The cost of high-profile K-12 finance and tax packages introduced this week would entirely consume the projected $1.9 billion that lawmakers have to enact new legislation in the current two-year budget cycle and then some, initial OpenSky analysis shows.

The total cost of the initiatives over the coming budget cycle, i.e. the next two fiscal years, is nearly $2 billion, early analysis shows. The education package has a price tag of $1.25 billion over the next two years and estimates from the Institute on Taxation and Economic Policy (ITEP) show the tax package price would be about $720 million over that same period.[1] The tax package’s financial impact would approach $745 million if the cost of LB 753’s scholarship tax credit – which was not examined in ITEP’s analysis – is included.

Packages could lead policymakers to tap cash reserve 

While some aspects of the packages – such as proposed increases in state public education funding – could help address key state needs, their combined fiscal impact could lead policymakers to dip into the state’s cash reserve. This is concerning because the state’s cash reserve is meant to be used for “rainy days” – typically one-time expenditures that serve key state needs in times of economic downturn.

Strong revenues may not actually materialize and are largely caused by influx of federal dollars

It is good news for the state that we find ourselves with flush coffers, but it’s important to keep in mind that our strong revenues are projected. This means they may not actually be realized, particularly if we enter a recession.

Furthermore, like other states, Nebraska is experiencing strong revenues in large part because of the influx of federal dollars since the COVID-19 pandemic and not because of policies enacted at the state level. That means our flush coffers are likely temporary. Agreeing to large, ongoing expenditures based on temporary funds or making structural changes to the tax code could force cuts to schools, health care and other key services or lead to increases in taxes, fees and fines when revenues lag in the future.

Prudence can ensure fiscal health 

To ensure our state’s future fiscal health, it will be important for policymakers this session to prudently use the projected $1.9 billion on proven initiatives that empower hardworking Nebraskans to support their families and their communities.