Loren Lippincott
The 109th Nebraska Legislature concluded its second session on April 17 after a 60day short session dominated by tight fiscal constraints, a large projected deficit and debates over gubernatorial vetoes. Lawmakers in the Republicancontrolled nonpartisan unicameral tackled a $646 million budget gap while passing major policy measures related to education, agriculture and tax policy.
The deficit representing over 10 percent of our $5.5 billion budget, was brought about by a financial “perfect storm.” All the money that flowed from Washington, D.C. during the recent pandemic has dried up. Of interesting note is the fact that during the first 24 months of the last administration, the M2 money supply (the measurement of the total currency in circulation plus highly liquid “near money” assets) increased 42 percent. As economist Thomas Sowell points out, “The first lesson of economics is scarcity: There is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” In other words, increasing the money supply by printing is the root cause of our current inflation.
This perfect storm was also fueled by a depressed farm economy. The prices for corn and soybeans have sunk. From spring 2022 when corn prices were near $8 a bushel, corn is now at $4.10 while the breakeven price needs to be $5 a bushel. Agriculture makes up 20 percent of our state’s economy, and employs 25 percent of the workforce. We are entering the fourth season in which farming is not profitable and one local implement dealership reports its business is down 50 percent from previous years. The resulting impact on our state’s economy is obvious.
Another factor in the budget crisis has been the reduction of income tax rates. In 2027 the Nebraska personal income tax rate will be 3.99 percent. Since income taxes make up 28 percent of our state revenues, this is impacting the amount of money coming into our treasury. (As a side note, property taxes make up 47 percent of money coming into government coffers, however, this is kept locally).
Sales taxes make up 19 percent of revenues to the state and corporate and excise taxes each produce six percent.
The session began in January with 547 bills being introduced, along with 715 bills carried over from last year. Altogether, 1,262 bills were on our docket this session, and 339 of these bills passed to become law.
In the days leading to the close of the biennium, Gov. Jim Pillen vetoed five legislative bills. While four of these bills had originally passed with more than the 30 votes necessary for an override, the veto override attempts on April 17 fell short, resulting in all five vetoes being sustained.
Gov. Pillen praised the session at its conclusion, focusing on the passage of a “fiscally, historically, conservative balanced budget” that decreased spending, utilized “rainy day” funds and increased revenue without cutting essential services.
Budgetary fixes: Lawmakers passed an omnibus bill to close the projected deficit, which included a 10 percent excise tax on kratom products and the reinstatement of certain sales taxes for non-profits and data centers.
The final budget package brought in roughly $21 million in new revenue and over $1 million in savings.
Several significant pieces of legislation were passed and signed into law. An omnibus education package was approved, alongside a measure broadening the school meal reimbursement program. The Legislature approved protections against foreign threats to agriculture and critical infrastructure. A bill strengthening child care subsidies passed with bipartisan support. Additionally, a bill requiring security measures at the Capitol passed. A bill allowing private companies to build electric generating capacity for large customers (LB1261) also passed. And a judicial package containing a comprehensive set of procedures affecting court processes also passed.
Failing to pass was a further clarification of voter-approved medical cannabis rules (LB933), partly due to a controversial anti-trans healthcare bill being attached to it during debate. Furthermore, discussions on significant property tax relief were minimal.
The session concluded with the departure of 13 senators, which sets the stage for significant turnover in the 2027 legislative body.
Loren Lippincott represents Legislative District 34 in the Nebraska State Senate. Read his column in the Nance County Journal.