OpenSky’s analysis of the budget reconciliation bill that passed in the House of Representatives is ongoing. The bill is lengthy and consequential, and we will analyze and share its impact on working Nebraskans in the days and weeks to come, especially as we track budget proceedings in the Senate. Stay tuned for more. 

$300 billion

Early Thursday morning, the House advanced a budget by a vote of 215-214 that would make the biggest cuts to Medicaid and SNAP in the history of either program, and would add so much to the national deficit (over $3 trillion), that 2010 sequestration provisions would be triggered, forcing half a trillion dollars in cuts to Medicare. Nebraska Reps. Don Bacon, Mike Flood, and Adrian Smith all voted in favor of this budget.

As part of the House bill process, last week, members of the Congressional Committee on Agriculture, including Congressman Bacon, advanced a proposal to cut $300 billion in food security investments over the next 10 years, exceeding the already massive $230 billion number outlined in the budget reconciliation approved in February. The cuts would take the form of a series of changes to the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

The federal government claims it is “saving” money–by shifting costs to the states for a portion of SNAP benefits, which have been 100% federally funded for the 50-year life of the program. The percentage cost shift would be decided based on that state’s payment error rate (the rate at which a state inadvertently makes overpayments or underpayments of SNAP benefits), starting at 5% for all states and increasing gradually to up to 25%.

State error rates vary year to year. From one year to the next, a state would not know with any certainty whether it would be required to pay 5 percent of benefit costs, 15 percent, or even 25 percent. The bill also expands what counts as an error by eliminating the quality control threshold (currently, errors smaller than $37 are not counted), increasing the payment error rate for every state and potentially tipping a state over the threshold to owe substantially more.

According to the most recent available data by the United States Department of Agriculture, Nebraska had a payment error rate in FY2023 of 7.06%, compared to the national average of 11.68%. If its error rate remained the same, Nebraska would fall into the bracket of finding the funds to cover 15% of SNAP benefits. Using last year’s data, $332 million was paid to Nebraskans in SNAP benefits, so the state would need to find nearly $50 million to cover the gap once the shift is complete, or be forced to reduce benefits, leaving families, seniors, and the thousands of armed service veterans who rely on SNAP for food security without a safety net.

The bill also cuts in half the federal funding states receive for program administration — so added to the cost shift, Nebraska’s costs to administer SNAP would rise from approximately $24 million in FY24 to at least $37 million in future years, an increase of at least $13 million per year. In total, Nebraska can expect to pay between $39M-$95M more each year to maintain SNAP benefits.

Further changes include expanding work requirements and narrowing exceptions for those caring for small children as well as limiting future updates to the Thrifty Food Plan, eroding the value of SNAP benefits, particularly as food costs increase.

28,000

Legislators working on reforms to and permanent implementation of the Tax Credits and Jobs Act (TCJA) have proposed limiting the federal Child Tax Credit (CTC) to only those children whose parents both have a social security number, even if one parent is a citizen. Analysis by the Center for Migration Studies estimates that 4.5 million children would lose financial support if this measure is adopted. Extension of the TCJA would still leave out the 17 million children who don’t see the full benefits from the CTC because their family incomes are too low. These families currently don’t even get the full $2,000 Child Tax Credit, and would get nothing from a proposed $500-per-child increase, even as families earning up to $400,000 would realize the full benefit.

Child Tax Credits are a proven way to reduce poverty across the nation, and many states and even local governments have leveraged them to provide basic needs to children and families. After Congress expanded the federal Child Tax Credit in 2021, child poverty in the U.S. dropped to an all-time low of 5.2%. When the pandemic-era expansion ended, child poverty rebounded to 12.4%.

Reports from the Center for Migration Studies estimates that in Nebraska, 28,000 children, citizens of the nation, who currently qualify for the credit would become ineligible if the provisions related to a parents’ social security numbers were implemented.

$100 million

The Nebraska Legislature failed to overcome a filibuster of LB 170 earlier this week, a bill that would have removed several sales tax exemptions and increased taxes on cigarettes, vapes, and soft drinks. When introduced by Senator Tom Brandt earlier in the session, the measure was intended to raise $67 million in funds over the biennium to help fill a budget shortfall facing the body at the beginning of session, but after choosing instead to close the shortfall with additional cash fund sweeps, rainy day fund transfers and program reductions, LB 170 was amended to direct funds to additional property tax cuts.

The legislature has considered, and rejected, a similar proposal as recently as last summer’s special session, but had hoped that a more narrowly-targeted list could make it across the finish line. Brandt proposed an amendment to narrow the bill even further, stripping the sales tax provisions out, but maintaining an increase on cigarette and vape taxes he estimated would raise nearly $75 million.

OpenSky has long supported broadening the sales tax base to lower the overall rate, currently at 5.5% for the state, but higher in certain areas where local sales taxes are imposed. However, increasing sales taxes for property tax relief would cause an already-regressive tax system to shift the cost of property tax relief to those who can least afford it.

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