Unicameral Update: A Much-Needed Break

Friday was a recess day and today is President’s day, two days everyone who works around the Capitol was ready for.  Lincoln also got its first real snow today (which I love, but that’s another story) and except for me, our building is empty.  So, as I sit here in a totally silent office, I breathe a deep sigh of relief that my least favorite part of session is over.  January and the first half of February are always the worst. Reading and summarizing bills, communicating with senators regarding their bills to find out just why they introduced them, and keeping you all up to speed on what is headed your way without causing panic, is like juggling a dozen batons (some of which are on fire).  My mantra these days is an old Waltism, “Remember, this is a process, not an event.”  Thirty years ago, we used to head to the Capitol and pick up paper copies of bills and mail them to clients.  If they were short, we would fax them.  If there was an emergency, Walt would make a phone call.  There was no internet, no mobile phones and somehow everything worked just fine.  Today, with Google searches and instant posting on the Unicameral’ s website, news travels faster than I can walk to my office and send an email.  Not going to lie, sometimes I miss those stacks of green bills spread out on the conference room table followed by a car full of manila envelopes headed to the post office.  Oh, the good old days!

Tomorrow, committees will start their fifth week of public hearings.  The Appropriations Committee will hear the Governor’s primary budget bills, with a twist.  For the first time that I can remember, the hearing notice for the Governor’s bills instructed the public to refrain from testifying on individual items in the budget bills until their associated department or agency hearing was held. A rather odd request considering each bill is supposed to be subject to a public hearing, especially given the fact that most of the public wouldn’t know which department or agency would be impacted as they aren’t identified in the bill.   One bill in particular, LB264, proposes to make 66 transfers funds from agency cash funds and other funds, 47 of which will be transferred into the General Fund.  In total, the bill makes more than 130 changes to how existing funds can be spent.  Historically, the budget is fairly tedious but straightforward process.  However, there has been a major shift in focus on how we spend our state resources, and I don’t want folks to ask “how didn’t we know this was happening,” after it happens. 

Governor Pillen has made it clear that he believes that state agencies hold on to too much cash.  It is taxpayer money and should be used more efficiently.  Thus, he has identified cash and other funds that will be swept into the General Fund for regular state expenses.  Before session started this year, the Governor announced that they planned to “clean out the couch cushions,” in order to use existing resources and avoid a large General Fund increase.  It is this efficiency that has allowed tax cuts and low General Fund annual budgets for the past two fiscal years. But what happens where there isn’t anymore loose change to be found?  Enter LB264.   Under LB264, more than 50 funds that are currently designated for specific uses, would be amended to allow for transfers to be made to the General Fund or other funds.  This means that license fees, user fees, interest income and other revenue would become subject to being transferred if needed in other ways. 

This may work just fine; it also may lead to a need for increased fees to replace the original purpose of those funds.  It all becomes rather ominous when you look at how state resources have been appropriated over the past three fiscal years.  Although we focus mostly on appropriations from the General Fund, Nebraska’s budget reflects the spending of all state resources.  This includes Cash Funds, Federal Funds, and General Funds.  When you compare actual expenditures from fiscal year 2022-2023 to the Governor’s recommendation for fiscal year 2025-2026, our total expenditures (all funds) will increase by over 130%, from $14.4 billion to $18.9 billion.  In that same time frame, Cash Fund expenditures will balloon by more than 200% from $2.8 billion to $5.6 billion, and Federal Funds will increase by 123% from $5.4 billion to $6.7 billion.  (A side note on federal funds: During FY22-23, we were still at the height of ARPA funding.  Further, it is expected that President Trump will strive to cut federal funding for many programs.)  Thus, even though our General Fund appropriations have been low, our overall spending has not.  This has led many to start sounding the alarms for out-year sustainability of our cash reserve funds and potential deep cuts to existing programs. 

Now you all know what the most contentious issue will be this session.  We began session with a $432 million deficit.  Hopes are high that revenues will be up, and gross receipts were up by 2.7% over the forecast in January.  The Economic Forecasting Advisory Board will meet on February 28 and again in April to determine the bottom line.  The budget will be advanced to the floor of the legislature on April 29, and debate will begin May 6th. 

Have no fear, there will be plenty of action between now and then.  I’ll be back with more highlights soon. 

Korby M. Gilbertson
Radcliffe Gilbertson & Brady