Fund transfer bill advances after cloture, budget gap remains

Lawmakers advanced the second bill in the state budget package March 11 after a successful cloture vote, leaving an approximately $125 million budget gap to be addressed on the next round of debate.

LB1072, introduced by La Vista Sen. John Arch at the request of Gov. Jim Pillen, would provide for and change transfers from the Cash Reserve Fund and make a number of changes to other fund transfers, agency powers and duties and a variety of programs.

An Appropriations Committee amendment would authorize sweeps of partial or full balances from dozens of agency cash funds to the General Fund totaling $38.6 million in fiscal year 2025-26 and $32.8 million in FY2026-27.

Elmwood Sen. Robert Clements, committee chairperson, said the priority for committee members was to take only “extra” money from those agency funds.

“We took a lot of time looking at these cash funds and making sure that they were sustainable — taking off excess dollars that haven’t been spent but making sure that they’re able to fully meet their projected expenses for these two years,” he said.

The amendment also would make various transfers between existing funds and increase by $130 million a transfer from the Cash Reserve Fund to the General Fund in FY2026-27, leaving a balance equal to roughly 10% of state expenses in the state’s so-called “rainy day fund.”

Omaha Sen. John Fredrickson expressed concern about the committee’s continued reliance on cash fund sweeps to balance the state budget. Doing so, he said, undermines the long-term stability of programs that the Legislature saw fit to establish and the agencies that count on those funds to function.

He said lawmakers should be wary of the temptation to “glamorize” efficiency efforts in the aftermath of the work of the federal Department of Government Efficiency.

“Government, of course, needs to be efficient,” Fredrickson said. “But sometimes when we cut things to the bare minimum and [to] the bone, it does the exact opposite. It makes government very inefficient.”

During first-round debate March 10, Lincoln Sen. Jane Raybould offered an amendment to transfer $78.75 million in FY2026-27 to the General Fund from the Perkins County Canal Project Fund.

The fund, which lawmakers created in 2022 to pay for a canal to divert South Platte River water from Colorado to Nebraska under a 1923 interstate compact, currently has a balance of approximately $613 million.

The amendment also would authorize a $5.13 million transfer from the canal fund this fiscal year to the Water Recreation Enhancement Fund and a $6 million transfer in FY2026-27 to the Water Resources Cash Fund.

Raybould said the transfers could be used to restore the balances of funds swept by the committee amendment, including $40 million from the Nebraska Environmental Trust Fund. She said senators have “clung” to the canal fund as a “sacred cow” while sweeping money from veterans’ aid, the arts and many other projects and priorities.

Describing herself as an “enthusiastic supporter” of the canal project, Raybould said the majority of money in the project fund won’t be needed for many years while lawsuits play out, environmental studies are concluded and land is acquired.

Several lawmakers, including Central City Sen. Loren Lippincott, opposed the amendment. He said the canal project is ahead of schedule and that maintaining momentum is “critical” to protect against development by Colorado that could hinder the project and to prevent costly construction delays.

Additionally, he said, leaving money in the fund demonstrates Nebraska’s commitment to seeing the project through.

“Securing Nebraska water is essential to the state’s economic prosperity and long-term welfare,” Lippincott said.

The Raybould amendment failed on a vote of 9-30. The Legislature adjourned for the day without taking additional votes on the measure.

Other amendments

When debate resumed March 11, lawmakers rejected a series of additional amendments that would have stricken a variety of fund transfers from LB1072. They approved one minor change, however, offered by Whitman Sen. Tanya Storer — an amendment to undo a transfer of $34,000 from the Niobrara Council Easement Defense Fund to the General Fund.

Storer said the sweep would leave the Niobrara Council unable to defend against future challenges to easements along the Niobrara National Scenic River. Easements exist in perpetuity, she said, and the council has a legal responsibility to hold grant funds in reserve to defend them if needed.

“If we sweep these funds, not only are we putting the Niobrara Council but ultimately the state of Nebraska at risk for a legal challenge,” Storer said.

The amendment was adopted 27-0.

The committee amendment also would make a variety of transfers between funds, including $1.5 million in the current and next fiscal year from the Nebraska Veterans’ Aid Fund to the Department of Veterans’ Affairs Cash Fund.

Bellevue Sen. Victor Rountree offered an amendment to eliminate that transfer. He said moving dollars from a fund that provides direct emergency aid to individual veterans for housing, food and other urgent needs to a more general departmental fund would set a bad precedent.

