State budget bills considered

The Appropriations Committee heard joint testimony Feb. 18 on five bills comprising the governor’s biennial budget proposal. The state budget is structured on a two-year basis, with the budget passed in odd-numbered years.

The package, introduced by Speaker John Arch of La Vista at the request of Gov. Jim Pillen, contains funding for operations of state government, state aid for individuals and local governments and capital construction projects.

The bills were presented to the committee by State Budget Administrator Neil Sullivan, who said the recommendations represent a 0.5% two-year average annual reduction in general fund spending over previous base appropriations. General fund appropriations for most state agencies are held flat under the proposal, he said.

Among other provisions, the bills would:
• transfer $182.9 million in “excess balances” from 70 different state cash funds to the General Fund;
• roll back more than $77 million in expansions to state incentive and aid programs authorized by the Legislature in recent years;
• authorize an increase of $8 million annually for the state’s developmental disabilities wait list over the next two fiscal years; and
• provide $4.5 million to staff a correctional reception and treatment center expansion.

Sullivan said the result would be a budget that closes an existing budget shortfall and leaves a Cash Reserve Fund balance of $755 million.

“The governor’s biennial budget recommendation balances the $432 million budget gap published in the November tax rate review report,” Sullivan said. “It also provides for additional investments in education, property tax relief and medical care.”

Representatives of several environmental organizations spoke in opposition to provisions in several bills within the budget package relating to the Nebraska Environmental Trust.

The trust was created in 1992 by voters when establishing the state lottery. The trust receives approximately 44% of Nebraska’s lottery proceeds, which are used to fund competitive grants to conserve, enhance and restore the state’s natural environment.

A provision in LB261, the mainline budget bill, would transfer $5 million from the Nebraska Environmental Trust Fund to the Water Sustainability Fund and $2.5 million to the Nebraska Soil and Water Conservation Fund in each of the next two fiscal years.

Katie Torpy, representing the Nature Conservancy, Ducks Unlimited and Audubon Great Plains, testified against that provision and in opposition to LB264. The bill would divert a significant portion of the trust’s funds to the state Department of Natural Resources and the Game and Parks Commission, she said, and change the purpose of the trust to include outdoor recreation and public health infrastructure.

“This is a permanent shift, meaning half of the trust’s funding would no longer be available for community-driven conservation projects,” Torpy said. “Turning a competitive public grant program into a fund for state agencies defeats the purpose of the trust and erodes local participation in conservation efforts.”

Also testifying against LB264 was Carol Bodeen, representing the Nebraska Housing Developers Association and the Nebraska Economic Developers Association. A provision in the bill would transfer $8 million from the Affordable Housing Trust Fund and $2 million from the Rural Workforce Housing Fund to the state’s General Fund.

As of the end of last year, Bodeen said, $24 million of the $35 million balance in the Affordable Housing Trust Fund was under contract. Those dollars are designated for specific purposes and not to fix gaps in the state’s budget, she said.

Benjamin Dennis, speaking on behalf of a group of rural broadband and telecommunications providers, opposed a provision in LB264 that would repeal the state’s 2021 Broadband Bridge Act. The act provides $20 million annually for grants to qualifying broadband development projects.

Dennis said state support of rural broadband is more important than ever given that anticipated funds from the federal Broadband Equity, Access and Development program now are “somewhat perilous” due to actions being taken at the national level. In addition, he said, parts of the state do not qualify for BEAD funding.

“Funding through the Broadband Bridge Act has made an incredible impact on broadband access in Nebraska and discontinuing the funding now — before the work is done — is shortsighted,” Dennis said.

Testifying in a neutral capacity, Mark McHargue of the Nebraska Farm Bureau said the organization appreciates that the governor’s recommendations prioritize property tax relief. He said the package represents a “strong and very conservative budget” that would provide $302 million in property tax relief in fiscal year 2025-26 and $370 million in FY2026-27.

No one testified in support of the budget proposal and the committee took no immediate action on it.