Ricketts vetoes money for nursing homes, other providers to make room for tax cuts

LINCOLN — Gov. Pete Ricketts cut more than $100 million out of the state budget package Monday before returning the bills to the Legislature.

The chief targets of his line-item vetoes were increased payments for providers caring for vulnerable Nebraskans, affordable urban housing development, and vocational and life skills programs to help inmates succeed outside of prison.

In a veto message to lawmakers, Ricketts said he was making the cuts to ensure that Nebraskans get tax relief during a year when state revenues are projected to top $5.9 billion.

“It’s important that we strike the appropriate balance between calibrating government spending and returning excess revenue back to the people,” he said. “That is how we responsibly steward taxpayer money. With that in mind, I’ve chosen to line-item veto certain spending items that will allow tax relief to succeed.”

State lawmakers are slated to debate a tax cut package Tuesday that would ratchet down the state’s top corporate and individual income tax rates over five years, expand income tax credits offered to property taxpayers and phase out income taxes on Social Security benefits.

The package would reduce state revenues by more than $860 million in fiscal year 2026-27, when all pieces of the package are fully implemented. Ricketts praised those changes in his veto message.

In the past, Ricketts has said his goal was to keep state spending growth under 3% annually to make tax cuts possible.

In his veto letter, he objected to the fact that the legislative budget would result in 5.9% spending growth for the fiscal year ending June 30, 2023. His vetoes would hold the increase to 4.8% for that year and 3.1% over the two-year budget period.

By contrast, the legislative budget package would increase spending by an annual average of 3.2% over the two-year budget period.

Ricketts vetoed $51.8 million of the $55 million increase in rates paid to private providers caring for the most vulnerable Nebraskans, accounting for the largest single cut.

He eliminated all of the $26 million intended to boost rates for nursing homes and cut 60% of the increases for child welfare providers and behavioral health providers. He cut about one-quarter of the money intended for providers serving people with developmental disabilities.

Ricketts said those providers are slated to get additional money from federal COVID recovery funds. He said that money, plus what he left in the budget package, would be enough to increase rates beyond what had been approved last year.

State Sen. John Stinner of Gering, the Appropriations Committee chairman, has cited inflationary pressures and pandemic-related worker shortages for the increases approved by the Legislature. The budget package would have boosted payment rates by 15%, in addition to the 2% approved for most providers last year.

The committee also sought to match private provider rates to the higher salaries negotiated by the administration for state employees in critical areas, such as corrections and 24-hour facilities.

Among his other vetoes, Ricketts eliminated the $20 million that was to come out of the state’s record-high cash reserve fund for developing affordable housing in urban areas. He said a separate bill allocating Nebraska’s share of federal COVID money provided $40 million for that purpose, which was more than the $25 million he had recommended.

The governor did not touch the $30 million provided in the budget to develop affordable housing in rural areas.

He also vetoed the use of $15 million to expand programs to help prison inmates learn vocational skills and develop more productive life skills. The money had been set aside last year to address prison overcrowding issues. Ricketts said the money should be used to build a new state prison to replace the Nebraska State Penitentiary, which he argued is critical to protecting public safety and enhancing programming in prison.

Lawmakers set aside $100 million for a potential new prison last year and added another $175 million this year. The budget package does not authorize construction to begin, however.

Ricketts’ vetoes left intact the money allocated to the prison and his other priorities, including money to start work on a canal and reservoir system in western Nebraska and a possible lake between Omaha and Lincoln.

The budget package draws from a record-high cash reserve fund to pay for nearly $500 million worth of building and infrastructure projects. Even after those projects, the cash reserve is expected to hit a record-high $1.3 billion by June 30, 2023.

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