State auditor funding reinstated, other line-item vetoes stand

Lawmakers voted May 31 to override a gubernatorial veto and increase funding to the state auditor’s office, but all other line-item vetoes were sustained.

Several bills comprising the state’s $10.7 billion, two-year budget package were passed May 18 and sent to Gov. Jim Pillen. The governor returned two bills to the Legislature May 24 with about a dozen line-item vetoes to expenditures and transfers that senators had approved.

Sen. Robert Clements, chairperson of the Appropriations Committee, offered motions to override three line-item vetoes on behalf of the committee.

Among the governor’s cuts were approximately $848,700 in general funds and $340,100 in cash funds over two years for a new state auditor position and salary increases.

Bennington Sen. Wendy DeBoer supported the motion to reinstate that funding, noting the need to ensure that an influx of pandemic relief funds in recent years is spent appropriately and not subject to “claw backs” by the federal government.

“We have to have an accounting and knowledge of where our money is,” DeBoer said. “We have to be able to do these audits; we have to know what all is going on financially in our state.”

Sen. Steve Erdman of Bayard also spoke in support of the override motion. The auditor’s office currently cannot offer competitive salaries, he said, and experienced staff have left the office for jobs in other state agencies for pay increases of up to $30,000.

Effective audits of state government will save the state more money than the amount that was appropriated for staff in the budget, Erdman said.

“[Auditor Foley] has shared with me that it’s been 10 years since the Department of Education has been audited,” he said. “In general, it’s about five to seven years before each agency of the state gets a look at. That’s too long.”

Senators voted 31-14 to override the governor’s veto. Thirty votes were needed.

As passed by the Legislature, LB814, the mainline budget bill, would have increased provider rates for the Children’s Health Insurance Program and Medicaid by 3 percent in FY2023-24 and 2 percent in FY2024-25. The governor vetoed the second-year increase, amounting to a reduction of approximately $15.3 million in general fund appropriations.

In his veto message, Pillen said the state’s hospitals have seen “record profits” in recent years and that increasing reimbursement rates would not address systemic workforce shortages.

Clements said he believed the governor’s veto was “reasonable” and that lawmakers could revisit the issue during mid-biennium budget adjustment discussions next year if necessary.

North Platte Sen. Mike Jacobson agreed. Speaking in opposition to the override motion, he said he introduced an interim study resolution to look at rebasing Medicaid rates, the results of which could be used when making budget adjustments during the 2024 legislative session if needed.

Jacobson acknowledged that inadequate provider rates place a burden on hospitals and insurance companies — and ultimately all Nebraskans in the form of higher premiums — but said lawmakers have time to address the problem.

“There’s no emergency to do anything now,” Jacobson said. “The Legislature can come back next session and either go to 2 percent or greater next year.”

Sen. Tony Vargas of Omaha supported the override motion, saying the state should prioritize care for its most vulnerable residents in a budget cycle that has left the state in such a strong revenue position.

In addition, he said, failing to raise provider rates in the second year of the biennium would result in Nebraska missing out on tens of millions in federal matching funds.

The override motion failed on a vote of 22-24.

Lawmakers also declined to override the governor’s veto of $40 million in cash fund transfers to the Rural Workforce Housing Investment Fund and the Middle Income Housing Investment Fund in LB818.

The state has invested more than $200 million in affordable housing over the last three years, Pillen said, which developers are leveraging to build up the state’s affordable housing supply.

Seward Sen. Jana Hughes supported the override motion. She said that only $40 million of the $200 million referenced by the governor in his veto message had been used for rural workforce housing – a program that provides matching grant funds to developers in rural communities to build housing that is affordable for middle-income families.

“The program is not one where we are throwing taxpayer money into a vacuum,” Hughes said, noting that communities must show evidence of housing needs and provide a minimum of 50 percent in matching dollars before they can even apply for program funds.

Sen. Anna Wishart of Lincoln also supported the motion, saying Nebraska currently is 50,000 housing units short of the statewide need. In addition, she said, the state has more than 80,000 jobs that it cannot fill. The two issues are connected, Wishart said.

“When I look at all of these statistics and I think about what we as a Legislature should be prioritizing our investment in as a state, housing should absolutely be at the top of that list,” she said. “It is an anchor for young people to grow a family, to build their careers, [and] it’s a development tool for communities.”

Speaking in opposition to the motion, Erdman argued that the free market should drive housing construction.

“I’m not for the government building houses,” he said. “Not one.”

Sen. Tom Briese of Albion also opposed the motion, saying the program currently has a fund balance of approximately $8 million that can be carried over. The most important priority for lawmakers should be tax cuts, he said, and every dollar that goes into a program impacts the state’s ability to protect those cuts.

The motion failed on a vote of 25-23.

Other override motions

Senators also declined to reinstate a veto of $2 million to fund part of a second-year pay raise for legislative staff, offered by Fremont Sen. Lynne Walz.

Briese, chairperson of the Executive Board, opposed the override motion. He noted that the committee had voted earlier in the day to provide funding for the pay raise from unexpended carryover appropriations.

But Walz said that balance — approximately $7.2 million by Briese’s estimate after accounting for the salary increase — should be preserved for other identified legislative needs, such as upgrading technology and better accommodations for public access to the Legislature.

“We have already made commitments to using these funds,” Walz said. “We are fully aware of the impacts that term limits have had on our Legislature and included in that is the loss of institutional knowledge … we need to ensure that staff have incentives to stay in the positions they’re in.”

Wishart also expressed concern with the funding mechanism, noting that without a general fund obligation to increase base salaries, it would be up to future lawmakers to maintain the promises made to staff in this budget cycle.

The motion failed 22-21.

Three other override motions also were rejected.

An attempt by Lincoln Sen. George Dungan to reinstate $1.9 million in funding for the state Supreme Court to fund salary increases for court interpreters, ex-officio clerk services and guardianship services failed on a vote of 20-23.

Two motions from Lincoln Sen. Danielle Conrad also were unsuccessful. The first, which failed 17-22, would have reinstated $500,000 in aid to expand the Court Appointed Special Advocate program. The second, which failed 19-27, would have reinstated $1 million in general funds for a grant to house pregnant and parenting homeless youth.