Additional budget changes advanced

A bill intended to help offset a future shortfall in funding for property tax relief advanced to the second-round of debate Aug. 15.

LB3, introduced by Sen. Robert Clements of Elmwood at the request of Gov. Jim Pillen, would authorize and provide for fund transfers, change certain fund transfer provisions, change application of investment earnings and amend certain fees.

Among other provisions, the bill as introduced would eliminate the crediting of accrued interest to state agency cash funds. Those dollars instead would be directed to the state’s General Fund.

An Appropriations Committee amendment would limit those transfers of investment earnings to 45 of the 68 cash funds that were recommended in the governor’s proposal.

Clements said the changes were made following an in-depth analysis by the committee to ensure that the bill would not harm the ability of state agencies to carry out their functions.

“We excluded funds where the interest is used in the agency budget and made sure that the funds that we’re taking interest from are sustainable so that we wouldn’t have an agency running out of money,” he said.

Clements added that the amendment is projected to increase state revenue by $22 million in 2025, $80 million in 2026 and $71 million in 2027. It also states legislative intent to transfer $200 million to the General Fund from the state’s Cash Reserve Fund in 2027 if needed and if funds are available.

Along with another measure advanced during the special session, Clements said, the bill would close an existing gap in the $750 million needed to fund the property tax relief moving forward in LB34.

Omaha Sen. Tony Vargas supported the amendment, saying it would provide approximately 70% of the revenue needed to fully fund property tax credits in the near future.

Sen. Justin Wayne of Omaha filed a series of amendments and motions to extend debate on LB3. He used the debate to encourage senators to rethink the trajectory of the special session and find ways to provide more tax relief.

“We’re not really trying to fix the problem,” he said. “We’re kicking the can down the road.”

None of Wayne’s substantive motions or amendments were successful.

Brainard Sen. Bruce Bostelman offered an amendment to remove a provision from the committee proposal that would permanently credit the interest on the Nebraska Universal Service Fund to the state General Fund. He noted that senators chose not to permanently divert those dollars during debate on the state budget in the last regular session.

The Bostelman amendment failed on a vote of 21-15. Twenty-five votes were needed.

Lawmakers adopted a compromise amendment, however, offered by Omaha Sen. Machaela Cavanaugh, which would end diversion of the fund’s interest after FY2026-27. That amendment was adopted 40-3.

An amendment brought by Omaha Sen. Terrell McKinney initially failed 13-32 but was approved following a successful motion to reconsider the vote. The amendment would remove a provision redirecting interest from the Correctional Industries Revolving Fund and the Correctional Services Facility Cash Fund to the state General Fund.

McKinney said the state’s correctional facilities are in disrepair, including serious water issues at the state penitentiary and the women’s facility in York. If there are funds available, he said, the department should be using them to address those concerns.

Clements dropped his opposition to the McKinney amendment after the first vote, indicating that LB3 would not be negatively impacted by losing the approximately $250,000 in revenue from the interest on the two cash funds.

“Seeing that there is great opposition here, I’m willing to reconsider the vote,” Clements said.

The amendment was adopted 29-14 on the second vote.

After eight hours of debate, Clements offered a cloture motion, which was adopted on a 37-9 vote. Lawmakers then adopted the committee amendment 40-6 and advanced LB3 to select file on a 35-11 vote.