The Appropriations Committee budget proposal, which will be debated by lawmakers today, prioritized increasing the cash reserve. But one key committee member said Tuesday that she would like to see the state’s rainy day fund bolstered even more.

While the state has a budget surplus that allowed the committee to allocate $211 million to be used to fund new legislation, Sen. Anna Wishart told attendees at Tuesday’s OpenSky-Nonprofit Association of the Midlands budget briefing that uncertainty regarding how the surplus funds can be used as well as the one-time nature of the revenues make now a good time to put surplus dollars in the cash reserve.

The committee’s budget proposal would take the cash reserve fund to $763 million — or about 14.2% of state revenues. But Sen. Wishart, Vice Chair of the Appropriations Committee, said she would like the fund balance to be closer to 16% of revenues, which is the level recommended by the Legislative Fiscal Office.

A healthy cash reserve was key to the state being able to weather some major shortfalls in recent years and using current surplus dollars to bring it back up to recommended levels would leave the state in good position the next time the economy dips, Sen. Wishart said.

Sen. Wishart noted that the budget holds state spending growth at about 1.7% over the next biennium — well below the historical average of 3.4% growth. Aside from bolstering the cash reserve, Sen. Wishart said the budget proposal also includes increased funding for service provider rates, bolsters the Property Tax Credit program and takes steps to increase the sustainability of the health care cash fund. Furthermore, Sen. Wishart said the proposal includes funding for:

  • Arts and cultural districts;
  • A federally qualified health center on tribal land in Nebraska;
  • Law enforcement training to help address racial justice issues that came to the forefront last year;
  • Entrepreneurship by way of the the Business Innovation Act;
  • Programs for wildlife management and farmers with disabilities;
  • Weatherization of low-income housing; and
  • Efforts to reduce the developmental disability service waiting list.

As the debate on the budget begins, Sen. Wishart said she expects considerable discussion around corrections overcrowding and calls for the creation of a new prison to replace the Nebraska State Penitentiary. The committee didn’t appropriate funds for a new prison but set aside $115 million to potentially be used after an upcoming study to assess what the state needs to do to address prison overcrowding. Sen. Wishart said she also expects the debate to feature discussion about the developmental disabilities waiting list.

While discussing some of the measures that have been advanced by the Revenue Committee this session, OpenSky Executive Director Renee Fry echoed Sen. Wishart’s call to use surplus dollars to increase the cash reserve.

Given the one-time nature of many of the surplus dollars Nebraska now has, Fry said OpenSky has considerable concerns about the sustainability of passing new ongoing tax and spending measures, including the multiple tax cut proposals advanced by the Revenue Committee.

The fiscal impact of the measures advanced by the Revenue Committee alone would exceed the $211 million the Appropriations Committee has set aside for new legislation. The measures would continue to grow in cost, eventually having an annual fiscal impact of at least $385 million. Comparatively, all other priority measures that have been advanced out of committees would cost the state an estimated $177 million in the next biennium and then have an ongoing fiscal impact of $22 million, Fry said.

Sen. Wishart and Fry also noted that more clarity is needed on whether tax cuts passed by the Legislature this year could force the state to have to return American Rescue Plan dollars. Guidance regarding this issue is expected in the coming weeks.

First round debate on the budget will begin today with second-round debate likely being completed sometime next week, Sen. Wishart said. It’s unclear at this point when final round debate on the budget would be held.

You can watch the full briefing here. Also, you can download the slides presented during the briefing here.