The Legislature gave first-round approval this past week to a $9.3 billion biennial budget for fiscal year 2019-20 and 2020-21, which consisted of seven bills advanced to the floor by the Appropriations Committee. The ending balance is $2 million above the required minimum 3 percent reserve. The fiscal impact of LB 300, which proposes to increase the salaries of judges, is approximately $2 million. If LB 300 is passed, there will be little to no funding for other legislation with a fiscal impact. In developing the budget proposal, the Appropriations Committee had to come up with an additional $45 million to bring the minimum reserve back to 3 percent, which had been lowered due to budget constraints during the last biennial budget.

The average budget growth over the two-year period is 3 percent, which is slightly lower than the governor’s recommendation. One of the largest growth factors in the budget is the $50 million in funding for Medicaid expansion, which was placed on the ballot through an initiative petition and approved by Nebraska voters. The budget contains a 3.1 percent per year average increase in total general fund aid for K-12 school districts, amounting to almost $1.3 billion each year, or approximately 28 percent of our general fund budget.

The projected balance of the Cash Reserve Fund will fall to $372 million by the end of the biennium, representing approximately 7.5 percent of annual state revenues. Fiscal experts have recommended a target of 16 percent, which gives the state some cushion in case of an economic recession. The status of the Cash Reserve Fund includes a transfer of $54.7 million for two additional high security housing units under the Department of Correctional Services, in an attempt to deal with prison overcrowding and to allow the transfer of high-risk inmates from the Tecumseh State Correctional Institution to Lincoln, where staff are more available. However, the Appropriations Committee also recommended transferring $25 million each year to the Cash Reserve Fund instead of fully funding the governor’s recommendation to increase appropriations to the Property Tax Credit Fund by the full $51 million each year, for a total of $275 million in annual funding. Although senators realized the importance of rebuilding the Cash Reserve Fund, they argued that it shouldn’t be done with funding for property tax relief. An amendment to block this transfer was successful on a 28-8 vote.

In addition to the new correctional facilities, the budget also contains $2.5 million each year to expand capacity at problem-solving courts, such as drug courts. These courts, which offer a lower cost alternative than prison, focus on early intervention, appropriate treatment, intensive supervision and consistent judicial oversight. 

Another issue that was a priority for the Appropriations Committee was provider rates, which are paid to the various providers in the Department of Health and Human Services’ programs. During the previous biennium, provider rates were either cut or frozen. Although the governor recommended a 2 percent increase for long-term care providers, the Appropriations Committee’s budget proposal includes an average 2 percent per year increase for all providers. Additional funding was included for nursing homes in order to adjust for recent negative inflation factors used in the calculation of their rates.

The Legislature debated LB 289 for three hours this past week. LB 289 is the Revenue Committee’s proposal for property tax relief. According to the Speaker of the Legislature’s policy, the sponsor of LB 289 will have to prove that she has 33 votes in order for LB 289 to be placed on the agenda again. The Revenue Committee is working on possible adjustments to their proposal in order to gain the approval of the necessary number of senators. I voted for the increase in the funding for the Property Tax Credit program during the budget debate and I’m hopeful that we can pass a proposal containing additional property tax relief. Although I can justify a sales tax increase if it results in significant property tax relief, I would prefer removing more exemptions and broadening the base of the sales tax, rather than an increase in the sales tax rate. 

I encourage you to continue to contact me with your thoughts and opinions on the issues before the Legislature. I can be reached at tgragert@leg.ne.gov. My address at the capitol is District 40, P.O. Box 94604, State Capitol, Lincoln, NE 68509 and my telephone number is (402) 471-2801. 

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