30,000

Governor Jim Pillen announced this week that Nebraska will opt to become the first state to conform to new federal regulations around work requirements for Medicaid recipients. The Governor noted during a press conference that he anticipates 30,000 adults will lose health care coverage as Nebraska voluntarily rolls out new requirements created by H.R. 1, known as the One Big Beautiful Bill Act, earlier than the rest of the nation, with a May 1, 2026 start date. Nebraska’s work requirements will take effect prior to formal guidance to the states from the federal government and will impact adults in the Medicaid expansion population without disabilities (adults 18-64 making less than 138% of the federal poverty level).  The requirements mandate 80 monthly hours in work-related activities (paid work, volunteering,  education, etc) as well as recertification every 6 months. Nebraska voters approved Medicaid expansion in 2018 by more than a 7% margin and has since had a significant impact on reducing the percentage of uninsured individuals in the state.  

Nationwide, more than 9 in 10 expansion adults are already working some or all months of the year, have caretaking responsibilities for a child or disabled relative, are pursuing education, are searching for work, or have a health impairment that prevents them from working, but falls short of qualifying as a disability. Medicaid work requirements, when implemented in Arkansas, had no or little effect on the rate of employment, and in fact increased earnings far less than lost benefits, according to analysis by the Congressional Budget Office. They note that many participants were unaware of the work requirement or found it too onerous to demonstrate compliance.

States are not required to submit an estimate of the costs associated with administering the program to the federal government, although these programs are expensive to implement. In states where work requirements have been implemented, they ranged from $6 million in New Hampshire to nearly $272 million in Kentucky. Georgia’s Medicaid work requirements cost their taxpayers about $110 million, and health care benefits – like doctor visits and prescription refills – accounted for less than $1 in every $3 total dollars spent.

$52 billion

Between July and November, revenue from the federal corporate income tax has dropped by $52 billion, or roughly a third, according to the New York Times, due to large corporations already taking advantage of corporate tax cuts reinstated by H.R. 1. While the corporate tax rate was unchanged by the bill, it included a buffet of options for reducing taxable income and accelerating the rate at which companies can write off costs. Many corporations are taking advantage of a provision that allows them to write off the complete costs for research and development (R&D) projects in the first year of the project, rather than over several years. According to reporting by the New York Times, AT&T projected that the provision would save them $2 billion in corporate taxes this year. The theory is that this will promote additional investments in technology and infrastructure that will accelerate economic growth, but some argue that the tax breaks subsidize investments that would have happened anyway.

Nebraska is what is known as a “rolling conformity” state, meaning that many of our state corporate income tax provisions mirror those of the federal government unless the Legislature specifically adjusts them. The Department of Revenue projects that this accelerated deduction of R&D costs will result in an approximately $29 million decrease in revenue to the state by 2029. 

$18 million

Nebraska had a bit of good news in the November tax receipts report this week, with actual receipts 3.1% above projections. This equates to approximately $18 million, which would be directed to either the state’s cash reserve or the School District Property Tax Relief Credit Fund at the end of the fiscal year, although the Legislature faces a $471 million shortfall as the 60-day session approaches. Higher than projected receipts were driven by a variety of categories, including individual income taxes, sales and use taxes and miscellaneous taxes. Corporate income tax receipts, however, were below forecast, though the Legislative Fiscal Office has projected a possible rebound as corporations pay tax bills in December. 

Legislators have established a practice of filling budget shortfalls with cash fund sweeps and cash reserve transfers in recent years, a tactic that Appropriations Chair Robert Clements told the Nebraska Examiner will be on the table again this session. The body will also need to consider the implications of federal legislation on Nebraska, including shared costs for food security, Medicaid changes, and whether to maintain conformity with a variety of tax provisions that will impact receipts in future years.