Nebraskans are paying higher fees to offset the state’s budget woes

Hugh McDermott recently put down $20 cash to fill up his Prius at a gas station at 17th and South streets in Lincoln.

“There's a reason I drive a Prius. I want to get better gas mileage,” McDermott said as he watched the numbers on the pump go up. “And I try to fill up when I'm only half full, because it just feels better.”

In the past, the 73-year-old retired Lincoln teacher and principal said a $20 bill has reliably been enough to top off his tank. This time, the pump reached the $20 limit and the gas stopped flowing.

“Well, it looks like I got five gallons and it didn't click off, so I'm not quite full, but it'll be all right,” McDermott said with a smile.

The same week the United States and Israel began bombing Iran this winter, gas prices in Nebraska increased by nearly 25 cents a gallon, according to AAA. But those rising prices come on top of a pre-existing state fuel tax hovering at just under 32 cents. This adds $16 a month for cars traveling 1,000 miles a month, according to Nebraska Department of Transportation staff estimates.

“I'm fortunate,” McDermott said. “I've kind of planned for my retirement, but there's a lot of folks that I can see are struggling.”

The state’s gas tax is set based on multiple factors, including wholesale fuel value and a variable rate. The latter is set based on NDOT’s budget needs. For instance, if the department is coming up short for its budget, it raises the variable rate, and if it has a surplus, it lowers it.

The state tax rate has been on a steady incline since 2020, but it saw a significant jump in 2023, shortly after Gov. Jim Pillen took office. That year, the rate spiked by just over four cents, up to 29 cents per gallon. Nebraska ranked third for states with the highest gas tax increases that year, according to the U.S. Energy Information Administration.

This was also the year that the state set steep income and corporate tax rate cuts, and ever since, state revenue has been dwindling. Despite the Legislature’s efforts, which included pulling excess money from cash funds and raising fees across state departments, the state is currently more than $200 million in the hole. Another approximately $800 million is needed to fund the budget over the next two years. In July, Pillen asked state departments to cut their budgets by 5% to help the state save money.

This next legislative session in January will be the third year in a row that lawmakers will have to balance a budget deficit. And to offset those cuts, many state agencies and state lawmakers are looking to increase fees paid by the public.

The Legislature already approved several fee hikes across state departments this year during budget discussions. The Department of Revenue on July 1 created new delinquent tax fees and assessment fees of $25, or 10% of tax liability each. Nebraska’s Department of Water, Energy and Environment increased many fees around water well registrations, including those used for monitoring groundwater, from $40 to $200 as of July 18.

On Aug. 1, the Department of Labor increased contractor registration fees from the current $25 to the maximum of $40 allowed under statute, according to documents provided to Nebraska Public Media News. And the Nebraska Legislature already increased marriage license fees through county clerks from $25 to $50, and certified copies from $9 to $16 as of July 18.

Lee Will, director of the state Department of Administrative Services, said the fees are the logical budget balancers.

“Before this year, people were paying $25 for a marriage license,” Will said, in an interview with Nebraska Public Media News about the state budget. “And if you look at the states around us they’re paying much more for a marriage license. So we have to look at our competitors or surrounding states to say, ‘Are we charging the amount of the service provided to Nebraskans?’”

Kathleen Kauth, a state senator representing parts of Omaha, has been part of tricky budget conversations during the legislative session and is an advocate for a smaller government. She’s working on legislation that will make it easier for counties to raise their fees, too, since the state has been battling with county lobbyists to claw back state aid.

“You should be able to run your county or run your agency well, but depending on fees that were set back in the 1980s is not the right way to do it,” Kauth said.

Under Kauth’s draft proposal, counties can raise fees up to the cost of a service plus a percentage, although since she’s still in the early stages of the bill, that percentage has not been set yet.

“(In) any household in America, if you have a money crunch, you look at cutting spending,” Kauth said. “If the state needs to do that, we need to look at (ourselves) first. Like, how do we cut spending? How do we tighten our budget? Asking people to restrict travel, do things that are again what normal households do when they tighten things up.”

Corey Steel, state court administrator for the Nebraska Supreme Court, said the judicial branch was already working on cutting spending at the beginning of this legislative session. Ultimately, the Legislature reduced the branch’s general fund appropriation to the tune of $6.5 million, but it was offset entirely by funds from the state’s Opioid Recovery Trust Fund, going toward probation program costs. But the courts still had to raid cash funds, typically filled by fees levied for services, in order to fully fund its budget this year, Steel said.

“Cash funds are not reliable, and when we testified in front of the Appropriations Committee, we actually hit on that,” Steel said. “Cash funds are there to be utilized for one-time type expenditures, not to balance a budget with because it’s not guaranteed. It's like building a house on sand. You're not building a foundation if you're using cash funds for court services.”

The Legislature also raised court fees as of July 1 this year, although many court fees won’t go back to the branch’s cash funds, but to the state’s general fund.

“We only increased these fees because the legislation was passed, it wasn't a court-initiated action to request court fees to be increased,” Steel said. “I just want to be very clear about that.”

Under LB935, for instance, in addition to existing court costs, filing a civil docket in a district court now costs $45 more. Small claims come with a $16 increase. Traffic misdemeanors now have a $36 hike. While fees typically go into cash funds to cover set services, these will go to the state’s general fund.

Steel said he’s unsure how the increasing fees will hit Nebraskans. Rebecca Gould, executive director of Nebraska Appleseed, said if someone is seeking a divorce and faces increasing filing fees, there comes a point when that person cannot have true access to the legal system. While those with income low enough can sometimes qualify for fee waivers, those who don’t qualify may still feel the sting.

“Prices have been going up for gasoline, prices have been going up for food, prices are going up for childcare, and you have a lot of people who are already challenged to meet those basic needs,” Gould said. “Paying a few $100 for a court filing fee can be a real stretch for people who are just making it month to month on the income that they have.”

Gould said the state budget might get a larger, structural budget policy change to help solve the deficit, rather than ever-increasing fees.

“Raising fees here and there not only is going to hurt low-income folks who are trying to utilize these systems and navigate them but also is not going to solve the larger revenue problem,” Gould said.

That revenue problem will be back before state senators – for the third year in a row – when they return to the Capitol in January.