Nebraska Legislative Wrap-up
Budget cuts, tax
increases, cuts to education, and no major rural
development initiative –
but microenterprise funding was spared. All-in-all the
2003 session could have been worse.
BY JON BAILEY, RURAL
RESEARCH & ANALYSIS PROGRAM DIRECTOR
The Nebraska Legislature ended its 2003 session on May
30, one day early and potentially many dollars short.
Future fiscal and economic happenings will determine how
successful the Legislature was in balancing both the
budget and the needs of the state.
There is already some concern that the budget, while
balanced on paper, may create a cash flow crisis for the
state and a new round of budget cuts if actual tax
revenues do not keep pace with projections.
The Legislature adopted a biennium budget that consisted
of two main blocks:
- $436 million in spending reductions to state
agencies, including $60 million less in K-12 school
- a $345 million revenue plan that increased some
taxes and maintained 2002 increases in others.
These were vetoed by Governor Mike Johanns, who
expressed a general desire for more spending cuts –
particularly to all levels of education – and less
reliance on revenue measures. Governor Johanns
particularly disapproved of portions of the revenue
package that maintained the 2002 increases in sales and
income taxes and expanded the sales tax base.
All vetoes were overridden by the Legislature by handy
margins, with most Senators expressing the need to spare
education from deeper cuts.
In our view, the budget approved by the Legislature is
markedly superior to the Governor’s budget in its impact
on rural Nebraska. However, the budget does
significantly affect rural people and rural communities.
The budget highlights an important policy issue – the
potential for a dramatic shift from state to local
responsibility and the possibility of increased local
The past policy theory of the state was to assist in
keeping a lid on local property taxes through direct aid
programs to local units of governments. The budget
adopted in 2003 continues cuts to those aid programs
begun in 2001 and 2002.
If local political subdivisions and institutions attempt
to replace these state funds with local funds,
equivalent amounts may be taken from rural taxpayers and
the rural economy. The alternative available to local
officials is to adjust their budgets without increased
revenue, with the potential for decreased services and
local job losses.
The Nebraska Microenterprise Fund appropriation was
maintained at the current $250,000 annual amount. It was
included at this amount in the budgets proposed by both
the Governor and the Appropriations Committee.
There was no effort to remove the funding at any stage
of the process, which speaks well for the work being
done by the NMPF and its grantees and the educational
efforts focused on the Legislature. Those efforts must
continue, however, in the event of further budget cuts
or increased funding for the NMPF in the future.
The Main Street Business Development Act (LB 776) will
be held over to the 2004 session. This bill seeks to
double the funding for the NMPF and restore funding for
the agriculture value-added grants program through some
changes to the state’s LB 775 business tax incentive
The Center for Rural Affairs and others will be working
with Senator Matt Connealy and other interested Senators
to gain more support for the bill so it can be moved out
of the Revenue Committee and to the floor of the
Legislature in 2004.
Senator Connealy also introduced an Interim Study
Resolution that will be of interest to those concerned
with small business development. LR 156 is a study of
options for creating a small business tax credit system
Finally, the Rural Development Commission was revived in
the waning days of the session, and the Governor is
currently accepting applications for new members. The
RDC will likely have a focus on rural economic
development, of which small business development must
play a vital role.