Pillen increases proposed transfer from Nebraska Environmental Trust

Members of Friends of the Environmental Trust and representatives of the Sierra Club of Nebraska called on lawmakers to reject a $14 million transfer out of the Trust in 2023. (Paul Hammel/Nebraska Examiner)

LINCOLN – The Nebraska Governor’s Office is more than doubling down on its effort to use state lottery funds, via the Nebraska Environmental Trust, to help close a $471 million state budget shortfall.

In his budget proposal released Jan. 15, Gov. Jim Pillen proposed to transfer $40 million, over two years, out of the Nebraska Environmental Trust to finance a new boat marina along with bank stabilization work at Lewis & Clark Lake, and to pay for water conservation projects – two things previously funded using state taxpayer funds.

The $40 million take, which must be approved by the Legislature, would nearly exhaust about $20 million-a-year in state lottery proceeds given to the Trust to dole out annually via competitive grants to enhance and conserve the state’s environment.

The $32.7 million earmarked for the Lewis & Clark Lake marina and bank improvements would nearly replace the $37.5 million in state tax funds that Pillen set aside for the project last year. The $8 million in Trust funds proposed for the Water Resources Cash Fund mirrors a request made recently by the Nebraska Department of Water, Energy and Environment, which administers the fund.

Neil Sullivan, the governor’s budget director, told the Examiner in an email that using $40 million in Trust funds, rather than state taxpayer funds, “contributes toward delivering both a balanced budget and additional property tax relief.”

But Jon Oberg, a former director of the Nebraska Department of Administrative Services who has sued previously to prevent a transfer of Trust funds, characterized the use of Trust money to replace general taxpayer funds as “classic money laundering” to solve a state budget problem.

Oberg, in an email, said he hopes the Legislature’s Appropriations Committee rejects the Pillen administration’s attempt to “circumvent the Constitution” and “uphold(s) budget integrity.”

He said rejection of the transfer by state lawmakers is preferable to requiring “citizen lawsuits” like the one he and W. Don Nelson, a chief of staff under then Gov. Bob Kerrey, filed in 2020 to block a swap of Trust grants to benefit an ethanol blender pump project.

In May, Oberg threatened – but didn’t file – a lawsuit against the Pillen administration’s proposal to transfer $15 million in Trust funds to sustain a state water conservation fund.

The proposed Trust fund transfer comes as Pillen looks to close a $471 million budget gap by tapping excess state funds (see infobox) and cutting government spending.

The Legislature has, in past years, approved transfers of funds from the Trust into the Water Resources Cash Fund. Local natural resources districts use that fund to finance projects that conserve water and soil. Backers say it fits with the Trust’s stated purpose “to conserve, enhance and restore the natural environments of Nebraska.”

The Environmental Trust currently shows a surplus fund balance of about $20.6 million, but that does not include a recent $6.5 million transfer from the state lottery at the end of December.

The governor’s fund transfer proposals in Legislative Bill 1072 call for $32.7 million for the Lewis & Clark Lake work to be transferred by June 30, which raises the question of whether the Trust will have enough money by then.

Questions also have been raised about whether Trust funds can be used for “recreation” projects, such as a marina for boats at Lewis & Clark Lake.

Sullivan, the state budget official, said recent Trust grants have included a discovery center at Pecan Creek in Lincoln and renovation of Memphis Lake. He said the Lewis & Clark project would improve public access to the lake and include shoreline restoration and enhancement of fish habitat.

“Using these funds to protect the vital groundwater and surface water resources and for lake improvements, access enhancements and shoreline restoration is a clear constitutional and commonsense use of the funds allocated to the Environmental Trust,” he said.

But former State Sen. Sandy Scofield, who heads a watchdog group called Friends of the Environmental Trust, said financing a marina for 350 motorboats and sailboats at Lewis & Clark Lake doesn’t fit with the Trust’s purpose.

“The only habitat it creates is for predatory humans,” Scofield said. “I love the [marina] idea, and I’d certainly support the project, but it’s not even remotely appropriate for the Nebraska Environmental Trust.”

Last year, the governor had a bill introduced to expand the use of Trust funds to include “recreation” and the construction of new cabins at state parks, but the bill didn’t advance.

Scofield added that transferring almost all of the Trust’s funds to one project — at Lewis & Clark Lake — runs contrary to the Trust’s goal of spreading the lottery money to all counties and cities across Nebraska.

“It’s just unfair to everyone in the rest of the state to play games like this,” she said.

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