Nebraska passes budget bills with work still needed to fill projected deficit

LINCOLN — Lawmakers passed the final adjustments to Nebraska’s two-year budget Wednesday, with several revenue-raising bills passing later that morning that will help fill the state’s projected deficit.

The Nebraska Legislature passed Legislative Bills 1071 and 1072 on separate 35-13 votes. For a moment, it appeared that LB 1071 would fail, as nearly all lawmakers voted no before changing their votes as part of a planned April Fools’ Day joke on Speaker John Arch of La Vista, whose look went from shock to a smile.

“That was a very closely held secret,” Arch said. “I was stunned.”

The budget bills passed on Day 54 of the Legislature’s 60-day session, the latest the state budget has ever been finalized. Prior to the bills’ final votes Wednesday, lawmakers voted to suspend the rules to bypass a legislative rule that says the budget must be passed by Day 50 of a short legislative session like this one.

Both bills now go to Gov. Jim Pillen’s desk to be considered for line-item vetoes before being finalized. Pillen congratulated lawmakers Wednesday for passing the budget, saying the overall package “reflects incredible progress for common sense fiscal conservatism.”

“We have made extraordinary progress with this year’s budget reductions. That has taken significant collaboration with lawmakers and time spent by leadership to understand the many issues and opportunities within their agencies to make the right decision for Nebraskans,” Pillen said in a press release. “I congratulate the Legislature on what has been accomplished. There’s still work to be done in the coming weeks to finish the job. We will keep working to meet the expectations of Nebraskans.”

LB 1071 and 1072 seek to narrow a projected deficit that started at $471 million at the beginning of the 60-day session but ballooned to more than $646 million following new economic forecasts in late February. Combined, both budget bills include a collection of cuts, changes and cash transfers expected to bring the deficit down to roughly $38 million, with several revenue-generating bills passing shortly after that lawmakers have said they hope to use to close the gap.

The vast majority of the budget-balancing actions in LB 1071 and LB 1072 were a large collection of smaller spending cuts. Some of the largest contributions to filling the deficit: a $50 million cut from the Tobacco Settlement Fund and $152 million from the state’s rainy day fund.

Last year, lawmakers approved a separate $152 million transfer from the cash reserve to balance a previous deficit, bringing the total amount cut from the reserve this budget cycle to $304 million. This would draw down the reserve’s balance to about $546 million.

Appropriations Chair State Sen. Rob Clements of Elmwood said he was pleased lawmakers were able to pass the budget bills without needing additional pulls from the reserve. He said there was a point this session when he wasn’t sure if more transfers might be unavoidable.

No lawmakers debated the budget bills passed Monday — a marked shift from earlier rounds that saw heated debates on both bills, including a week when lawmakers hit a roadblock on LB 1071.

LB 1071 was blocked from advancing twice during its second round of debate because lawmakers hit an impasse over whether to remove or include a proposed new $3.5 million school vouchers program, largely to use state funding to offset some costs of attendance at private K-12 schools for students who started attending under a school choice law that voters repealed in 2024.

The “bridge” program came at Gov. Jim Pillen’s request, who originally set the funding at $7 million in his early session budget proposal. The Appropriations Committee halved the funding during its discussions, citing cost concerns.

SUPPORT: YOU MAKE OUR WORK POSSIBLE

Just before LB 1071’s first stall, Clements tried to remove the provision on his own, believing that it lacked enough support to pass — a theory his fellow conservatives tested on the floor days later. Some supporters of the school choice proposal said they wouldn’t support the broader budget if the program was removed, leading to the cloture motion failing.

On LB 1071’s second attempt at advancing, lawmakers tried adding the voucher program back into the budget. Some supporters aired grievances about the inclusion of LB 304 from State Sen. Wendy DeBoer of Bennington in the budget. That proposal would permanently extend income eligibility for the state’s child care subsidy program at 185% of the federal poverty level, rather than letting it fall to 130% this October.

Several school choice supporters expressed that the budget likely wouldn’t progress unless both the voucher program and the child care subsidies were included in the budget — or neither. The attempt to include both provisions in the budget failed 27-15.

LB 1071 advanced on its third try with an amendment to remove the child care subsidy provision from the bill. Removing the voucher program wasn’t necessary because Clements removal of it was still in effect. Lawmakers adopted the amendment with no one speaking against it.

State Sen. Machaela Cavanaugh of Omaha, an Appropriations member and vocal critic of Pillen’s budget approach since adopted by the Legislature, stood by her previous comments that the state budget was a “dumpster fire.” She said she was surprised that so many senators supported the budget’s passage Wednesday, considering opposition in earlier debates.

With the budget bills passing, lawmakers still need to find at least $38 million to fill the remaining deficit. The Legislature is considering a collection of revenue-generating bills that could add roughly $44 million to the state’s ending balance, leading to a small surplus of about $6 million, according to Legislative Fiscal Analyst Keisha Patent. Several of those bills passed Wednesday morning.

SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX