Nebraska Approves $11 Billion Budget, Temporarily Sealing Deficit Gap
LINCOLN, Neb. (
Nebraska Examiner
Lawmakers passed Nebraska’s primary $11 billion budget for the upcoming two years on Thursday, providing themselves with $1.1 million in flexibility as they manage expenditures and allocate funds to address the initial phase of an anticipated shortfall over the first two years.
That figure
encompasses $1.5 million in expenditures
from
LB 513
, to provide all state judges with a 1.5% raise for each of the upcoming two years. This anticipated approval comes from State Senator Rob Clements of Elmwood, who chairs the Legislature’s Appropriations Committee.
On Thursday, no senators addressed the debate to support or advocate for the budget bills—Legislative Bills 260, 261, 262, 263, and 265—as well as LB 534 aimed at funding legal claims against the state. Meanwhile, several opponents argued that although the budget was purportedly balanced, this wasn’t truly the case.
For instance, State Senator Machaela Cavanaugh from Omaha forecasted that the bills would not resolve the deficit issue and suggested that a special legislative session might be necessary.
This budget relies on several accounting tricks,” stated State Senator Wendy DeBoer from Omaha. “In reality, it isn’t balanced; we’re merely making it appear as though it is.
Clements stated that “there’s nothing” suggesting a special session would be required unless there are “extreme measures” taken at the federal level, implying potential reductions in the congressional budget. He expressed satisfaction with the outcome of the budget bills, which provided funding for raises and healthcare coverage for state workers, noting that state agencies did not face severe cutbacks.
‘A daunting mountain to ascend’
Clements said his committee’s work put the state in “good financial shape” for the next two years in a budget-writing year that required extra work and he described as stressful. He said he was proud to protect funding for the Perkins County Canal and a new state prison.
“It felt like climbing an un-scalable mountain, yet we managed to do it without cutting off vital services,” Clements stated.
LB 261
,
passed 37-11
, and
LB 264
,
passed 35-13
, were the
main budget bills
Due to the legislative requirement that the budget must be passed by the deadline of Thursday evening, lawmakers did not make any last-second alterations, even though they spent over two hours voicing criticism about the bills. These measures will now move forward to Governor Jim Pillen, who has the authority to reject specific provisions through a line-item veto. Overriding such vetoes would necessitate at least 30 votes.
Clements mentioned that he hadn’t been in touch with the Governor’s Office regarding expectations of potential vetoes or the number thereof.
General fund estimates
for the current fiscal year and the following two are:
- For the fiscal year 2024-25, the organization expects to receive $4.56 billion in net receipts and anticipates spending $5.48 billion on various expenses.
- For the fiscal year 2025-26, the anticipated net receipts amount to $5.36 billion, whereas the projected expenditures total $5.48 billion.
- For the fiscal year 2026-27, the anticipated net receipts amount to $5.42 billion, whereas the projected expenditures total $5.52 billion.
For the fiscal years 2025-26 and 2026-27, net receipts consist of $57.6 million in interest income, $216 million through cash fund transfers, and $147 million drawn from the state’s “rainy day” cash reserve fund, all utilized to address the anticipated shortfall.
Core criticisms
DeBoer likened the budget bills to the fairy tale “The Emperor’s New Clothes,” wherein the king is bare but everyone pretends he is adorned with magnificent garments.
“They discussed how wonderful it is since they aim not to appear inadequate,” DeBoer stated, highlighting that a young boy in the narrative exposed the pretense.
DeBoer and Cavanaugh contended that the budget bills were fraught with errors and unconstitutional elements, primarily resulting from hasty combinations of different cash reserves. They noted that this budget proposed an average spending increase of only 0.9% over two years. According to them, these cash reserve maneuvers encompassed revenues derived from heightened charges for Nebraska residents.
Cavanaugh objected to plans aimed at reallocating approximately $2 million in interest from the administrative account under the Board of Educational Lands and Funds, as well as proposing $15 million in withdrawals from the Environmental Trust Fund. To prevent what she deemed unconstitutional transfers that could lead to legal challenges, Cavanaugh suggested instead utilizing funds from the state’s “rainy day” cash reserve.
She mentioned that the authorities managing the education sectors have indicated they may need to take legal action, and a previous state official has
suggested a lawsuit to protect the Environmental Trust
.
It is anticipated that at least $24 million of the budget shortfall will be covered by reallocating unused agency resources following June 30, which marks the close of the fiscal year. State Senator Ashlei Spivey from Omaha mentioned that at minimum, $7 million out of this amount is legally bound within the Nebraska Department of Education’s contracts.
Several senators have indicated that the budget does not adequately account for potential federal alterations, including measures aimed at redirecting state-specific funds.
broadband expansion
, as some funds originated from the federal government. A portion of these federal contributions are currently under threat.
Senator Ben Hansen from Blair, who backed the budget, proposed that legislators should have considered implementing further reductions to ready themselves for significant cutbacks in federal funding, particularly to programs like Medicaid.
“It’s not simply a matter of cutting back, but we may have to make severe sacrifices, even amputating parts, just to cover our budget,” Hansen stated.
‘Do better next time’
Spivey, a freshman member of the Appropriations Committee with Cavanaugh, said it would be “interesting” to see the budget implications, including for the years farther out, when lawmakers are projected to face a hole of at least $110 million under current projections.
“I hope, as we continue to work on our financial status and sustainability, that folks are more open to discourse and challenging ourselves around our decisions and our approach to how we create a responsible and responsive budget to our constituents,” Spivey said.
DeBoer said cash funds don’t sit around for no reason and expects a number of deficit requests next year that the Legislature might need to grapple with.
Of the budget’s passing, DeBoer, a senior member of the body, said: “I guess we need to learn this lesson to do better next time.”
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