The Appropriations Committee advanced their finalized recommendations for the Fiscal Year 2021-22 and 2022-23 biennial budget to the full Legislature. First-round debate took place this past week and all bills were advanced unanimously except LB383, dealing with capital construction. Under the $9.7 billion biennial budget proposal, the two-year average estimated revenue growth is 3.0%, whereas the two-year average growth in spending is just 1.6%. The committee was able to control the growth of spending due to a higher federal match for Medicaid, a lower than expected increase in the formula for state aid to schools, and federal coronavirus relief funding.

The chair of the Appropriations Committee stated that their priorities in fashioning the budget were to replenish the Cash Reserve Fund, to increase service provider rates, to enhance property tax relief, and to provide for job training and economic development. They also left some funding available for priority bills.

Under the committee’s proposal, the Cash Reserve Fund will increase from $412 million to $763 million, as a result of automatic transfers due to current law and a $50 million transfer from the General Fund each year to replenish the fund. The Cash Reserve Fund balance at the end of the current biennium represented 7.5% of revenues. The balance will increase to 15% of revenues at the end of the first fiscal year and 14.2% by the end of 2022-23. This is still below the 16% target of what the balance should be at the end of a positive growth revenue cycle, but is significantly better than our current level.

The single largest increase in the budget was a 2% per year increase for service providers, amounting to an $89.3 million increase over the two-year period. This would apply to the Department of Health and Human Services providers, such as those providing behavior health services and services to persons with developmental disabilities, as well as providers of community corrections and juvenile services.

The committee recommended a 2% increase to the Property Tax Credit Fund (shown on your property tax statement), which amounts to $63 million over the two-year period. This would increase the annual appropriation from $275 million to $310 million by the second year in the biennium.

The Property Tax Incentive Act (LB 1107) was passed by the Legislature last year. It provides a refundable income tax credit for taxpayers based on the amount of property taxes paid to their school district. For this year the amount appropriated for the income tax credit was $125 million. The amount was to increase based on the amount in the Cash Reserve Fund and the revenue growth, reaching $375 million by the fifth year. Because the Cash Reserve Fund is greater than $500 million, 100% of the growth over 3.5% is distributed to the LB 1107 income tax credit, increasing it to an estimated $313.7 million in both years of the biennium.

Combining the funding for the Property Tax Credit, the LB 1107 income tax credit and the homestead exemption, the Legislature is providing more than $1.4 billion in property tax relief over the two-year budget period.

The budget recommendations include $17 million in funding for Nebraska Career Scholarships for students attending the University of Nebraska, State Colleges, or Community Colleges and $15 million for the Business Innovation Act, which helps businesses develop new technologies that lead to quality job opportunities across the state. The recommended budget also leaves $211 million for legislation pending before the Legislature.

The Governor requested funding for a $230 million correctional facility to house approximately 1,500 inmates, in an effort to deal with the overcrowding situation and the aging Nebraska State Penitentiary. The Appropriations Committee’s recommendations set aside $115 million in the Nebraska Capital Construction Fund for addressing prison overcrowding but did not actually appropriate the money. However, an amendment offered by the chair of the Appropriations Committee would, among other things, appropriate $14.9 million to the Department of Corrections to prepare designs and plans for the new multi-custody-level correctional facility. The amendment was adopted by the body prior to LB 383 receiving first-round approval on a 37-3 vote.

As we finish up the debate on the budget bills, I encourage your input on the spending proposals, as well as other issues before the Legislature. I can be reached at tgragert@leg.ne.gov. My mailing address is District #40, P.O. Box 94604, State Capitol, Lincoln, NE  68509 and my telephone number is (402) 471-2801.

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