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OpenSkyLIGHTS: Focus on Nebraska fiscal policy (7/26/24)

Welcome to OpenSkyLIGHTS, with our special edition highlighting key numbers related to the Nebraska Legislature’s Special Session. 

113

LB1, introduced by Senator Lou Ann Linehan, outlines elements of Governor Jim Pillen’s Nebraska Plan. It includes 113 current sales tax exemptions slated to be removed, creating a new tax ranging from 2%-7.5% on items ranging from pet services to tax preparation. The sales tax shift stands to increase the already disproportionate effect on the lowest income earners who already pay 5.5% of their household income in sales taxes, compared to 1.1% of the highest income earners. Sales tax revenue is also one of the least reliable ways to fund essential services, as it tends to react significantly to economic downturn

0%

The Nebraska Plan calls for growth of city and county budgets limited to 0% or the Consumer Price Index, a key yardstick for inflation. Our analysis of “Hard Caps” on cities and counties finds that limitations on revenue growth make it incredibly difficult for cities to weather economic downturn, as was the case in Michigan, where cities showed an average reduction of 24% in parks and recreation, an 11% reduction in local housing development and 39% in arts and cultural expenditures. It can also make cities and counties vulnerable to fallout from legislative priorities like income tax reductions. Massachusetts is a notable example, where major, phased-in cuts in its personal income tax between 1998 and 2002 resulted in unrestricted state aid to localities falling by 44 percent between fiscal years 2001 and 2015, adjusted for inflation. New York limited annual revenue growth to the lower of 2% or CPI in 2011, which resulted in spending on health services and community services declining 21 percent and 25 percent respectively, after adjustment for inflation.

55

LB2 introduces 55 separate adjustments to the biennial budget, an absolutely unprecedented move for the Legislature to undertake in a special session. Nebraska’s state budget is healthy, unlike the last time the Legislature used a special session to amend the budget all the way back in 2001 when the state faced several financial difficulties. 

Earlier this year, state agencies were directed by the Governor to make significant cuts to budgets already approved by the Legislature, which the Constitution charges with budgetary control. The amendments reduce General Fund expenditures like $15 million earmarked for biomedical research and $300,000 for the AgrAbility program that helps individuals with disabilities or who have sustained on-farm accidents overcome obstacles to the pursuit of a career in agriculture. It also shifts several expenditures from General Fund expenditures to a variety of cash funds, continuing a trend of cash fund sweeps to fund legislative priorities like income tax cuts, as was the case in the most recent legislative session.

 

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OpenSkyLIGHTS: Focus on Nebraska fiscal policy (7/26/24)

Welcome to OpenSkyLIGHTS, with our special edition highlighting key numbers related to the Nebraska Legislature’s Special Session. 113 LB1, introduced by Senator Lou Ann Linehan, outlines elements of Governor Jim Pillen’s Nebraska Plan. It includes 113 current sales tax exemptions slated to be removed, creating a new tax ranging from