By Unicamiral Update
Following discussion of several proposed changes, lawmakers gave second-round approval May 12 to the state’s $10.8 billion budget package. The state budget is structured on a two-year basis, with the budget enacted in legislative sessions held in odd-numbered years.
LB261, introduced by Speaker John Arch of La Vista at the request of Gov. Jim Pillen, is the mainline budget bill. Senators adopted an amendment on select file offered by Appropriations Committee chairperson Sen. Robert Clements of Elmwood that replaced the bill and made additional adjustments to close a shortfall.
Among those additional adjustments is a $10 million reduction in the Medicaid Managed Care Excess Profit Cash Fund and the reappropriation of a number of carryover funds, including $8 million from the Nebraska Crime Commission. The amendment also would allow several state agencies to utilize cash funds and correspondingly decrease their general fund appropriations.
Clements said the adjustments were needed because of projected reductions in revenue madeby the Nebraska Economic Forecasting Advisory Board after the committee’s initial proposal had been advanced to the full Legislature for debate.
Lincoln Sen. Danielle Conrad questioned the committee’s approach. She said shifting funds to “fill holes” in order to achieve a constitutionally required balanced budget this year would not address the “structural imbalances” lawmakers created in recent years that she said threaten the state’s long-term economic stability.
“We’ve moved from a historic fiscal surplus to a budget deficit in a matter of just a few years through unaffordable, inequitable, unsustainable tax cuts … that primarily benefit the wealthy at the expense of Nebraska consumers and communities,” Conrad said.
The Clements amendment was adopted 37-2.
Other changes
Senators considered a number of additional changes to the mainline budget bill, including an amendment offered by Bellevue Sen. Rick Holdcroft to restore $3 million in general fund appropriations to the Nebraska Supreme Court.
Holdcroft said the funds are necessary to maintain problem solving courts in Sarpy County and other areas, which the Supreme Court indicated would be halted under existing budget constraints. Problem solving courts are diversion programs that connect adults and youth with treatment services for mental health and substance use disorders.
Without these programs, Holdcroft said, people would cycle through courts and jail systems without getting real help. The average cost for an individual participating in a problem solving court is $4,400 compared to $41,000 to keep a person incarcerated for a year, he said, adding that problem solving court participants have a 10% recidivism rate compared to 30% for those exiting the state’s prison system.
“These are not theoretical programs,” Holdcroft said. “These are real people whose lives and outcomes are being changed through structured, accountable and therapeutic court interventions.”
Clements opposed the amendment. He said the Supreme Court could fund the problem solving courts with cash funds through this year and make a deficit request of the Appropriations Committee next session if additional funds are needed.
Sen. George Dungan of Lincoln supported the amendment, saying the courts need certainty in their funding in order to continue providing problem solving courts. Program participation often stretches over multiple years, he said, and without a guaranteed funding source, the courts likely would start winding down the programs.
The amendment would transfer $3 million from the state’s Cash Reserve Fund to the General Fund to cover the cost. Holdcroft said the move would leave $689 million in the state’s so-called “rainy day” fund, still above the 12% of state expenses that the Appropriations Committee has determined is a necessary balance.
“It’s the ‘rainy day’ fund,” Holdcroft said, “and folks, it’s raining.”
The amendment was adopted 26-17. Twenty-five votes were needed.
Also adopted was an amendment offered by Lincoln Sen. Carolyn Bosn that would provide $3 million in each of the next two fiscal years from the Medicaid Managed Care Excess Profit Cash Fund for domestic violence support services across the state.
Bosn said lawmakers approved the funding last session, but were unable to utilize Temporary Assistance to Needy Families as the source. She said 20 programs serve all 93 Nebraska counties and provide counseling, legal advocacy, transportation services, shelter and assistance navigating the court system.
Nine Nebraskans have lost their lives in domestic violence incidents so far this year, she said, and demand for services continues to rise, with the state’s domestic violence service network providing assistance to 12,000 people last year.
“These are not optional services,” Bosn said. “These are life-saving interventions and they are required in our state statutes under the Protection from Domestic Violence Act.”
Sen. Jason Prokop of Lincoln supported the amendment, saying “not a single dollar” of the funds approved last year made it to domestic violence survivors because the state Department of Health and Human Services was not able to access TANF funds for that purpose.
The Bosn amendment was adopted 40-2.
Several additional changes also were approved, including amendments from:• Norfolk Sen. Robert Dover to restore $1 million in funding to the Robert B. Dougherty Water for Food Global Institute at the University of Nebraska, on a 30-11 vote;• Glenvil Sen. Dave Murman to restore approximately $264,000 to the state’s Educational Service Units, on a 42-0 vote; and• Bennington Sen. Wendy DeBoer to reduce a reappropriation of lapsed funds from the Nebraska Broadband Bridge Program from $5 million to $4 million, on a 42-0 vote.
After four hours of debate and a successful cloture motion from Arch, senators advanced LB261 to final reading on a vote of 39-6.
Fund transfers
Several amendments were considered to LB264, also introduced by Arch at the request of the governor, which would provide for fund transfers, change provisions governing the administration and use of funds and repeal previous expansions to aid and incentive programs.
Among the changes approved was an amendment brought by Syracuse Sen. Bob Hallstrom that would transfer $8 million from the Affordable Housing Trust Fund to the General Fund in fiscal year 2026-27 in order to restore $4 million in funding cuts to both the Rural Workforce Housing Fund and the Middle Income Workforce Housing Fund.
Hallstrom said he supports the free market but that incentives are needed to spur the workforce housing development Nebraska needs to grow the state’s economy. He said the Affordable Housing Trust Fund, which is funded by the documentary stamp tax on real estate transactions, should be able to make up the transfer in a year.
Conrad questioned the amendment, which she said simply would “paper over” a hole in the budget and likely would ultimately shift affordable housing funds away from Lincoln and Omaha.
The Hallstrom amendment was adopted on a 26-5 vote. Twenty-five votes were needed.
Also adopted was a Bosn amendment to effectuate the change she succeeded in making to the mainline budget bill. Adopted 36-0, the amendment would add domestic violence services to the list of allowable uses of the Medicaid Managed Care Excess Profit Fund.
On a 27-12 vote, lawmakers approved $1.25 million in transfers over the next two fiscal years from the Nebraska Litter Reduction and Recycling Fund to the General Fund offered by Clements.
Finally, Clements offered an amendment, adopted 40-3, which would increase a transfer from the Cash Reserve Fund to the General Fund from $142 million to $147 million. The increase was necessary to balance the budget following additional changes made to the committee package during select file debate, he said.
Senators rejected an amendment from Omaha Sen. Terrell McKinney on a vote of 15-32 that would maintain a policy directing interest on earmarked funds for the proposed Perkins County Canal project and the new state prison to a variety of economic recovery projects.
LB264 would end that policy and begin directing interest to the General Fund beginning July 1. McKinney said lawmakers had negotiated to divert those funds for three years and that the Legislature should honor that deal and continue investing in important economic development projects.
Clements opposed the amendment, saying diverting the interest to the General Fund was needed to help erase the budget deficit. Taken together, the budget package would leave a $1.1 million surplus, he said, and any additional changes would jeopardize the state’s bottom line.
Following four hours of debate and a successful cloture motion from Arch, senators advanced LB264 to the final round of debate by voice vote.