Budget, Taxes, Hemp and Right to Farm Move in Legislature

May 2, 2019, 4 p.m. ·

Nebraska Capitol (Photo by Fred Knapp, NET News)

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The Nebraska Legislature moved closer to some big decisions affecting spending, taxes, and agriculture Thursday.

Next year, state government in Nebraska would spend just over $4.6 billion dollars – about $2,400 per resident – under the budget the Appropriations Committee sent to the full Legislature for debate next week.

The anticipated spending includes a start on a 384-bed addition to the Lincoln Correctional Center, part of a strategy to reduce prison overcrowding.

The $49 million cost for that prison construction will come out of the state’s cash reserve – the so-called “rainy day fund,” which has dropped from $730 million three years ago to an estimated $333 million this year, as the agricultural economy softened and state tax collections slowed.

Sen. John Stinner, chairman of the Appropriations Committee, wants to begin rebuilding that reserve. To do so, the committee is recommending taking half the money Gov. Pete Ricketts wanted to use for property tax relief and putting it instead into the cash reserve.

Stinner said that’s necessary to avoid painful budget cuts in the next recession. “I am very much focused in trying to build the rainy day fund back – start that process back. We are a long ways into this business cycle and there are concerns that revenue won’t be there, and without a rainy day fund, you have no cushion,” he said.

But other senators have designs on that money as well. The Revenue Committee, for example, wants to use it as part of its plan to reduce property taxes.

In a briefing for state senators and staff Thursday, Revenue Committee Chair Sen. Lou Ann Linehan touted the benefits of that plan, LB289. “LB289 broadens the base and reduces public K-12 education’s reliance on property tax dollars. LB289 provides property tax relief for every property owner, homeowner, commercial property owners, and agricultural producers,” she said.

The plan would raise the state sales tax by half a cent and subject a long list of currently exempt goods and services to the sales tax, ranging from pop and candy to home and car repairs. It would funnel additional state aid to schools and limit how much they could collect from property taxes. The bill is scheduled for debate Tuesday afternoon, and the budget is scheduled for Wednesday.

Meanwhile, the Revenue Committee also advance a proposed rewrite of the state’s corporate tax incentive laws. Sen. Mark Kolterman, its sponsor, said it would work better because it will be administered by the Department of Economic Development rather than Revenue, and has other advantages for the state and for companies. “It’s more transparent. We’re getting more money upfront. It’s a better use of our dollars. It’s a shorter period of time to collect the money. We’re going to be paying out earlier, but we’re also going to be tracking very closely where people are at on an annual basis,” he said.

Similar proposals in the past have become ontroversial because their costs have exceeded the estimates at the time they were passed.

Also Thursday, senators gave the second of three required approvals to a bill that would let farmers grow hemp in Nebraska. The move came despite objections from Sen. John Lowe, who said “It is true that my fear (is) that this bill will usher in marijuana into our state.”

Hemp is from the same plant species as marijuana, but contains minimal amounts of the psychoactive ingredient THC.

Sen. Justin Wayne, sponsor of the hemp bill, said Lowe’s fears are unjustified. “Looking at our 50 states, 28 states had medical marijuana programs before they had hemp. Five states enacted both the same year. Nine states have hemp programs with no medical marijuana programs. The data doesn’t support the notion of your fear,” he said.

The bill got second round approval on a voice vote.

And, lawmakers gave final approval to an expanded version of so-called Right to Farm legislation. Currently, neighbors are banned from suing farm operations for nuisances like odors, if the farm was already operating before the neighbors moved in. Sen. Dan Hughes originally wanted to expand that to say the ban would still apply, even if the farm operation changed after the neighbors moved in -- for example, from growing row crops to running a livestock operation.

Under a compromise, neighbors would now have a two-year time limit from such a change to file lawsuits. The bill passed on a vote of 46-2.