Nebraska senators divided over Pillen’s call for more budget cuts

Sine Die, April 17, the Nebraska Legislature left Lincoln with a balanced state budget. Senators had opened the session with a $471 million deficit, and after weeks of tough choices, they managed to end with $6.2 million in the bank.

Just days later, Gov. Jim Pillen played down the next biennium’s anticipated $630 million deficit. Then three months of tax receipts came in below forecast. Now, Pillen is calling for state departments to rise to the challenge of cutting 5% of their budgets and eliminating any financial redundancies. He also enacted a hiring freeze.

Last week, Pillen’s memo announcing the cuts cited tax receipts leaving the state with $307 million less than expected as of June 30. For the senators who spent the session working to balance the budget, the news has been greeted with widely varying opinions.

“It seems rational,” said Sen. Kathleen Kauth, who represents parts of Omaha. Kauth sits on the Legislature’s revenue committee. “Anytime any household in America (has) a money crunch, you look at cutting spending.”

“I was a bit disappointed,” Sen. Ashlei Spivey, also of Omaha, said. She is on the appropriations committee. “It feels like we are on the same, unsteady and unsustainable cycle.”

Pillen’s memo applies to fiscal year 2027, which began in July. State departments will be looking to cut 5% from this half of the state’s biennium budget. Based on the governor’s budget, this will likely apply only to state and cash funding, not federal funds. The following figures come from the State of Nebraska’s Biennial Budget, which encompasses fiscal years 2025-26 and 2026-27.

The Nebraska Department of Agriculture, which was appropriated close to $17 million in state and cash funds this year by the Legislature, will be looking to cut around $842,000 to meet the 5% threshold. Including state funding and revenue, the department’s budget is over $22 million for this year.

The Nebraska Department of Human Services is the largest state budget at more than $8.3 billion, making up over 42% of the state’s overall appropriations. This figure includes just under $5.3 billion in federal funds. A 5% cut to its state-funded budget, which is a little more than $3 billion, would reduce more than $152 million from the department.

The Nebraska Department of Correctional Services has a total budget of a little more than $400 million this fiscal year. Five percent of its state-funded portion of the budget, which is about $374 million, amounts to a near $19 million reduction. Correctional officers are exempt from Pillen’s hiring freeze under the memo.

The Nebraska State Patrol’s budget, including federal funds, amounts to $128 million for fiscal year 2027. Of its state-funded budget, which amounts to nearly $121 million, the agency will need to cut a little more than $6 million.

Justin Hubly, executive director of the Nebraska Association of Public Employees, said the members are nervous about another round of budget cuts.

“Nobody goes into frontline state government work to become rich,” Hubly said. “It’s one of the lower-paying jobs in Nebraska. But we take a great deal of pride in the work we do. And it’s frustrating when you hear the leader just say, ‘We’re going to cut, cut, cut, and you’re going to do more, more, more.’”

Hubly added that state employee turnover is around 20% each year, and this memo does not help because it leaves the remaining employees struggling to carry the workload.

While the legislature is officially nonpartisan, right-leaning senators like Kauth who spoke with Nebraska Public Media agreed that Pillen’s call for further budget cuts is necessary. While their left-leaning counterparts, like Spivey, take issue with and point to the state’s reducing individual income tax rates over the last several years as the culprit for the deficit, Kauth said the deficit comes simply because revenue cycles ebb and flow. She added that if tax receipts came in lower than expected, that means Nebraskans have more money in their pockets.

“We’re in the middle of summer,” Kauth said. “So we always see the money going out. But right now, it’s okay. We had more money going back to people than we expected, but that is a good thing.”

Kauth added that the memo’s structure allows state department heads to find their own ways to cut their budget, including by eliminating any staff they feel they can afford to lose.

“When people get cut, everyone else who’s there takes on a little bit more so that you can ride through it,” Kauth said. “That’s just kind of the way things work in the business world. And so to me, it’s not a surprise that we also need to do that in the government world.”

Sen. Myron Dorn, who represents Gage County, said Pillen’s memo is a helpful heads up to state agencies, as they can expect more cuts come the legislative session in January.

“I call it proactive that he’s doing something like this,” Dorn said. “That hey, ‘we know we’re going to have this issue, let’s work on it now.’”

But Spivey feels that the memo represents an overall lack of a plan from Pillen’s office. She said when sitting on the appropriations committee this year, she asked his staff what their strategy was for handling the state’s deficit.

“The budget is a moral document, and it shows your priorities, what we're invested in, and how (we) are going to try to balance our receipts with our expenses,” Spivey said. “And there was never any communication that could be articulated that there is an actual strategy and approach to what the governor is proposing outside of, ‘We can cut our way out of this,' And we can’t.”

Spivey worries about the programs that will be cut for elderly and disabled people or even programs within the state’s correctional systems that are there to help reduce recidivism. According to the budget, she said these programs are considered less important than individual tax relief and building new prisons.

“I think for me, as a member of appropriations, and the conversation that I try to lend my perspective to is, ‘How do we invest in the people, programs, and activities that one government is responsible for?'” Spivey said. “It's the core of why we exist, to ensure that basic quality of life and to have a good return on investment for taxpayer dollars.”

Sen. Danielle Conrad, who also represents parts of Lincoln, said the governor’s memo was strange, and she doubts that the governor has the authority to appropriate, or rake back already appropriated, state funds.

"It's such a strange strategy,” Conrad said. “It seems to indicate that he doesn’t trust those who he put in leadership to manage cash flows.”

Conrad added that to balance the budget this year, the Legislature took funds set aside for veterans and disabled people. And in the meantime, Conrad said Pillen enjoyed a record-breaking surplus at the start of his tenure, comparing it to today’s budget deficit.

“That’s not running a government like a business,” Conrad said. “That’s mismanagement.”