Political News

Ricketts budget plan calls for cuts, tapping cash reserve

Posted January 5

— Nebraska government would see a net budget cut of $151 million over the next six months under a plan Gov. Pete Ricketts unveiled Thursday to help balance the state's finances.

The proposal would preserve funding for K-12 public education — the largest chunk of the state budget — and the problem-plagued Department of Correctional Services, but would impose a 4 percent across-the-board cut for dozens of state agencies. The Nebraska State College System would lose $2 million and the State Patrol's operations budget would shrink by $2.3 million.

Other departments would see a smaller percentage cut. And some programs, such as child welfare aid and Medicaid assistance, would see a combined funding increase of $20 million to address problems identified by state agencies.

"We really tried to be thoughtful and balance out the across-the-board cuts with specific reductions, still with the aim of making sure we can get a balanced budget without increasing taxes," Ricketts said in a briefing with reporters.

Ricketts urged lawmakers to act quickly on his proposal to get the state into position to address the full shortfall, which is projected to reach nearly $900 million by 2019.

The plan relies on a combination of spending cuts and pulling money from various government accounts. It would draw $92 million from the state's rainy day fund and about $22 million from more than two dozen cash funds, which are separate from the state's general fund.

Ricketts is also betting that online retailer Amazon will help the budget by generating another $11.2 million for the state. Amazon announced last month that it will start collecting sales taxes on purchases in Nebraska. Ricketts said the projection was his administration's "best estimate" of how much tax revenue the company would produce.

Nebraska already requires residents to report how much they spent online when filing their income tax returns, but few people comply, costing the state millions each year in lost revenue.

The proposal seeks to address a revenue shortfall in the current fiscal year, which ends June 30, but does not address the upcoming two-year budget cycle. Ricketts will release that plan after his address to lawmakers on Jan. 12.

Combined, the proposed cuts and new money for the general fund would adjust the budget by nearly $276 million. The projected shortfall for the rest of this year is $267 million.

Members of the Appropriations Committee said they were still digesting the report.

"There's still a lot of work to do, and we need to be diligent with our process," said Sen. Kate Bolz of Lincoln.

Bolz said she wants to protect the rainy day fund as much as possible to ensure an adequate safety net for the state's finances. The fund is projected to reach $630 million by 2019. She praised the governor's decision to provide a funding increase for child welfare services.

Sen. John Stinner of Gering, the committee's new chairman, said the committee will go through the governor's proposal "line by line" but will try to accommodate his request to approve the package quickly. The committee is expected to meet Tuesday.

"It looks like a balanced approach," Stinner said. "They didn't cut some of the bigger, more sensitive areas, but certainly there are cuts. We'll take a look at them all."

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Follow Grant Schulte on Twitter at https://twitter.com/GrantSchulte

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