Pillen's proposal to cut agency budgets met with mixed reviews

Gov. Jim Pillen has asked state agencies to identify how they can cut 10% from their budgets next year. The requests are part of the governor’s broader goal of reducing general fund spending by $500 million, which would be a historically significant cut.

In 2009, following the "Great Recession," the Legislature cut $156 million from the budget.

Pillen said the proposed cuts are part of his effort to reduce the size of government and not due to particular economic indicators.

However, June tax revenues fell well short of predictions and the amount of federal funds for the state next year is uncertain.

Income tax cuts passed in 2023 are also still being phased in, reducing state revenue. The state’s top income tax rate has been dropping annually from 6.64% 2023 to under 3.99% by 2027.

Justin Hubly, the executive director of the Nebraska Association of Public Employees, said Pillen’s proposal would likely lead to a workforce reduction.

"What that means is that there are going to be layoffs of state employees, and if frontline state employees are laid off, that means a reduction in services to Nebraskans," he said. "There's just no way to pick up that level of slack.”

Hubly said low staffing levels are already impacting the Department of Motor Vehicles and the Department of Correctional Services and additional cuts could make things worse.

"If you cut $500 million, the lines at the DMV will be longer. Your cabin at a state park might not be turned over in time for your vacation if there's no staff to clean and do maintenance," he said. "We worry about safety issues with child protective services or the Department of Transportation."

Others, including Platte Institute CEO Jim Vokal, have praised the governor’s approach as a better alternative to raising taxes.

"Asking agencies to identify savings is a prudent step, especially as Nebraska faces the uncertainty in federal funding and prepares for the mid-biennium budget adjustment process," he said.

Vokal encouraged the governor to not consider rolling back the income tax cuts, which he said make the state more competitive and can lead to GDP growth.

'Without this kind of fiscal discipline, the state will be left with fewer options to address potential budget shortfalls or pursue or sustain tax reform in the future," he said. "This action is certainly difficult, but it's also a far better alternative than turning to tax increases."

Barring a special session, the Legislature will return in January.