Ricketts' Budget Includes Prison Construction, More Property Tax Credits

In his State Speech Tuesday, Gov. Pete Ricketts proposed a budget with ideas on everything from prisons to taxes that’s sure to generate lots of debate.

In his fifth State of the State speech, Gov. Pete Ricketts set an optimistic tone. “As we begin our work this year, I am happy to report to you that the state of the state is strong and growing,” he declared.

He soon got down to specifics about what he said would continue that trend, drawing on highlights of his two-year, $9.3 billion budget proposal.

On property taxes, he proposed increasing a credit fund using state sales and income tax dollars to offset part of Nebraskans’ local property tax bills. The credit equaled about $86 on a $100,000 home last year. In a budget briefing, Ricketts said the increased credit would rise to about $106.

He also proposed a constitutional amendment limiting property tax increases to 3 percent a year. “Over the past decade, local property taxes have risen by over 57 percent. To deliver long term, structural relief, it is important that we limit the growth of property taxes,” he said.

Speaker of the Legislature Jim Scheer predicted the proposal will upset local governments, but without it, state efforts to relieve property taxes could be nullified. “I’m sure there’s going to be concern from school districts, counties, municipalities -- anybody that has a budget that’s funded by property taxes. But to a certain extent, that is the culprit,” Scheer said. “Whatever we do to reduce property taxes, if we don’t do something to curtail the growth, then it is absorbed within a very short period of time.”

Sen. Tom Briese said the governor’s proposals fall short of what’s needed. “While I appreciate everything the governor is trying to do for the property taxpayers of Nebraska, it’s not enough. We have to do a lot more,” he said. Briese promised a bill that will raise other revenues in order to lower property taxes. Ricketts has described that approach as a tax increase; Briese promised it would be “revenue neutral.”

Ricketts also proposed spending nearly $50 million to hold more prisoners at the Lincoln Correctional Center. “My budget recommends an additional 384 high security beds, which will help assist in bringing our prison population below the emergency levels set by the Legislature,” he said.

Nebraska prisons currently hold about 60 percent more people than they were designed for; the Legislature has said that needs to be cut to 40 percent by July, 2020.

Sen. Steve Lathrop, chairman of the Judiciary Committee, said Ricketts’ proposal would get the state only about halfway to its goal. “The other concern I’d have is, if we’re going to build more beds, how are we going to staff that additional space, since we’re having so many staffing difficulties right now?” Lathrop asked.

Ricketts has proposed adding more around 50 prison staffing positions, but Lathrop said existing employees are leaving because they can make about $8 an hour more working in county jails.

Ricketts also mentioned another aspect of his budget, declaring “In November, voters approved Medicaid expansion, and my budget recommendation reflects the vote of the people of Nebraska.”

Ricketts had opposed expanding Medicaid, predicting it would force cuts in other state programs. In December, he said the cost of Medicaid expansioni “will have to fit into the budget alongside all of the other priorities that we have in the budget, which necessarily means there will be less for everything else. So that means there’s going to be less money for higher education, K-12 education, property tax relief, all those other priorities that we’ve been working on over the course of the last several years.”

In fact, Ricketts budget proposal increases spending in the areas he mentioned – although he said those increases could have been even more if not for Medicaid expansion, estimated to cost more than $60 million over the next two years.

In addition to increasing the property tax credit fund, the governor is s proposing nearly $7 million in new college scholarships, and an increase of more than $100 million through the state aid formula to K-12 schools. “This means the formula will provide a record $1.1 billion in annual school aid,” he said.

Sen. Mike Groene, chairman of the Education Committee, said that formula is tilted in favor of urban school districts. Groene said he’ll push for more equal funding per student, which he said would benefit rural areas. He said his proposal would “get some money into rural Nebraska through the school payroll on Main Street,” and “lower the taxes on the farmers so they can spend more money on Main Street.”

“Rural Nebraska’s in a depression… Main Street’s closing up. We need help,” he said.

Sen. Adam Morfeld said he is glad Ricketts is implementing the will of the voters by proposing to expand Medicaid without proposing cuts. However, he added “I’m a little confused at some of the spending that he proposed and the tax cuts he’s also proposing at the same time. So it’s going to be tough for us to balance both of those.”

But Sen. John Stinner, chairman of the Appropriations Committee, said Ricketts’ proposal seems to be using realistic assumptions. However, Stinner cautioned that the state’s Economic Forecasting Advisory Board still has to update its projections of how much tax revenue the state will have available for the budget that’s eventually approved. “So far, our revenue has not shaped up the way I thought it would, or the forecasting Board, so there may be some changes,” Stinner said. “But, you know, it’s a start.”