$553.5 million

As a regular part of the two-year state budget process, Nebraska’s code agencies (state agencies who report directly to the Governor) recently submitted their FY26/FY27 budget requests. This is a preliminary step in the development of the budget proposal that the Governor will introduce to the Legislature’s Appropriations Committee at the start of the 2025 legislative session. 

Agencies are required to provide a list of programs and services to which they would recommend budget reductions, should such reductions be necessary. The Department of Health and Human Services’ proposed $553.5 million in reductions from programs providing services in key areas like developmental disabilities, child welfare, Medicaid, developmental disability assistance and more. Several of these proposed reductions could ultimately jeopardize federal funding to the program, costing Nebraskans more in the long run.

Some especially notable proposed reductions include: 

  • The elimination of Medicaid coverage for major services, including access to prescription medications for adults, breast and cervical cancer services, hearing aids and dental services for adults, and occupational, physical, speech, and vision therapy, a reduction of $244 million over FY26-FY27. 
  • Elimination of financial aid and medical assistance to persons aged 65 and older, or to persons who are aged 64 or younger who are blind or disabled, reducing the state budget by $17 million over FY26-FY27. Under federal law, eliminating this program would make Nebraska ineligible to receive any federal Medicaid funding. 
  • A decrease in the funding rate for all healthcare providers who provide care under Medicaid by 5%, regardless of specialty or service, designed to reduce the state budget by about $121 million over FY26-FY27. Reductions in provider reimbursement rates reduce the incentive of health care providers to participate in Medicaid, making it more difficult for people insured under Medicaid to access the care they need. 

The Appropriations Committee will have the opportunity next winter to consider how any Department of Health and Human Services budget cuts will impact care for our  fellow Nebraskans and whether they comply with federal regulations. 

DHHS is hosting listening sessions on developmental disabilities throughout the month of October. Details can be found here.

2.75%

On the ballot in a few Nebraska municipalities this election season is a question on whether to approve a Good Life Transformation District. Registered voters may be wondering what that is.

The Good Life District is an economic development tool made possible by the passage of LB 727 in 2023 and refined by LB 1317 in 2024. The new provisions dictate that local voters will decide whether extra sales taxes or occupation taxes would be collected in a Good Life District to help pay the costs of economic development projects designed to be large-scale economy boosters, attracting new-to-market retail and sports and entertainment venues. The fiscal note indicated a cost to the state of about $10 million in the upcoming biennium, but with the changes made in 2024, it’s estimated that the state’s cost could exceed $55 million per year.

The sales tax rate for Good Life Transformational Projects is set at 2.75%, or half of the current state sales tax rate. This special rate was recently challenged in context of Nebraska’s standing in the Streamlined Sales and Use Tax Agreement (SSUTA), an agreement between 44 states to reduce the administration required by states and retailers in the collection of the sales and use tax. The SSUTA met last month to review several states’ compliance issues, including Nebraska’s, finding Nebraska to be out of compliance with the SSUTA due to its multiple sales tax rates.

The results of the ruling are unclear, but could potentially create an unfriendly environment or overly burdensome regulations, especially for national chains who may have locations within and just outside the district and therefore required to collect different tax rates.

$71.8 billion

Economic and investment analysts Ocean Tomo have projected that legal cannabis will reach $71.8 billion in sales in the United States by 2028. They explore what they consider a burgeoning industry due to increased medical research into the potential health benefits of marijuana as well as decriminalization measures pending in several states and federal territories. Ongoing efforts to encourage the Drug Enforcement Agency to reschedule the compound as a Class III drug, garnered a record-breaking number of public comments submitted to the agency website.

The Tax Foundation finds that rescheduling marijuana would alleviate what they call a disproportionate tax burden by removing marijuana businesses from the jurisdiction of Section 280E of the Internal Revenue Code (IRC), which dictates that operating expenses for businesses engaged in the cultivation, production, or sale of Schedule I drugs are ineligible for exemption from the corporate income tax. Operating expenses could be those related to staff salaries for functions like accounting, marketing and sales, which would normally be exempt from corporate income taxes for a business not engaged in the sale of Schedule I drugs.

With only about 27% of cannabis businesses in the country turning a profit, a more favorable tax structure could lead to wider expansion of the industry.