Committees hear support, opposition to Pillen’s budget and tax proposals

Nebraska legislative committees heard testimony Tuesday on Gov. Jim Pillen’s budget and tax proposals to pay for property tax relief.

Pillen is proposing $400 million in cuts across 22 government agencies. Along with the cuts, the proposal includes taking money made from interest and other income from state investments to put in the general fund.

The largest of the proposed cuts would come from the Department of Health and Human Services, which would see $87 million in reductions.

Senators questioned how the department would be able to ensure the needs of Nebraskans are met with less funding. Director Steve Corsi said the department can take the reductions because of federal funding and increased quality of services.

“As we get better at what we do, like getting better at claiming federal funds, we have additional opportunity to provide additional services,” Corsi said. “I am absolutely not concerned about the future for services for the people of Nebraska through DHHS.”

The Department of Correctional Services cited similar reasons for supporting the budget cuts. That department would have $20 million in reductions under this plan.

The Secretary of State’s Office would face $500,000 in reductions in election administration. Secretary of State Bob Evnen spoke against the cuts because it would impact elections. He said any money the office saved is being used to continue education about voter ID.

“Where, in the 11 counties that vote entirely by mail, there was less compliance with the voter ID requirements in those areas,” he said. “So what we want to do is take these funds and focus on that in a way that we hadn't initially planned.”

The Foster Care Review Office would also face $500,000 in cuts under this proposal. Heidi Ore works for the office. She said the cuts would result in immediate layoffs to the agency that monitors how children in the foster care system are being treated.

“Staff layoffs could mean that 750 Nebraska children, youth and out of home care under the child welfare and juvenile justice systems would no longer receive Citizen Review benefits of an independent review of the plans safety services, placement or case progress," she said.

Several of the agencies said they would not recommend the reductions on their own. Some also said the governor’s office never approached them about the cuts.

More from the Legislature's special session:

Legislature begins property tax session with a variety of bill introductions

Legislation to legalize online sports betting introduced in special session

Senator introduces bill to sell state plane for property tax relief

Supporters promote alternative to Pillen's property tax proposal

Meanwhile, across the Capitol hallway, the Revenue Committee was holding a hearing on Pillen’s main tax proposal, LB1.

Critics, including Sen. Julie Slama, have blasted the plan as increasing taxes on the middle class to benefit wealthy property owners. But Pillen said the net result would be a tax cut.

“This plan is not a tax increase, this is a tax decrease,” Pillen said. “LB1 will reduce the total number of taxes collected by just under $1 billion. This will be the largest property tax reduction in state history.”

Supporting the plan, Mark Veiting of Grand Island said Pillen had asked him to testify about the effect property taxes are having on his family.

“The family discussions of many gatherings every month have started centering around the property taxes in Nebraska, and how I have two sons looking in Iowa now for property,” he said. “If the interest rates were better, they'd probably be gone already. My wife begins to sob when she hears that conversation.”

Opposing the plan, Rachel Gibson of Omaha said the proposed tax on car repair services would have added $600 to her bill after a recent accident.

“I think back to when we were newly married and one of us worked and made $30,000 and had a kid, we wouldn't be able to adjust to $600 in car repairs when we were paying rent and not owning a home,” Gibson said. “...We have insurance. We have that safety net. And I'm really worried about people who don't have that but are still going to be facing that sales tax.”

Mark McHargue, president of the Nebraska Farm Bureau, opposed the plan because it proposes to tax ag machinery and equipment. He said that violates the principle that you should not tax the inputs businesses use to make consumer products.

Heath Mello, president of the Greater Omaha Chamber of Commerce, offered similar reasoning.

“We are opposed to those provisions of LB1 which taxes business inputs,” Mello said. “These inputs include manufacturing and agricultural equipment, legal services, accounting services, investment services, advertising software as a service, marketing, PR, and telemarketing, to name a few.”

But Creighton University economist Ernie Goss, supporting the plan, discussed the benefits found in a recent study.

“Passage of Governor Pillen’s tax reform package will produce the following three-year impacts: generate an increase in overall economic activity of $25 billion, produce an upturn in wages and salaries of about $8 billion, boost self employment income by $1.3 billion and support an increase in annual level of jobs about 41,000.”

The committees will now consider changes to the proposals, as they decide on the shape of the bills to send to the full Legislature for debate.