Nebraska legislators and legislative committees have designated their priority bills for the session. Priority bills are placed ahead of non-priority bills on the legislative debate schedule, so receiving a priority designation increases a bill’s likelihood of being debated by the full Legislature. The list of priority bills can help provide insight into what measures will be on the legislative agenda for the remainder of the session. We discuss here the priority bills that relate to OpenSky’s work and what position we have taken on them.
Priority bills that OpenSky supports
LB 121 would end Nebraska’s lifetime ban on federal food assistance through the Supplemental Nutrition Assistance Program (SNAP) for people convicted of federal drug felonies. This measure would help provide food security for some of Nebraska’s most vulnerable families, create a bridge to self-sufficiency and promote a safer, more equitable state. Preventing access to nutritional assistance doesn’t just impact the previously incarcerated, it spreads to the livelihood of their families. Approximately 1 in 10 children in Nebraska have a parent who is incarcerated. While families are still eligible to receive SNAP when a member is banned, the banned individual’s income still counts toward the household and results in fewer SNAP benefits for the household. A 2018 University of Maryland study showed that depriving individuals with drug felony convictions access to SNAP in Florida increased their rate of recidivism by approximately 9.5%.[1] Given Nebraska’s recidivism rate (30.3%),[2] cost of incarceration ($46,000 per year),[3] and number of individuals incarcerated for drug related offenses (870),[4] ending our state ban would result in 23 fewer individuals recidivating, saving more of $1 million in tax dollars. People of color are arrested more frequently, charged more harshly, and therefore more subject to the drug ban than white people. Eliminating this ban would support greater equity in our criminal justice system rather than filling our prisons with non-violent, low level offenders.[5]
LR 263CA would prevent the state from enacting or increasing unfunded mandates on local governments, such as cities and counties. This could help prevent further reliance on property taxes to fund local services. Relative to other states, Nebraska schools and local governments receive little support from the state. Nebraska presently ranks 47th in the percentage of local government support that comes from the state. We rank even lower – 49th – in the level of K-12 support that comes from the state. Low state support has resulted in localities relying more heavily on property taxes to fund services, including many services that are required by the state. Prohibiting unfunded mandates for new or increased levels of government services could relieve some pressure on local governments and by extension property taxpayers.
Priority bills that OpenSky opposes
LB 939 – as amended by AM 1780 – would lower the state’s top personal and corporate income tax rates to 5.84% over the next few years. The measure – which has received first-round approval by the Legislature – would reduce state revenues by at least $415 million annually once fully implemented with the vast majority of the tax cuts going to the wealthy and out-of-state corporations. Institute on Taxation and Economic Policy (ITEP) analysis shows the highest-paid 5% of Nebraska residents would receive 54% of the bill’s personal income tax cut. The lowest paid 40% of Nebraskans, meanwhile, would get less than 1% of the tax cut. ITEP analysis also shows 83% of the corporate tax cut would leave the state and other estimates show that the out-of-state benefit of cutting Nebraska’s top corporate tax rate could be 90% or more.
LB 1237, which has been amended into a Revenue Committee omnibus bill, LB 730, would create a tax credit for donations to private school scholarship programs that gives taxpayers a dollar-for-dollar tax credit up to $25,000 or 50% of the taxpayer’s state income tax liability, whichever is less, for their donations to organizations that grant scholarships to private school students. This credit would make donating to scholarship granting organizations considerably more lucrative than donations to other charitable organizations while depleting Nebraska of revenue – $5 million annually – that could be used to fund public K-12 education. The bill originally limited the credit to 50% of a taxpayer’s donation, but in LB 730, as amended by AM 2087, the credit would be 100%. This is similar to the credit proposed in LB 364, which was already rejected by lawmakers earlier this session. The bill also would create a separate $5 million tax credit for contributions to qualified early childhood education or child care programs. Both tax credits would sunset in 2028.
LR 264CA would put a resolution on the 2022 ballot asking voters whether the state should prohibit all forms of taxation except a consumption tax, which is essentially a sales tax on all new goods and services sold in Nebraska. A legislative bill that was introduced as a companion to a prior consumption tax resolution proposes a 10.64% rate for the consumption tax. In order to be revenue neutral, the rate of this tax would need to be considerably higher as that bill’s fiscal note shows the measure would eventually reduce state and local revenues by nearly $4 billion. The consumption tax could also extend to many goods and services not currently taxed – most for good policy reasons – like health care, tuition and mortgages.
LB 825 would phase in a complete tax exemption of Social Security income with all such income becoming exempt by 2025. Most Social Security income is already untaxed in the state and changing demographics would make any level of exemption on Social Security or pension income unsustainable over time. The bill’s fiscal note shows it would reduce state revenues by about $74 million annually once fully implemented. The 2013 Tax Modernization Committee report found many states that exempted Social Security income have been pulling back on these exemptions due to demographic changes. It also found that the growing population of retired taxpayers and their exempt retirement income will put increasing pressure on state budgets to maintain such exemptions into the future. Enacting LB 825, which has received first-round approval, could leave future Nebraska lawmakers with the unenviable choice of cutting services retirees rely on, like health care and public safety, or raising taxes, including rolling back the bill’s exemption, if state revenues lag.
LB 723 – under FA65 – would prevent the funding level for the LB 1107 refundable income income tax credit for property taxes paid from dropping below $561 million per year once fully implemented. Obligating future funds to this tax credit now while our revenues are heavily propped up by federal funding has the potential to force tough decisions by future legislators, particularly if we see a drop in revenues after the federal funding ends. LB 723 has received first-round approval by the Legislature.
Other priority bills that OpenSky is monitoring because of considerable fiscal policy implications
LB 1011 is the mid-biennium budget adjustment bill. The measure leaves $453.6 million for new tax and spending bills to be passed this session. The Legislature will begin debating the budget on Tuesday.
LB 1013 is the mid-biennium cash reserve adjustment bill. The fund is projected to contain more than $1.3 billion at the end of the current fiscal year.
LB 1014 is a bill that represents the governor’s plan to appropriate $1.04 billion in federal funds distributed to Nebraska by way of the American Recovery Plan Act (ARPA). While the proposal contains some promising provisions like increased investments in public health and money for premium pay for essential workers, on the whole, it could do more to help individual Nebraskans. ARPA funds are largely intended to support people struggling in the pandemic economy while beginning to address long standing inequities the pandemic exposed. LB 1014, however, only allocates 30% to directly or indirectly help individuals. While the federal government gave states broad latitude in deciding how to use ARPA funds, the remaining 70% of ARPA dollars go towards projects that are not being used for the intended purpose of addressing the health and economic disparities amplified by the pandemic.