By:Erin Bamer
Nebraska Examiner
Legislative committee considers study examining impacts of unfunded mandates on county budgets
LINCOLN — State senators are renewing a push to reduce unfunded mandates on Nebraska counties in hopes of reducing local reliance on property taxes.
The Nebraska Legislature’s Government, Military and Veterans Affairs Committee considered Legislative Resolution 195 at a public hearing Friday at the Capitol. The resolution, proposed by State Sen. Rick Holdcroft of Bellevue, asked lawmakers to study the impacts of unfunded mandates.
The committee heard from eight invited testifiers, all of whom represented various county government entities across Nebraska. Each argued that the state passing down requirements to counties puts additional strain on their resources and increases the likelihood of future property tax increases.
“When we talk about unfunded mandates, these are things the state doesn’t want to fund, and therefore it’s going to go on the backs of property taxpayers,” said one testifier Jon Cannon, deputy director of the Nebraska Association of County Officials.
A line of Nebraska lawmakers has fought against unfunded mandates for decades to minimal success, including former Gov. Ben Nelson and U.S. Sen. Deb Fischer, R-Neb., when she served in the Legislature. Before Holdcroft, former State Sen. Carol Blood of Bellevue championed the cause.
At one point during her eight years in office, she claimed she had the votes to pass a constitutional amendment that would put the fate of unfunded mandates in the hands of voters, but legislative leaders ended the session early to prevent it from passing. She argued most lawmakers don’t want to end unfunded mandates, because that would force them to explain how the state will pay for services.
Blood claimed she even heard resistance from Holdcroft to her proposals when he ran against her in 2020. She said many opponents question whether unfunded mandates are a big deal, because most of the individual mandates don’t have a high price tag. But Blood countered that there are so many mandates that together they make a dent in local budgets.
“Those pennies add up,” Blood said.
Friday’s testifiers confirmed as much. While the annual costs vary county to county, several testifiers attested that their counties spend millions of dollars each year to address state requirements.
In Sarpy County, Commissioner David Klug said state mandates make up about 9% of their general fund, which equates to about $12.4 million in the current fiscal year. In Lancaster County, fiscal officer Dennis Meyer said taxpayers paid more than $20 million last year to cover unfunded mandates.
While the number of unfunded mandates seem to increase, several testifiers noted counties have limited options in how to generate revenue to pay for the costs. NACO Deputy Director Candace Meredith said the primary revenue options for counties are property taxes and inheritance taxes — two measures lawmakers have been trying to reduce in recent years.
“Lancaster County has a demonstrated track record of prudent financial management, but we have no control over the continually escalating costs of these state mandates,” Meyer said.
Unfunded mandates cover a broad range of services, but many of the costliest involve the criminal justice system. Multiple testifiers pinpointed courtroom security and probation housing as services with high costs and no state support, though a majority of the workers are employed by the state.
Meyer claimed Lancaster County foots the entire bill for their criminal justice system, except for the salaries and benefits of state employees.
But state mandates stretch beyond criminal justice. Multiple testifiers listed concerns with the rising costs of verifying signatures for ballot petitions and budgeting for University of Nebraska extension programs.
Seward County Commissioner Misty Ahmic said the state requires counties to budget for NU extension programs, but counties have no discretion in how those programs operate. Since 2020, Ahmic said Seward County has spent more than $1.2 million on this, mostly covering salaries.
The University of Nebraska system has 83 county extension offices across the state, which provide research opportunities typically relevant to their locations, such as livestock systems, horticulture and early childhood development.
In addition to burdening taxpayers, Meredith said unfunded mandates also make it more difficult for counties to offer competitive pay and benefits to employees.
There have been some signs of progress recently. Klug thanked lawmakers for passing Legislative Bill 376 this year, which, among other things, eliminated the requirement for counties to provide office space for the Department of Health and Human Services.
“If we can start to chip away at (unfunded mandates), we see that as a huge advantage,” Klug said.
Meredith suggested lawmakers consider modernizing current regulations to possibly eliminate some mandates. Cannon encouraged committee members to brainstorm requests the state can afford to let counties stop covering.
Meredith also proposed the Legislature review existing tax exemptions to ensure Nebraska’s tax structure is “fair and equitable to everyone.”
“Counties are all in to work alongside the Legislature to modernize unfunded and underfunded mandates,” Meredith said.
Holdcroft has introduced several bills still pending in the Legislature that would remove some existing unfunded mandates. These include Legislative Bill 327, which would require the state to pay for probation services, and LB 216, which would give the Nebraska Supreme Court administrative authority over all courts in the state. Neither bill has advanced out of committee.
Blood followed a broader strategy in the Legislature that attempted to reduce or eliminate unfunded mandates as a whole. She said she disagrees with Holdcroft’s more individualized approach, arguing it makes the state “pick winners and losers.”
Holdcroft said he hopes to make progress on the pending bills in 2026 but acknowledged that Nebraska’s ongoing budget constraints pose a challenge. The state faces a projected budget deficit of at least $95 million, and several other factors at play could multiply that figure.
Holdcroft said the success of his bills will likely depend on “how serious” fellow lawmakers are about addressing Nebraska’s property tax crisis. He said he introduced LR 195 in an attempt to raise their awareness of how unfunded mandates impact counties and taxpayers.
“I think right now almost every senator looks at his legislation to make sure that there aren’t unfunded mandates that are included in there,” Holdcroft said. “And this, I think, helps with the lens.”