Nebraska lawmakers send $10.7 billion budget plan to governor's desk

LINCOLN — Nebraska lawmakers passed the last pieces of the state budget Thursday and sent the package on to Gov. Jim Pillen’s desk.

The governor will have until Wednesday to sign or veto any bill within the package or to issue line-item vetoes on specific items. It will be the first budget of Pillen’s administration.

The package includes several items Pillen called for in his January budget recommendations, such as $1.25 billion to create an Education Future Fund to boost state aid to schools, plus money to build a new prison and a canal-and-reservoir system in western Nebraska.

But it also would increase state spending more than the governor had recommended, including higher payment rates for health and human services providers and a larger increase in funding for the University of Nebraska.

As passed, the Legislature’s budget would appropriate $10.7 billion for state operations and aid and authorize capital construction projects for the two fiscal years ending June 30, 2025. It also would transfer more money into the state’s long-standing Property Tax Credit Fund.

The budget would increase state general fund spending by an annual average of 2.2% over the two years. That’s well below the average going back 20 years but more than the 1.3% average spending growth that Pillen proposed.

The package would leave an estimated $892 million in the state’s general fund for tax cuts and other uses over the two fiscal years. That would be the difference between revenue projections and the spending plan.

Major income tax cut and property tax relief measures that are awaiting final approval would reduce those revenues by an estimated $561 million during the two years. That’s down from the $870 million impact estimated before lawmakers trimmed back the tax measures.

State Sen. Rob Clements of Elmwood, the Appropriations Committee chairman, pointed out that the tax cuts plus all other bills at the second and third rounds of consideration would tally up to $863 million. He said he hoped to see some additional trims made in those bills.

Overall, however, Clements said he was pleased with the budget. He said the package kept spending growth down, while funding the priorities of state agencies and addressing about half of the 87 bills referred to the committee. Those bills sought a combined $1.3 billion, out of which the budget package included about $400 million.

Clements said he hopes to set aside more money in the state’s “rainy day” fund in the future. Under the budget package, the cash reserve fund is expected to be at $779 million by June 30, 2025, or about 13% of state revenues for one year. That would be down from the nearly $1.6 billion expected in the reserve by June 30 this year.

The Appropriations Committee had proposed to keep the reserve at about 16% of state revenues but, at Pillen’s request, lawmakers opted to make more room for tax cuts by reducing a planned transfer of money into the cash reserve.

The budget also would tap the fund to pay for a number of water, housing, economic development and other initiatives, including two major construction projects.

The budget would set aside $574.5 million from the reserve for the proposed Perkins County Canal, which is to start in Colorado and bring water into southwest Nebraska. Under a century-old compact, building the canal would entitle Nebraska to 500 cubic feet per second of water from the South Platte River during the non-irrigation season, in addition to the current 120 cfs during the summer irrigation months.

Another $95.8 million would be transferred from the cash reserve for a new $350 million prison. Lawmakers had set aside the rest of the money during previous years but held off approving construction to encourage negotiations on slowing the increase in prison populations.

This year’s main budget bill would authorize the Department of Correctional Services to proceed with building the prison. Language included in the bill would require the department to complete studies of staffing and programming needs, as well as projections of the mix of maximum-, medium- and minimum-security inmates. The studies were called for under previous legislation.

The main budget bill also would boost payment rates for hospitals, nursing homes, foster parents, therapists and other health and human service providers by 3% next year and another 2% the following year, which accounted for close to $70 million of spending growth.

Pillen did not include any provider rate increases in his original budget plan. But numerous provider groups had asked for larger increases, saying they were struggling to stay afloat in the face of inflationary cost increases and workforce shortages.

The budget also included a 2.5% annual increase in state funding for the University of Nebraska. The increase was less than university officials requested and more than Pillen had recommended in January, but represented a compromise between the two.

In addition, the committee plan included the full cost of salary increases for state employees, which averaged 7% the first year and 5% the second year.