$262 million

Last week, the Appropriations Committee released its Preliminary Budget report for the upcoming biennium, Fiscal Years 2026 and 2027 (July 1, 2025-June 30, 2027). The report, a milestone in the budget process, is the Legislature’s starting point for budget actions to be taken during the 2025 session. 

The preliminary report shows some alignment, but a lot of divergence on several key aspects of the budget when compared to the Governor’s budget proposal. Notably, the Committee cuts the projected $432 million budget shortfall to $262 million, but it will still need to be remedied through increased revenue or budget cuts. The state’s next revenue forecast, as determined by the Nebraska Economic Forecasting Advisory Board, who will meet this morning at 10:00 AM and will determine whether the Committee can rely on additional revenue to close the gap. 

The Committee proposal also relies less heavily on one-time cash fund transfers, reducing the Governor’s proposed transfers by about $39 million. New cash fund transfers of $134 million are proposed by the Committee, something OpenSky remains concerned about. Two transfers OpenSky objected to in the hearing – from the Affordable Housing Trust Fund and Rural Workforce Housing Investment Fund – are not included in the Preliminary report.

The Committee also proposes higher General Fund spending growth, at 1.8% over the biennium, versus the 0.5% reduction proposed by the Governor. Notably, the preliminary report maintains the 2% cut to the University of Nebraska system. 

6,000

As many Nebraskans continue preparation for filing of their annual income tax returns, the Internal Revenue Service (IRS) is grappling with the elimination of nearly 6,000 employees, about half of whom were from the IRS Small Business/Self-Employed Division, which supports more than 57 million small business owners and entrepreneurs with less than $10 million in assets. Another division with significant impact is the Research, Applied Analytics and Statistics Division, which has been leveraging data to improve efficiency, including reducing unnecessary audits and providing data and analytics that inform tax policy decisions. 

These employees have been credited with large reductions in fraudulent tax schemes and identity theft, helping protect more than $1 billion from scams in Fiscal Year 2024. The agency decreased its budget by 15% between 2010 and 2021, including reducing staff from 94,346 to about 80,000 in that decade, even as the number of tax filings increased by 13%, according to a report by the Tax Policy Center. They also note that in 2021, more than 60% of the IRS workforce was eligible to retire within the next 6 years.

The IRS collects 96% of revenue that funds the federal government, and processing an expected 140 million individual tax returns by the April 15 deadline requires a full workforce, not to mention the work to combat a significant rise in fraudulent schemes that threaten the financial security of American taxpayers. 

$96.3 million

Louisiana Governor Jeff Landry included a $96.3 million appropriation in his budget proposal to expand K-12 school privatization efforts with the LA GATOR program, similar to education savings accounts that have been implemented throughout the country with disastrous results for state budgets and fiscal transparency. The program will build upon a decade-old voucher program in Louisiana and be limited in its first year to students already receiving vouchers to attend private or parochial schools.

The existing program has cost Louisiana taxpayers half a billion dollars, and promises of a better education have not panned out. On average, voucher students at private schools fare worse on state tests than their public-school peers, according to scores examined by The Times-Picayune and The Advocate. In 2023, just 14% of voucher students in grades 3-8 met state achievement targets, compared with 24% of low-income students at public schools. While the scholarship program will replace vouchers, many of the same private schools already have signed up, including over 20 with D or F ratings given by the state. 

Nebraska is considering several school privatization measures, including an educational scholarships program nearly identical to that in Louisiana. OpenSky offered analysis of programs like this with similar poor results across the nation in testimony on LB 624, LB 557, LB 633, LB 131 and LB 427.

UPDATE

Earlier this week, we asked you to contact Rep. Don Bacon to ask that he consider voting no on a budget resolution making its way through the House of Representatives. The resolution passed on Tuesday evening with the support of each of Nebraska’s three Representatives. This sets the stage for significant cuts to Medicaid, SNAP, and a variety of other services that help families make ends meet. We will be watching closely as the budget process continues.

To help illustrate what is at stake, according to a recent report from the Urban Institute, a reduction or elimination of the enhanced FMAP, which some have floated as a likely proposal for funding cuts, Nebraska would have to increase state spending by 33.5% to maintain coverage for Medicaid expansion at the state level. Seven other states would also have to increase spending by over 30%. Nebraska’s state budget cannot accommodate federal cuts like these, so we remain vigilant as the budget process proceeds.