Budget challenges may overshadow initiatives in Legislature

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The Nebraska Legislature begins its 2026 session Wednesday facing a budget squeeze that could overshadow new initiatives in a variety of areas.

As Speaker of the Legislature, Sen. John Arch sets the daily agenda for what senators will debate. In a recent interview in his office overlooking one of the Capitol courtyards, Arch talked about what will dominate this session.

“Without a doubt, the budget is the number one issue, and so there's going to be a consideration, not just for one year, plugging the gap, but also to set ourselves up for the out years,” he said.

That “gap” for the current two-year budget shows the state falling $471.5 million short of its required 3% budget reserve. For the out years, the following two years, that gap is projected to grow to $690 million. Those gaps are about 4% of total state spending for the current biennium and 6% for the next.

Gov. Jim Pillen plans to address that by proposing spending reductions.

“We're going to be presenting a budget to the Unicameral from what we had last year that will have $500 million decrease in spend for Nebraska taxpayers,” he said.

In a mid-December interview, Pillen said he was still working on details of his proposal. But Sen. Rob Clements, chair of the budget-writing Appropriations Committee, said one way or another, senators will have to clamp down on spending.

“If we don’t accept some of his cuts, then we’ll have to find money elsewhere to balance the budget,” he said.

One likely target of those cuts will be the Health and Human Services system, according to Sen. Brian Hardin, chair of the committee that oversees that department.

“The biggest part of the budget is HHS, we're the big red balloon in the sky," he said. "When it comes to making cuts which we think are inevitable, we will be front and center. So essentially, the fine balance of how do you make those cuts and somehow still try to make some progress on cooling down the medical desert, particularly in rural Nebraska, is the dark art that we have to try and master this year."

Hardin says to address rural medical needs, he wants to expand what physicians assistants and nurse practitioners are allowed to do.

Sen. George Dungan says addressing the budget shortfall will require more than just reducing spending.

“I think there's absolutely no way that we can simply cut our way out of the situation," he said. "Anybody I talk to, whether it's our business industries here in Nebraska or folks that just live in Nebraska, everyone agrees that we have to make Nebraska a place that people want to live in."

To Dungan, that includes investing in projects like parks and bike trails, along with essential services like home nursing visits for new moms and babies.

Sen. Jane Raybould said senators need a compromise that recognizes that current budget problems stem from the income tax cuts they approved.

“Until we acknowledge that and come up with solutions to pause it or halt it, we will continuously be in this state of structural deficit,” she said.

Proposals to pause the income tax cuts failed last year, and Arch doesn’t think they’ll succeed this year.

“Given the fact that we're dealing with the same senators, the ones who had cast a vote earlier on it, I'm not aware that votes have changed, but there's lot of discussion. And of course, sometimes necessity breeds solutions, and you don't know until that final vote is taken,” he said.

Raybould will also continue to push for allowing employers to once again pay 14- and 15-year olds $13.50 an hour, which was the minimum wage before it rose to $15 an hour Jan. 1. That proposal could come up for a final vote in January.

Meanwhile, Pillen has signaled he’ll try to revive an idea he’s proposed in the past to lower property taxes by having the state pay operating costs for schools through a broadened sales tax.

Pillen also said he’ll pursue other initiatives, like repealing a prohibition on suspending students in kindergarten through second grade.

‘We have children in our schools, kindergarten, first and second grade that can go in and double flip teachers off and say, 'F-you’ more than ‘Thank you,’ and there's no consequence, and that has to get changed. It's a gigantic priority,” he said.

Sen. Kathleen Kauth said she’ll reintroduce legislation to restrict people to using bathrooms corresponding to their sex at birth.

Sen. Merv Riepe, who blocked that provision last year, says he’s still against it.

“It's not enforceable. How do you enforce it, even at say, at the state capitol? How are we going to do that? Are we going to put a potty patrol officer at every bathroom? And I don't think it's an issue in Nebraska,” he said.

Sen. Bob Hallstrom said there will be plenty of other subjects raised as well.

“There's a lot of issues that are raised by constituents, some of which, particularly this year, I think is going to be a pretty heavy year, pretty full of discussion and shenanigans and a lot of things that might go on,” he said.

How those discussions, and shenanigans, play out will be seen between now and when the Legislature’s scheduled to adjourn in mid-April.