Legislature advances fund transfer bill despite concerns

The Nebraska Legislature gave first-round approval to another state budget bill Thursday, but not before nearly half the senators signaled what some described as unease over part of the proposal.

Thursday’s debate focused on a bill to transfer money between different state government funds to balance the budget and fund property tax cuts. The biggest single part of this bill was a proposal to transfer $70 million from an unemployment insurance trust fund to the general fund.

Supporters of the move say this state unemployment fund is just a backup to a federal trust fund, and no money has been spent from it for the last five years. Gov. Jim Pillen proposed transferring $60 million, and the Appropriations Committee upped that recommendation to $70 million. Sen. Rob Clements said even after that transfer, there would still be $12 million left in the fund.

Sen. Danielle Conrad proposed an amendment to undo the proposed transfer, and criticized the idea.

“There is no policy behind grabbing $70 million for this fund. It is a raid for a raid purpose. It is a big ticket item that helps to prop up the budget for other purposes. And that is not what a trust fund is for,” Conrad said.

Sen. Brad von Gillern objected to using money that businesses pay into the unemployment insurance trust fund for other purposes.

“As an employer I paid into this fund for 30 years and so if we knew that we paid into that fund it was for a very specific purpose and a reason and to do something different with those funds I think is his at least getting close to an edge that we don't want to get close to,” von Gillern said.

Sen. Christy Armendariz, a member of the Appropriations Committee, urged senators to support the proposed transfer.

“What I would propose is that we stay the course, do what the Appropriations Committee has recommended. Quite frankly, previous legislators should have noticed it. Previous appropriations committees should have noticed this, and eliminated this fee or tax being charged to these businesses long ago,” Armendariz said.

Sen. Steve Erdman supported that idea, as well as the transfer.

“We have businesses make a contribution to this fund that has never been used in years, and the fund continues to grow. And it would make sense that somehow we get this money back to those who have contributed,” Erdman said.

And Sen. Mike Jacobson downplayed concerns that transferring money from the fund could leave the state cash-strapped if the economy worsened and unemployment claims went up.

“We had roughly a billion dollars in reserves so we're not running out of funds. If we get a recession we have reserves,” Jacobson said.

When time came to vote on Conrad’s amendment, senators tied, with 20 voting in favor and 20 against. It would have taken 25 votes to approve the amendment, so it failed. But five senators passed on the vote, and four were absent. Conrad said that indicates the question of the transfer, and how much it could wind up being, is still up in the air.

“I think everybody can see the writing on the wall. When you look at that vote, when you see how we had multiple supporters that were absent at that moment, for different professional and personal reasons, there is no doubt that there's discomfort in the body with moving forward with this proposal as written,” she said.

Conrad said she’d been assured there will be further negotiations about the transfer, as well as other budget issues.

One change legislators did make was to change a proposal to transfer interest earned on the universal service fund, which is intended to subsidize high-cost telecommunications services.

Gov. Pillen had originally proposed transferring $13 million for the current and next fiscal year to the general fund. Clements said the $13 million was based on an estimate of interest that had accrued to the fund over the last 10 years. But because that interest had been converted into principal, and because there was a legal argument that principal in the fund could not be transferred, the Appropriations Committee reduced the transfer to $1.2 million, while proposing that it continue indefinitely into the future.

Under an amendment proposed by Sen. Machaela Cavanaugh, the transfer is only for the next fiscal year, and the Legislature would have to decide whether to continue it after that.

Supporting Cavanaugh’s amendment, Sen. Wendy DeBoer said the money will be needed in the universal service fund to maintain telecommunications infrastructure that’s currently being expanded.

“Right now, we're building out at a very rapid pace. The head of the broadband office -- the Nebraska broadband office -- has said to our committee that we will be built out by ‘29. I hope he's right. I cannot imagine we can get built out that quickly, but we'll at least be a lot further along, which means we're going to have a lot of fiber out in the ground in very rural areas that needs to be maintained,” DeBoer said.

Senators voted 30-12 for Cavanaugh’s amendment. They later voted 37-5 to advance the overall fund transfer bill, as work on changes to the state budget and taxes continues.