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A Lancaster County District Court judge ruled Monday that money in the Nebraska Environmental Trust set to be redirected to other projects should not be transferred until an ongoing lawsuit is settled.
As the Nebraska Legislature sought to fill a deep budget hole this session, it redirected $13.5 million from the Trust. About $6 million would go to a marina renovation project at a state park, and the other $7.5 million would go to the Water Resources Cash Fund.
The lawsuit – originally filed in May – alleges that these fund transfers out of the Trust "constitute a series of unlawful appropriations and direct a series of illegal expenditures of public funds.”
It targets a handful of public officials who would be responsible for moving funds in their official duties.
The plaintiffs – two former state officials represented by Gutman Law Group and the American Civil Liberties Union – filed the motion June 4, asking the court to stop any fund transfers requested by the Legislature while the court proceedings continue.
Judge Susan Strong said it is “in the public’s interest to make sure the funds are spent lawfully.”
The lawsuit will move forward, continuing the crusade by conservation activists fighting for Environmental Trust dollars to stay locked in the fund.
The court will approve an official order to stop the funds within the coming days. It will last until the outcome of the lawsuit is decided. The state is allowed to appeal the decision.
The arguments
The Trust was created in 1992 when Nebraska voters approved a state lottery. The original legislation creating the lottery system allocated a portion of the proceeds to the Nebraska Environmental Trust. In 2004, Nebraskans voted on a ballot measure to send 44.5% of lottery proceeds to the Trust and codify that amount in the state’s constitution.
At the center of the lawsuit is an argument about lawmakers’ original intentions when they wrote the constitutional amendment and sent it off to voters as a ballot measure.
The defense argues rejected amendments to the ballot measure prove the Legislature never wanted to give up control of the Trust funds. The plaintiffs say the explanation of what the measure would do – written by the Legislature itself – clearly states it would prevent funds from being moved by lawmakers.
The plaintiffs want to return any funds the Legislature moved in 2026 to the Trust and stop the state from spending any funds transferred in previous years.
“The Legislature has increasingly thwarted these restrictions and now consistently raids the Trust for the purpose of balancing its budget and diverting other funds to non-conservation related priorities, like property tax relief,” the plaintiffs wrote in the brief. “Without Plaintiffs’ lawsuit, these raids on the Trust would go unchallenged.”
The state filed a motion to dismiss the lawsuit, which was also rejected at Monday’s hearing. It argued there is no legal basis to resolve the claims the plaintiffs brought forward, and granting the motion to stop the fund transfers would “cause significant harm to the State.”
Assistant Attorney General Carlton Wiggam said pulling or pausing grant funds that have been distributed could disrupt ongoing environmental projects.
“Many of the funds that Plaintiffs seek to enjoin are already committed through grants and other contracts with local political subdivisions and nongovernmental entities,” said the defendants in their brief. “An injunction would leave Natural Resources Districts, municipalities, public power and water districts, irrigation districts, and landowners in limbo.”
On behalf of the plaintiffs, attorney Daniel Gutman argued that when a law is cited in a constitutional amendment, it “cuts and pastes” the statute as written, essentially freezing the language in time.
“The Legislature is operating as if the 2004 amendment failed,” the plaintiff’s brief reads.
The defendants argue the language of that constitutional amendment still permits the Legislature to redirect funds from the Trust. Wiggam said it’s a “general reference” when the constitution points to the Nebraska Environmental Trust Act, which can be amended by the Legislature.
Additionally, rather than funding conservation projects directly, the plaintiffs argue the funds from the Trust replace money from the state’s general fund due to how the Legislature’s budget bill is structured. Gutman said the state’s argument treats the Environmental Trust as a “parking lot” where funds can go before being moved.
The defense argues funds have been transferred without issue before, showing lawmakers were under the impression that they were allowed to move money.
A successful lawsuit against Trust funds being used for other purposes has succeeded before. In 2020, a judge ruled $1.8 million in Trust funds could not be used for ethanol blender pumps.