Nebraska budget bill advances as lawmakers dispute sweeping cash funds to close deficit

Nebraska’s 49 lawmakers continued a meandering debate on Tuesday over the first of two major bills that aim to close the state’s current $125 million deficit.And even as LB 1071 advanced to the second round of debate, a pair of Republican lawmakers vowed to oppose it unless a plan to throw $3.5 million of state funds toward private school scholarships.”The will of the people and they speak to us in a petition, best we can, we need to adhere to that,” Sen. Merv Riepe said.Projections show the deficit could balloon to around $874 million next budget cycle, but there are serious disagreements on how to chip away at the widening gap.”It’s a structural deficit, and the only way we can help offset that and put our fiscal house in order is to either pause the accelerated income tax rate or slow it down,” Sen. Jane Raybould said.But many Republican lawmakers argue that the next round of personal and corporate income tax cuts that will go into effect next year will finally make Nebraska competitive with peer states.”We have to not only have our own budget balance, but we also have to compete for corporations,” Riepe said. “It’s an integral part of economic development. It does become a factor in a corporate relocation.”LB 1072 is the second major budget bill and looks to transfer millions of dollars from various cash funds to the general fund. During debate on Tuesday, many lawmakers discussed how sustainable that approach is.”It’s maybe a necessary evil,” Riepe said. “But you can only do it about once because they accumulate over years, and some of them probably had accumulated too much.”Raybould takes issue with the proposed transfer of about $40 million from the Bureau of Educational Land Funds, which she, backed by a 2007 attorney general opinion, argues is off limits.”They’ve come up with a new and creative way of interpreting income and interest to be able to justify their plan,” Raybould said. “But their actions are unconstitutional.”A letter from an attorney with the Nebraska Department of Administrative Services argues that money the fund has made through long-term investments don’t qualify as “principal” under Nebraska law and therefore can be put toward school purposes.Proponents of the move say the $40 million would help stabilize the state’s Education Future Fund, which has been declining in recent years.Another pool of cash in the crosshairs is the Nebraska Environmental Trust Fund.”We know there’s a safety concern again, economic concern, but then also environmental,” Kimberly Carroll Steward, the executive director of the Nebraska Recycling Council, said.Carroll Steward said grants from the trust make up about half of the money the non-profit, which supports recycling across the state, uses in the year. She said rural communities would especially feel the impact of the uncertainty.”A lot of those recycling efforts are being kind of run either by proxy through some of our programs or getting directly through NET, and if they go away, there’s just nowhere to take the material,” she said.Originally, the plan called for $40 million to be swept from NET, but now that’s closer to $11 million. Lawmakers will continue to discuss the cash fund sweeps on Wednesday.