The state Legislature has a record budget surplus to work with this year, and bills being debated this week reflect opportunities to invest in Nebraska’s schools and other services that all Nebraskans rely on.
An education finance bill, LB 583, proposes new investments in K-12 public schools through foundation aid in the amount of $1,500 per student and supplemental special education funding that would reimburse districts for 80% of costs.
The budget bills, LB 813, LB 814 and LB 818, outline $5.3 billion in spending from the state’s General Fund in each of the next two fiscal years, including the commitment to increase funding to schools.
Education finance measures
With Nebraska ranking 49th in the share of state aid to K-12 public education, the state is overdue to provide more support to the districts and teachers working with our students.
The special education funding and foundation aid provisions proposed by Gov. Jim Pillen would send significant additional resources to schools. This is an important investment in educating the next generation of workers and entrepreneurs.
OpenSky has long held that the best way to provide property tax relief in Nebraska is to increase state funding for schools. But much of the proposed state funding does not represent “new” dollars for schools but instead acts as a replacement for revenue they are likely to lose under revenue caps included in LB 243.
If, as proposed, a school district is limited to 3% base growth, any increase in state funding essentially offsets what could be collected through property taxes at the local level. School districts already face spending limits, and further restrictions would add to the challenge of providing a quality education during a time of inflation, staffing shortages and increasingly complicated student needs.
At the same time, the state’s investment in education requires a long-term commitment covering times of budget surpluses and fiscal challenges. Some of the new funding would be paid out of an Education Future Fund created with an initial $1 billion investment in state funds and $250 million annual transfers in future years. Future Legislatures will be tasked with maintaining that annual commitment beyond the current budget cycle.
Budget proposals
History tells us that senators will face a budget shortfall sometime down the road. When faced with tough times in the past, the Nebraska Legislature has resorted to “shaking the couch cushions” to help in balancing the state budget.
As recently as 2017, the Legislature turned to cash funds – essentially accounts within different state agencies – as an additional revenue source to avoid cuts to state services or raising taxes.
This year, the Legislature has a budget surplus to work with, but the Appropropriations Committee has proposed transfers involving cash funds and other sources to pay for state priorities that would traditionally be paid for out of general funds.
For example, with the state facing a $5.5 million settlement resulting from a lawsuit with a contractor hired to upgrade the state’s Medicaid eligibility and enrollment management system, the committee proposes taking the money from funds set aside for behavioral health services.
The Appropriations Committee also proposed transferring $14 million from the Nebraska Environmental Trust – funds built on proceeds from the Nebraska Lottery – to the Water Resources Cash Fund. Opponents criticized the transfer of funds from the Trust, which distributes grants to organizations for wildlife habitat, recycling programs and other conservation efforts.
One reason to pay for commitments from cash funds is to hold back General Fund dollars for other priorities not included in the budget, including proposed tax cuts that would significantly reduce revenues available in future years.
Taking money from those cash funds now, when there’s a budget surplus, means there’s less money to access when the financial outlook shifts. Prudent revenue and spending decisions are critical to keeping Nebraska on sound footing in the future.