“Instead of transferring these dollars out, we should increase their availability, or increase the services that we give to the veterans,” Rountree said.

Omaha Sen. Bob Andersen opposed the amendment. He said the Nebraska Veterans’ Aid Fund has a balance of more than $53 million and pays out approximately $1.5 million in aid annually to veterans. The transfer authorized in the committee amendment would come from interest on the fund and not the principal balance, he said, and would be used for upgrades to the state’s veterans’ homes.

“The fund is going to continue to grow, it’s not going to be depleted,” Andersen said. “The veterans are going to continue to be supported. They’re going to continue getting what they need.”

The amendment failed on a 20-20 vote. Twenty-five votes were needed.

An effort by Kearney Sen. Stan Clouse to remove a provision that would change the allocation of funds within the Municipal Equalization Fund also fell short. Clouse said the fund serves as a passthrough for a portion of sales tax dollars that are returned to cities in the form of equalization aid to encourage municipalities to keep levies low.

The committee amendment would move approximately $14 million from the fund to the Department of Revenue Enforcement Fund. Clouse said a better solution would be to change the formula to allow more dollars to be returned to cities.

“This is not the right way to handle it,” he said.

The amendment failed on a 20-16 vote.

Sen. Dunixi Guereca of Omaha attempted to remove a provision in the committee amendment that would transfer $5 million from the Nebraska Cultural Preservation Endowment Fund to the General Fund. He said the cultural endowment acts as a “force multiplier” by providing state matching dollars to philanthropic donations that increase the impact of the arts across the state.

Clements opposed the amendment, saying the transfer still would leave $10 million in the endowment fund. Those dollars will continue to earn interest, he said, allowing the Nebraska Cultural Endowment to continue as a successful program.

The Guereca amendment failed 14-23.

Lawmakers also rejected four additional amendments, including an attempt to transfer dollars to provide funds for financial literacy. After eight hours of discussion over two days, Arch offered a motion March 11 to invoke cloture, which ceases debate and forces a vote on the bill. The motion was adopted on a vote of 34-12.

Senators then adopted the committee amendment 33-11. Among other provisions, the amendment includes the following bills:
• LB844, introduced by Rountree, which would expand grant eligibility under the Site and Building Development Fund to authorize a grant of $100,000 to a nonprofit organization for building rehabilitation for purposes of food distribution in certain counties;
• LB862, sponsored by Lincoln Sen. Jason Prokop, which would extend intent language under the Nebraska Reading Improvement Act for regional coaches and job-embedded training relating to evidence-based reading instruction until FY2029-30;
• LB992, introduced by Sen. Robert Dover of Norfolk, which would create the Nebraska Technology Infrastructure Cash Fund and require that documentation related to software, informational technology hardware and a planning report be included with agency budget requests;
• LB1229, sponsored by Sen. Paul Strommen of Sidney, which would require the state Department of Health and Human Services to designate a unique budget subprogram for purposes of federal law for the Rural Health Transformation Program; and
• LB1231, also introduced by Strommen, which would amend the Animal Damage Control Cash Fund to include intent to appropriate funds for the animal damage control program and amend the Panhandle Improvement Project Cash Fund to authorize transfers to the Animal Damage Control Cash Fund.

Following adoption of the committee amendment, senators advanced LB1072 to select file 33-12.

State claims

Finally, lawmakers advanced a measure March 12 that would provide for payment of claims against the state. If a person sues the state of Nebraska, he or she files a claim with the State Claims Board. Approved claims exceeding $50,000 must be reviewed by the Legislature.

LB1133, sponsored by Business and Labor Committee chairperson Sen. Kathleen Kauth of Omaha, would approve:
• a settlement reached by the attorney general on behalf of the Nebraska Department of Veterans’ Affairs regarding VA disability and dependent benefits totaling $51,791;
• an indemnification claim totaling $354,456 to settle with a former Nebraska State Patrol captain who claimed retaliation after investigating and disciplining troopers accused of significant criminal activity and unlawful conduct;
• five Worker’s Compensation Court claims totaling $882,500; and
• a variety of state agency write-offs totaling $2.843 million.

A committee amendment, adopted 33-0, would add three workers’ compensation claims totaling $285,000. An additional amendment from Kauth would add a $289,260 line-of-duty claim for a Nebraska State Trooper who died when struck by a plow while assisting at an accident scene during a 2025 snowstorm.

Following the 34-0 adoption of the Kauth amendment, lawmakers advanced LB1133 to select file on a 36-0 vote.