LINCOLN — State senators on Thursday called Gov. Pete Ricketts’ proposed budget a good start but expressed concerns about how his planned cuts could affect students and some of the state’s most vulnerable people.
His plan, unveiled during his annual State of the State address, would close a budget gap projected at nearly $900 million through June 30, 2019, without raising taxes.
The shortfall equals about 6.3 percent of the budgeted and projected state spending during that same period.
Speaker of the Legislature Jim Scheer of Norfolk said he believed Ricketts’ proposal was reasoned, without taking a hatchet to any one area.
“Overall, he was pretty close to being on track,” he said. “I think the citizens expect us to tighten the reins and meet our obligations,” and that’s what the governor is proposing.
“I appreciate that it was not a unilateral approach,” Scheer continued. “He worked with every one of his directors and found out specifically where reductions could be made and, in some cases, there were additional dollars.”
Ricketts’ plan prioritizes the Department of Correctional Services and state aid to schools. It cuts payments for those who care for abused and neglected children, Medicaid recipients, and developmentally disabled and mentally ill people, and proposes cuts to higher education.
Under Ricketts’ plan, state aid to K-12 education would grow by 2.7 percent on average.
Sen. Mike Groene of North Platte, chairman of the Education Committee, said he can work with that proposal.
“I think they got more than they ever thought they would get — if they get it,” he said. “I’m going to wait and see what we bring through the committee” after the forecasting board makes its report in February.
The Nebraska Economic Forecasting Advisory Board meets next month to update the official forecast of state tax revenues and possibly revise its estimates.
While the governor’s proposal is about half the growth projected for the two years under the current school aid formula, Ricketts called the formula “flawed.” Ricketts said senators should be prepared for claims that his proposal “doesn’t fully fund education.”
Scheer said K-12 education should be pleased it was spared.
“That’s sort of like going in and asking your boss for a raise and you were sort of hoping for a 10 percent raise, but you walk out with a big frown if you got 5 percent?” he said. “I don’t think so.”
John Lindsay, a lobbyist for the Omaha Public Schools, said the education community understands the state has fiscal problems and is willing to help out. But he said educators don’t want to see cuts so deep that they hurt student achievement.
He said school officials will be looking more closely at the state aid proposal, especially at the changes that would be made in the distribution formula.
“When you revise the formula, it’s a matter of winners and losers,” he said.
“It could be worse,” said Michael Baumgartner, executive director of the Nebraska Coordinating Commission for Postsecondary Education. “I think we’ll be able to work our way back up from this.”
Some states, including Iowa, are facing more austere proposals, Baumgartner said.
Sen. John Stinner of Gering, chairman of the Nebraska Legislature’s budget-crafting Appropriations Committee, said he is concerned how cuts to the University of Nebraska and the community colleges could affect tuition for students.
Under the governor’s proposal, NU would get a $12.2 million, or 2.1 percent, cut in its budget for the first year of the budget period. About half that amount would be restored in the second year.
Meanwhile, community colleges would see a 3 percent cut in the first year and flat funding for the second year.
“It’s up to those universities to run as efficiently and effectively as they possibly can without a (tuition) increase, because there is a burden that goes back to the students,” he said. “That is the reality.”
Stinner emphasized that the governor’s proposal is just a proposal and that the Appropriations Committee will work to go through it once they’re finished with Ricketts’ plan for the current fiscal year.
The governor last week announced plans for cutting the previously approved budget for the current fiscal year, which ends June 30.
“It’s a proposal,” Stinner said. “Let’s treat it as a proposal.”
While the governor’s budget generally would not reduce services or cut people off from benefit programs, it would cut the rates paid to doctors, hospitals, therapists, developmental disability providers, public health departments and others who care for people getting state benefits.
“That’s always a concern when we go after those who provide services to the most vulnerable in our society,” said Omaha Sen. Burke Harr.
Harr noted that he looks forward to working with Ricketts and having full and fair debate in areas where they may disagree.
Sen. Bob Krist of Omaha called proposed cuts to provider rates “very bad.”
“The developmental disability community depends upon those providers, and those providers are the core. They’re the wheels on the car. As we start to deflate those tires, we’re going to lose those people,” he said.
Sen. Kate Bolz of Lincoln, was also skeptical about the governor’s proposal. She said she doesn’t know how to justify income tax cuts that would benefit some of the richest Nebraskans while making budget cuts that impact middle-class Nebraskans. Some examples include cutting higher education, which could drive up tuition costs, or human services programs.
“There are more questions than answers,” she said.
Bolz also raised concerns about reducing payment rates to health and human services providers, when those providers already report that state reimbursement does not cover their expenses.
In addition to being a senator, Bolz works as the executive director of the Nebraska Association of Service Providers.
The governor’s plan focused on state spending cuts now and tax cuts in the future. His proposal includes easing property taxes for farmers and ranchers, starting in 2019, and reducing the top individual income tax rate, starting in 2020.
Scheer called the cuts now and tax reduction later strategy wise. Groene said that the governor’s property tax plan isn’t fast enough for him and that he will introduce his own proposal this year.
Ricketts’ income tax proposal, which would reduce the top individual income tax rate from 6.84 percent to 5.99 percent, would take effect only if state tax revenues were projected to grow by more than 3.5 percent that year.
Harr said lawmakers need to proceed with caution with that proposal.
“We had projections this year we’ve fallen almost $1 billion short of,” he said. “So we have to be careful in using projections to determine tax cuts.”
Nebraska Democratic Party Chairwoman Jane Kleeb said Ricketts’ plan is modeled after Kansas, where Gov. Sam Brownback overhauled the state budget and slashed personal income taxes.
She said the governor did not deliver bold plans for public education, clean energy, health care and prisons.
“Modeling our state after Kansas is a lose-lose (situation) for everyone,” she said. “We need a hard hat revolution to create jobs, keep young people from leaving our great state, and to ensure working-class families can stop treading water.”
Jack Cheloha, who lobbies for the City of Omaha, said he was concerned about the proposal to eliminate the $1.8 million annual funding for storm water management grants. The grant program was created to help Omaha with its federally mandated sewer upgrade project.
“That is a problem,” he said.
Nebraska’s chapter of Americans for Prosperity, meanwhile, praised Ricketts for focusing on cutting taxes and controlling spending.
Matt Litt, the group’s state director, called Ricketts’ address “right on target.” Ricketts was a founder of the Nebraska chapter of Americans for Prosperity.
“Our state’s projected nearly $1 billion shortfall was brought about by years of unchecked spending,” Litt said, later adding: “We applaud Gov. Ricketts for pledging to tackle our budget crisis while providing Nebraska’s workers and families with the tax relief they need.”