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Nebraska will reap $5 billion — and probably much more — from federal stimulus bill

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How massive is the $1.9 trillion economic stimulus package signed recently by President Joe Biden? Here’s some Nebraska-size perspective.

Those $1,400 payments going directly to individuals are bringing $2.3 billion into the state, equal to almost 6% of what Nebraskans spent last year on all taxable purchases. The package also provides roughly half a billion dollars worth of income tax credits for families and the state’s working poor.

The American Rescue Plan is granting another $1.2 billion to the State of Nebraska for spending needs, which is more than 25% of the state’s annual general fund budget.

There’s also $685 million for Nebraska counties, cities and municipalities, including an estimated $200 million-plus for Omaha and Douglas County. And then another $566 million for K-12 schools and $211 million for public and private universities.

The Democratic president’s package proved politically divisive, passed without a single Republican vote in Congress.

But politics aside, economists say the infusion of so much money into the state can’t help but pack an economic wallop. The idea behind such stimulus plans is to inject lots of money into the economy, helping spur growth.

“It is a substantial stimulus,” said Eric Thompson, an economist at the University of Nebraska-Lincoln. “There’s something like 10 million fewer people working than pre-pandemic. They are trying to get as many people back to work as quickly as possible.”

Total up just the $1,400 checks, the tax credits and the grants to the state, local governments and schools, and that’s more than $5 billion coming into Nebraska — enough to increase the state’s annual economic output by 4%.

And Nebraska will likely collect billions more from myriad other programs in the bill, from increased unemployment benefits to expanded subsidies to help families buy health insurance. The $2.2 trillion stimulus package passed a year ago under former President Donald Trump sent more than $10 billion from Washington to Nebraska. In the end, the Biden package could well be in that ballpark.

“We’ll look to federal guidance and see how we can spend it, and we’ll put that money to work,” Gov. Pete Ricketts said in a recent interview on the state’s huge allocation.

The bill is popular with Americans, gaining 70% approval in polls. Most of those opposed think that it’s simply too much money.

The $1.2 billion in fiscal relief being allocated directly to the State of Nebraska could certainly be seen as overkill. Thanks to previous COVID-19 aid and an economy that’s in better shape than that of most states, Nebraska’s budget is currently showing a projected surplus.

“You certainly can question why we would need that much additional money,” Ricketts said. “Now, having said that, that’s our tax dollars, right?” — a reference to the taxes Nebraskans pay to the federal government.

The latest stimulus is the third round passed by Congress since the virus first began spreading across the country a year ago, following last March’s Coronavirus Aid, Relief and Economic Security Act and a supplemental $900 billion bill passed in December.

Ricketts said the state is still awaiting specific guidance from the Treasury Department on how it can spend the latest money. That could take weeks. Then the state will come up with a plan, he said.

A year ago, Ricketts had more than $1 billion in federal money to allocate. The largest chunk of that — some $427 million — went to shore up the fund from which unemployment benefits are paid. That relieved the state’s businesses, some of which have been struggling, from having to pay increased taxes to replenish the fund.

Ricketts also allocated hundreds of millions for grants to small businesses and livestock producers, as well as human services agencies and other nonprofits.

“We’d probably be looking at the same sort of thing with the new money, trying to target it at places where we think we do still have problems here in the state,” he said.

Expanded rural broadband seems to be another likely area of focus.

At a time when more people are working remotely from home, Ricketts put $29 million of CARES Act money into helping Nebraskans get better connected to the internet. He has since proposed $40 million for further broadband expansion in this year’s budget. But even that still leaves 50,000 Nebraskans without the baseline level of service the state is targeting.

“So there’s still demand or need there,” Ricketts said. “We’re certainly going to take a look at all those things, depending on what the Treasury guidance is, to be able to take best advantage of those dollars.”

The American Rescue Plan appears to be the largest infusion of federal dollars into counties and cities since Congress instituted revenue sharing almost a half-century ago.

“I’ve been with the League since 1978, and I don’t know of any time there has been anything that comes close to this,” said Lynn Rex, executive director of the Nebraska League of Municipalities. “But these are unprecedented times. I think it will have phenomenal impact.”

