Budget Shortfall Unlikely to Stop Nebraska Push for Tax Cuts

LINCOLN, Neb. (AP) — Nebraska lawmakers are gearing up for a short but busy session next month that’s likely to be marked by renewed efforts to cut taxes even amid projections that the state faces a giant budget shortfall.

The $173 million shortfall forecast for the current two-year budget cycle will loom especially large for lawmakers who had to reduce funding for state services in this year’s session. When senators reconvene for a 60-day session on Jan. 3, they could face pressure to cut more.
Despite the tight budget, Speaker of the Legislature Jim Scheer, of Norfolk, said he expects a new effort to cut property taxes, possibly by shifting the tax burden to some other revenue source. But senators who want to spend more or reduce state revenue will have to explain how they’ll pay for their legislation, he said.

“Everything we do to reduce part of the budget is going to impact people,” Scheer said. “I expect a substantial amount of conversation on how we’re going to do that.”

Scheer said he doesn’t think any plan to lower the state’s income tax will succeed in the Legislature unless the cuts are only triggered when state revenue surpasses expectations. A plan championed by Gov. Pete Ricketts earlier this year would have done so, but the measure hasn’t gained enough support to pass.

Critics say tax cuts are at least partially to blame for the state’s recent financial problems at a time when lawmakers should be preparing for a population that’s growing older and more dependent on government services. The state also needs to spend more on prison rehabilitation and mental health services, said Sen. Paul Schumacher of Columbus.

Schumacher said lawmakers have deferred decades of necessary spending on prisons and mental health services so they could cut taxes.

“At some point we’re going to have to deal realistically with unrealistic expectations,” Schumacher said. “… There are all kinds of things that we’ve basically just pushed off into the future in hopes that we’d see a revenue turnaround that would magically fund them.”

Still, some leading conservative senators say they hope to overcome resistance to the package in the upcoming session. Business groups argue that cutting the state’s income tax rates will help businesses and the economy.

“Getting some sort of tax cut package done is a top priority for many of us,” said Sen. John Murante of Gretna.

Murante said he plans to introduce legislation to reduce state regulations, drawing from his experience on a working group formed by Ricketts. Ricketts created the group in June to review all regulations in agencies under his control.

Ricketts formed the group at the same time a report by the Mercatus Center, a privately funded free market think tank at George Mason University with ties to Republican billionaire donor Charles Koch, found that Nebraska’s most regulated industries are outpatient health care services, nursing homes and residential care facilities, and chemical manufacturers.

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