Budget debate begins, attempt to nix private school scholarship ‘bridge’ funds falls short

Lawmakers began debate March 9 on the first of two bills comprising the Appropriations Committee’s mid-biennium budget adjustment package.

The state budget is structured on a two-year basis, with the budget enacted during legislative sessions held in odd-numbered years. Adjustments are made during sessions held in even-numbered years.

Before the 2026 session began in January, senators were facing a $471.5 million budget shortfall. That hole got deeper following a February meeting of the Nebraska Economic Forecasting Advisory Board, which lowered revenue projections by another $175 million.

The Appropriations Committee’s budget adjustment package would reduce the gap, but not close it entirely — leaving the state roughly $125 million below the minimum reserve requirement. The committee package includes proposed transfers from dozens of agency cash funds to the General Fund totalling $38.6 million in fiscal year 2025-26 and $32.8 million in FY2026-27.

It also would increase by $130 million a transfer from the Cash Reserve Fund to the General Fund and make a number of cuts to state agency appropriations.

Lawmakers began debate with LB1071, the main budget adjustment bill introduced by Speaker John Arch of La Vista on behalf of Gov. Jim Pillen. The measure would provide, change and eliminate provisions related to appropriations for state expenses for the biennium ending June 30, 2027.

Among other changes from the bill as introduced, the committee proposal would reduce General Fund appropriations by $52.4 million in FY2025-26 and $182.4 million in FY2026-27. It also would boost the state’s bottom line by reappropriating $36.3 million of general funds already appropriated to a variety of state agencies but not yet spent.

Sen. Robert Clements of Elmwood, chairperson of the committee, said the remaining budget gap would need to be addressed during the second round of debate and with the possible passage of several revenue-generating bills that are working their way through the Legislature.

He said the committee would be meeting daily to determine possible additional cuts.

An amendment offered by Plymouth Sen. Tom Brandt would remove a provision in the committee package meant to provide “gap year” funding for private school scholarships.

The federal One Big Beautiful Bill Act of 2025 created a federal tax credit starting Jan. 1, 2027, that allows individuals a dollar-for-dollar, nonrefundable tax credit of up to $1,700 for donations to organizations that provide scholarships to students attending private and religious schools.

The governor’s proposed budget adjustments included $7 million in FY2026-27 to fund scholarships in Nebraska until the federal law takes effect. The committee amendment would lower that number to $3.65 million, with $3.5 million for scholarships and $150,000 for administrative costs. Families would have to be at 185% of the federal poverty level or less to qualify for scholarship funds.

Brandt noted that Nebraska voters repealed a 2023 law passed by the Legislature authorizing the use of state general funds for private school scholarships. Voters were clear in their rejection of the concept, he said, and senators should respect that by not diverting public funds to private schools.

“For me, this is fundamental,” Brandt said. “This is about the First Amendment; separation of church and state.”

Seward Sen. Jana Hughes supported the amendment, echoing Brandt’s sentiments. Hughes said she had been supportive of such scholarships in the past, but that voters had “overwhelmingly” said they don’t want general funds supporting private schools.

“I voted for these scholarship programs when I was here at the beginning of my term,” Hughes said,  “but I will listen to Nebraskans, and I will now not support this.”

Also speaking in favor, Sen. Megan Hunt of Omaha said the value of private school education was not the issue at hand, but whether taxpayers dollars should be used to fund it.

“What we’re talking about is whether public funding should be redirected to subsidize private education out of the General Fund in a time when we have no damn money,” Hunt said.

Opposing the amendment, Omaha Sen. Christy Armendariz said children need educational options and characterized not providing assistance to low-income families who cannot afford to move to a public school district that better fits their child’s needs as a form of “educational redlining.”

She said expending public funds on scholarships now is a “strong, long-term” strategy to save taxpayer dollars down the road by “turning the tide of generational poverty through educational achievement.”

“I believe it is the responsibility of Nebraskans to support a child’s education through 12th grade, whatever that education looks like for that individual child,” Armendariz said.

Sen. Kathleen Kauth of Omaha also spoke in opposition, saying the scholarship funding included in the budget should be seen as a “winding down” of the repealed Opportunity Scholarship Program, not a continuation of it. She said the funding would allow students who do better in private schools to continue their education uninterrupted until the federal law takes effect.

The Brandt amendment failed on a vote of 23-17. Twenty-five votes were needed.

Another amendment brought by Syracuse Sen. Bob Hallstrom would add the amended provisions of his LB1058 to the main budget bill.

Those provisions would direct the Nebraska Tourism Commission to develop a program to make a grant to an organization promoting tourism that is located along the Missouri River and within five miles of a first class city.

As introduced, the proposal stated legislative intent to appropriate $150,000 in general funds. As amended, it instead would transfer those funds from the State Visitors Promotion Cash Fund.

Hallstrom said the funds are intended to fill a gap in federal funding for the Missouri River Basin Lewis & Clark Visitors Center near Nebraska City, which he said serves approximately 10,000 visitors per year.

The $150,000 in federal grant dollars lapsed in 2025, he said, and the transfer in his proposal would bridge the funding gap while efforts are underway to reinstate federal support.

Clements spoke in favor of the amendment, saying the land the center is on would revert back to the federal government if it is forced to close. In addition, he said, the transfer would be an appropriate use of Nebraska Tourism Commission funds.

The Hallstrom amendment was adopted on a 34-1 vote and the Legislature adjourned for the day without taking any additional votes on the budget adjustment package. Debate resumed when the Legislature convened March 10.