Douglas County was the only subdivision in Nebraska to receive direct money from the CARES Act. The county shared some of its $166 million with the City of Omaha. But all 529 cities and villages in Nebraska and all 93 counties would receive direct payments under Biden’s aid package.

Cities and counties are still waiting to hear how much money they will receive and how they will be allowed to spend it. But the National League of Cities has already made estimates based on formulas in the bill. Omaha is projected to receive $118 million, Lincoln $48.6 million, Grand Island $10.7 million, Bellevue $8.6 million, Kearney $5.7 million, Norfolk $4.1 million, North Platte $4 million and Scottsbluff $2.5 million.

Estimated county allocations include $110.8 million for Douglas, $61.9 million for Lancaster, $36.3 million for Sarpy, $11.9 million for Hall, $6.9 million for Scotts Bluff and $6.8 million each for Lincoln and Madison.

Much of the money Douglas County and Omaha received under the CARES Act was used to help people in need, such as providing financial assistance to people who had fallen behind on rent.

“We still have a lot of people in need,” Rex said. “A lot of folks are one paycheck away from standing in a food line.”

The bill provides $546 million to the state’s public K-12 schools. There is not yet any breakdown, but it appears that payments to individual districts will be twice as large as what they received during the last round of stimulus.

So the Omaha Public Schools, which received $86 million in the previous round, appears to be in line to receive more than $190 million this time. Past stimulus money could be spent in a number of ways, including helping kids who have fallen behind because of school disruptions and remote learning.

Private K-12 schools aren’t left out. They have been allocated roughly $20 million that will be distributed by the governor.

The aid bill will also provide $211 million for Nebraska’s public and private colleges and universities, according to estimates by the Association of Public and Land-grant Universities.

That includes $42.9 million for UNL, $31.9 million for the University of Nebraska at Omaha, $12 million for the University of Nebraska at Kearney and $3.2 million for the University of Nebraska Medical Center. Metropolitan Community College would receive $24.4 million, Creighton University would get $8.5 million and Bellevue University would receive $6.3 million.

As with previous grants, colleges will be required to use much of the money to assist needy students. But beginning with the second round of grants, schools have also had much discretion on allocating the dollars, including covering budget deficits that were run up because of millions of dollars in lost revenue and coronavirus-related expenses.

“We’re thankful for the money, but it will still not meet all our needs,” said Chris Kabourek, vice president and chief financial officer of the University of Nebraska system. “We will still have deficits from COVID even with all the federal support.”

Nebraskans have already begun to receive the direct payments to families: $1,400 for individuals making under $75,000 and $2,800 to two-parent families making under $150,000, plus $1,400 for each dependent child. That’s $5,600 for a couple with two children.

The White House has estimated that payments will be provided for 1.2 million Nebraska adults and 520,000 children. That’s $2.3 billion in new personal income coming into the state.

The $1,400 payments were also part of a sizable anti-poverty drive that was included in the bill. The bill increased child tax credits through the federal income tax system by as much as $1,600 for 434,000 Nebraska children.

Congress axed the minimum wage increase that had been part of Biden’s original proposal. But the bill did include increases of up to almost $1,000 in the Earned Income Tax Credit, which uses the income tax system to supplement the earnings of people working in low-wage jobs. The White House estimates that the bill would affect more than 100,000 childless Nebraska workers.

Of all the money in the bill, the $1,400 payments will have the swiftest economic impact, Creighton economist Ernie Goss said.

“The $1,400 will get there quickly,” he said. “The unemployment (benefit increase) will also get there quickly.“

To the degree that the money is spent, he said, it will help prop up and grow the economy during the current downturn.

But Goss questions the need for many of the bill’s aid provisions, especially considering that the bill is being funded through federal budget deficits.

“This might help us get back to previous levels more quickly,” he said. “But at what cost?”

Our best Omaha staff photos of March 2021


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Reporter - Metro News

Henry is a general assignment reporter, but his specialty is deep dives into state issues and public policy. He's also into the numbers behind a story, yet to meet a spreadsheet he didn't like. Follow him on Twitter @HenryCordes. Phone: 402-444-1130.

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