constitutional amendment approved by Nebraska voters in 2004. He said the state constitution does not authorize the Legislature to transfer those funds or to appropriate the money for other purposes.
“The environmental trust is not a pass-through for agencies to use in lieu of general funds” Cavanaugh said, calling the provision “likely unconstitutional.”
Clements opposed the amendment, saying LB814 includes intent language to restrict the department’s use of the transfer to water projects that would be authorized uses of the Nebraska Environmental Trust Fund.
In addition, there is precedent for such transfers, Clements said, and the trust fund currently has a surplus, which ensures that a one-time transfer would not jeopardize the fund’s long-term sustainability.
“With the increase in revenue from the Nebraska lottery, the fund is on track to continue to grow,” he said.
The Cavanaugh amendment failed on a vote of 12-28.
Senators adopted an amendment brought by Omaha Sen. Mike McDonnell, which would appropriate $10 million in general funds to conduct a required actuarial study regarding changes to the Nebraska State Patrol retirement plan. The amendment was adopted 28-0.
Several amendments to LB814 focused on issues with the state’s corrections system and $335 million in proposed funding for a new prison to replace the aging Nebraska State Penitentiary.
Omaha Sen. Justin Wayne said the state’s focus on building a new facility without a comparable focus on programming for incarcerated individuals or assistance with their reentry into society is not fiscally responsible.
“Our prison system is overcrowded,” he said. “We are going to spend over $300 million to build a new prison and nobody in this body can find me any data point that says that prison will not be full the first day it is open.”
He brought an amendment, adopted 28-3, to add provisions originally outlined in his LB792, which would create a pilot program in a metropolitan class city to assess and treat post-traumatic stress disorder related to gun violence.
As introduced, the bill would have appropriated $25 million in general funds to carry out the study, but Wayne said he would work with senators before the second round of debate to ensure that funding for the current biennium is $5 million per year from the Nebraska Health Care Cash Fund.
Wayne said he believed that research into and subsequent assistance for PTSD in North and South Omaha could benefit those communities as much as any economic development effort and would be a necessary step in curbing the cycle of violence and incarceration experienced by many area residents.
Lincoln Sen. George Dungan supported the amendment, calling PTSD one of the major root causes of involvement in the state’s criminal justice system. A person who experiences numerous traumatic events as a child often is further traumatized by being incarcerated, he said, leading to a spiral of mental health issues.
“One of the things about PTSD is that it compounds upon itself,” Dungan said.
Sen. Terrell McKinney of Omaha brought an amendment, adopted 29-8, to address the current grant reimbursement process for nonprofits that provide reentry services for individuals transitioning back to communities from the state’s correctional system.
McKinney explained that many such organizations operate on tight margins and cannot afford to provide extensive services upfront and then wait to be reimbursed by the state. The amendment would require that grants not be funded through a reimbursement process.
Another amendment offered by McKinney to strike funding for a new state prison failed on a 14-24 vote.
Dungan brought an amendment, adopted 31-1, to provide $200,000 in general funds in FY2023-24 and FY2024-25 to increase payments for court interpreter services for deaf and hard of hearing individuals and those who are unable to communicate in English.
After eight hours of debate, Arch offered a motion to invoke cloture, which ceases debate and forces a vote on the bill and any pending amendment. The motion was adopted on a 38-3 vote and senators advanced LB814 to select file 36-4.
LB818, also introduced by Arch at the request of the governor, would provide for fund transfers and change and eliminate provisions regarding fund transfers. A committee amendment, adopted 39-0, replaced the bill.
Debate focused on proposed funding for the Perkins County Canal Project, which would divert South Platte River water from Colorado to Nebraska in accordance with a 1923 interstate compact. The state Department of Natural Resources originally requested $449 million for a 500 cubic feet per second canal. The committee increased that request to $574.5 million for a 1,000 cfs canal.
Senators rejected an amendment offered by Omaha Sen. John Cavanaugh to revert to the original funding outlined by the department.
Cavanaugh said the expanded project could jeopardize the state’s ability to exert its rights under the compact by provoking backlash from Colorado over expanded eminent domain claims. Additionally, the department has failed to explain why the larger canal is necessary, he said, and building it likely would result in extensive legal battles.
“I remain skeptical whether the canal is worth the cost to the state, both in terms of construction and the inevitable litigation it will bring,” Cavanaugh said.
Clements opposed the amendment, saying the larger canal would result in Nebraska obtaining 100 percent more water capacity for only 28 percent more cost. He said the expanded canal also would send a message to Colorado that Nebraska is serious about exerting its water rights under the compact.
Dunbar Sen. Julie Slama said Nebraska is “wholly dependent” on flows from others in order to irrigate land and provide drinking water across the entire state. Speaking in opposition to the amendment, she said the expanded canal is necessary to preserve agriculture and secure the state’s prosperity.
“Water is the gold of the future,” Slama said.
The Cavanaugh amendment failed on a vote of 11-32.
Omaha Sen. Terrell McKinney offered an amendment to require that $70 million of any transfers from the Cash Reserve for a new state prison must first go into the Nebraska Prison Overcrowding Contingency Fund, to be released only on completion of several studies regarding classification, staffing requirements and programming needs and efficacy.
McKinney said funding for the prison should not be approved without some level of oversight and accountability for the state Department of Correctional Services, which has yet to complete a classification study required by the Legislature in 2021.
Wishart said she understood the frustration expressed by several lawmakers that the Legislature has not passed meaningful criminal justice reform in recent years and agreed that, without such reform, the state’s prison overcrowding crisis will continue even after construction of a new prison.
She said she was committed to working on an amendment for the next round of debate that would build in greater accountability for the department.
McKinney’s amendment failed on a 16-16 vote.
Columbus Sen. Mike Moser offered an amendment, adopted 36-0, to remove a $40 million transfer from the Nebraska Telecommunications Universal Service Fund to the Cash Reserve Fund. Moser said the current fund balance of roughly $120 million is dedicated to a number of ongoing projects and should not be used to bolster the state’s “rainy day” fund.
Lincoln Sen. Danielle Conrad supported the amendment, saying the state’s robust fiscal position means there is no need to “shake the couch cushions” and “raid” cash funds looking for money in order to avoid cutting state services or raising taxes.
“If and when we face an economic downturn — and there’s a great deal of economic uncertainty on the horizon — if we utilize and sweep those cash funds today, in a time of unprecedented economic prosperity, we have no place to go in the future,” Conrad said.
Following a successful cloture motion adopted 36-2, lawmakers advanced LB818 to select file on a 35-0 vote May 4.
LB813, the final component of the budget package, would make adjustments to funding for state operations, aid and construction programs in the current fiscal year ending June 30, 2023. Omaha Sen. Machaela Cavanaugh offered a series of amendments to extend debate on the measure, none of which were adopted.
Following a successful cloture motion from Arch, lawmakers adopted a committee amendment May 5 on a 38-0 vote. LB813 then advanced to select file 36-2.