The Nebraska state government operates on a balanced budget — no deficit spending allowed. So, when tax revenues fall due to an economic downturn, lawmakers must tighten the state’s spending. Big pullbacks for major programs are common.
In such circumstances, hefty cuts in growth typically apply to state aid to schools as well as the state’s property tax credit fund — reductions that lawmakers described as especially painful, since support for schools and property tax relief stand tall as key goals for state senators.
Our point: If Nebraska lawmakers want to keep revenues adequate for needs such as school aid and property tax relief for the long term, they must act responsibly in the tax-cut decisions they make this session.
Sensible reductions in the tax burden serve the public interest, but only as long as they don’t blow up the state’s revenue stream. Nebraska leaders must heed the lesson provided by Kansas earlier this century, when the Brownback administration rammed through tax reductions so reckless they jeopardized support for key state needs, spurring enormous tumult and upheaval.
To protect Nebraska’s long-term revenue stream, State Sen. John Stinner, chairman of the Appropriations Committee, this session has rightly pushed for constraints on major tax-cut proposals. As the Legislature heads into the final days of the session, it’s vital that lawmakers reject the grumbling over those safeguards and maintain such practical protections.
The Legislature has pressed the brake pedal, for example, on both a reduction in the corporate income tax as well as a decrease in state taxation of Social Security benefits. Lessening the tax burden on retirees and cutting the corporate income tax, given lower rates in neighboring states, are worthwhile goals. But lawmakers must balance those aims with the need to maintain a sound revenue stream. At the insistence of Stinner and others, the Legislature has rightly adopted safeguards, scaling back the reductions and adopting a process to monitor the ongoing effects on state revenues. It’s an eminently responsible approach.
The current legislative session is atypical, in that lawmakers for the first time in years have some leeway for a significant boost in spending and tax reduction (a bit more than $200 million for the two-year budget). This budgetary windfall has left senators tipsy at the many possibilities for spending and cutting taxes.
But experience at the Legislature shows the need for budgetary sobriety. Time and again in the past, economic good times gave way abruptly to downturns that choked off government revenues and forced painful belt-tightening. On two occasions so far this century, the Legislature had to cut $1 billion in the two-year budget in order to balance it. Nebraskans have no reason whatsoever to assume that the state has become immune to such economic cycles. All members of the Legislature — urban, rural, liberal, conservative — must remain wide awake to this economic reality.
The revenue effects from tax cuts made this year will be felt long into the future, well after the current set of state senators have exited the Legislature due to term limits. Their successors will inherit the consequences of those revenue decisions. It’s vital, in this session’s final days, that the Legislature decide wisely.