By Erin Bamer | Nebraska Examiner
Legislature rejects proposal to pull dollars from Perkins Canal project or restore funding for Cultural Endowment and Veterans Aid
LINCOLN — The second piece of Nebraska’s budget-balancing effort cleared its first round of floor debate Wednesday, but the only approved change made a negligible increase in the state’s projected deficit.
Lawmakers advanced Legislative Bill 1072 to the second of three rounds of floor debate in a 33-12 vote. The bill deals with statutory changes needed to enact the approved budget adjustments, including a collection of cash fund sweeps.
Lawmakers began the session with a projected $471 million deficit, which ballooned to more than $646 million following new economic forecasts in late February.
Appropriations members approved a collection of cuts, changes and cash transfers that brought the expected deficit down to about $125 million. In reality it’s closer to $140 million.
LB 1071, the other budget bill, advanced on Tuesday and is expected to return to its second round of floor debate next week. Under the Legislature’s schedule, lawmakers are expected to finalize both budget bills and send them to Gov. Jim Pillen’s desk by March 25.
Lawmakers proposed multiple amendments that would have adjusted the projected deficit, but only one was adopted.
The amendment, from State Sen. Tanya Storer of Whitman, would restore $34,000 to the Niobrara Council Fund. Legislative Fiscal Analyst Keisha Patent estimated that amount represents about 0.06% of state spending per year.
Lawmakers rejected an amendment from State Sen. Jane Raybould of Lincoln to pull nearly $90 million out of the Perkins County Canal Project Fund and distribute the dollars to the general fund and two separate cash funds. Raybould said it didn’t make sense to her why lawmakers were so willing to sweep nearly all other cash funds — including ones with constitutional protections — but not the Perkins Canal.
“The biggest and most idle fund is the Perkins Canal,” Raybould said.
Fiscal analysts brought up the possibility of pulling dollars from the Perkins Canal fund on two separate occasions before the Appropriations Committee. Analysts noted the fund’s balance is about $613 million, but roughly $595 million is expected to remain unobligated for at least six years.
On both occasions, Republican members of Appropriations indicated they were opposed to taking any money from the fund, and that mindset was reflected during floor debate. State Sen. John Fredrickson of Omaha called the fund “a land mine,” as lawmakers said it was an issue on which many were unwilling to budge.
State Sen. Mike Jacobson of North Platte said he would vote against any efforts to take “one penny” out of the fund and asked that lawmakers stop raising it as a potential option. He said even discussing it would make Nebraska seem unserious about the project to Colorado, with which the state is currently engaged in a lawsuit regarding its water rights to complete the project.
“Colorado, if you’re listening, don’t get excited. We are still on track,” Storer said.
Raybould repeatedly said she supports the canal project, but disagreed with arguments that pulling dollars from the fund would make Nebraska appear less serious about the project. She said Colorado officials think Nebraska is unserious because key first steps of the project haven’t been completed.
Raybould argued lawmakers could pull from the fund and bond out the difference, but Jacobson said he found it unlikely that the Legislature would agree to that option because it would incur state debt.
Other amendments lawmakers rejected included proposals to restore $5 million for the Nebraska Cultural Preservation Endowment Fund and to restore $3 million to the state’s Veterans Aid Fund.
Though the adopted amendments so far have had little impact on the deficit, the Appropriations Committee has met during lawmakers’ lunch break for the past two days, and greenlit a collection of spending cuts that combined would reduce the deficit by about $70 million. The full Legislature expects to vote on the changes next week.
The largest portion of that is a proposed $50 million transfer from the state’s Tobacco Settlement Fund, which the committee approved Tuesday. Among the latest committee adjustments Wednesday was a $3.5 million transfer from insurance proceeds that covered the loss of housing at state prisons and a $2 million rollback from state mentorship grants.
Patent noted that a collection of revenue-generating bills still up for debate could close the deficit by about $40 million, if approved by the Legislature. If lawmakers pass those bills and accept the committee’s recommendations, that would bring the $125 million deficit below $30 million.
Some lawmakers shared concerns about the continued reliance on cash fund sweeps to balance the budget, which has been a pillar of Pillen’s budget strategy in recent years. State Sen. John Fredrickson of Omaha said the sweeps might appear efficient, but he argued it undermines the sustainability of the government services the cash funds support.
“We can say we feel like it’s efficient,” Fredrickson said. “Efficiency is not just about dollar amount.”
Storer floated the idea of “across-the-board cuts” Tuesday, an approach mentioned by Pillen’s Policy Research Director Kenny Zoeller last week after the Legislature rejected a $50 million proposal to increase the state’s cigarette tax by $1 and increase taxes on vape products.
Storer mentioned that in 2018 — the last year Nebraska’s budget bills failed to pass a filibuster-ending cloture vote — lawmakers agreed on a 2% cut to almost all state agencies. Following that, Storer said the state government was able to recover, and revenues got back on track “in short order.”
“It’s been done. The sky won’t fall. We’ll all be okay,” Storer said.