Preliminary Budget Leaves Prison, Property Tax Questions Hanging

Major questions involving a proposed new prison and property taxes are being highlighted in a preliminary budget recommendation to the Nebraska Legislature.

In his budget proposal last month, Gov. Pete Ricketts included $115 million over the next two years to start on a new 1,500 bed, $230 million prison. In its preliminary budget released Tuesday, the Legislature’s Appropriations Committee reserves that money, but it doesn’t specifically approve using it for the new prison. Committee Chairman Sen. John Stinner said he wants to hear more before committing to a new facility.

“I think we need to have a whole lot of information before we can reach a decision. That really kind of entails not only bringing Director Frakes into the conversation, but Judiciary needs to enter into the conversation as the policymakers. I think there also there has to be some other outside testimony from experts saying this is the best path forward. And I think there is some talk that maybe along with it, there needs to be some sentencing reforms and the like of that,” Stinner said.

Tuesday afternoon, Director of Correctional Services Scott Frakes unveiled a new estimate for what it would cost to renovate the Nebraska State Penitentiary to continue to house high security inmates: $196 million. By contrast, he said converting it to minimum security would cost only $24 milliion, but that assumes construction of a new prison. Frakes said the worst thing would be if the state doesn’t have a plan.

“(If) we don’t have a plan to address the needs at NSP, either restore it for high security or repurpose it for minimum custody, we’re going to be in a very difficult situation. I believe we can make it to 2025. I don’t believe we can make it farther than that,” Frakes said.

Frakes said components ranging from locking systems to fire alarms and compliance with the Americans with Disabilities Act are problems at the penitentiary. The new cost estimate comes two days before the Appropriations Committee is to hold a hearing on the new prison proposal.

Meanwhile, Stinner talked about another area in which the Appropriations Committee’s preliminary budget differs from Ricketts’ proposal. Ricketts has proposed transferring $88 million of tax revenues to the state’s cash reserve. Under legislation passed last year, that would trigger an additional $173 million toward an income tax credit to offset property taxes. Stinner has resisted that proposal, and said the committee is still undecided.

“We set that aside as something that we needed to take a look at, just do we want to trigger it before this biennium, as the governor did? We set that aside as an item to discuss with the committee and to vote on,” he said.

To give some perspective on the amount of money being discussed, on income taxes due to be filed this April, someone who pays $2,000 in property taxes for schools would receive a credit worth $120. If valuations and tax levies remained constant, that credit would increase to about $350 next year without the governor’s proposed increase, or $475 with it. But with property valuations generally increasing, that could reduce or eliminate the effect of those credits.

Reacting to the committee’s preliminary budget, Ricketts said “The Appropriations Committee’s initial report falls short on delivering the full potential of property tax relief this year, and instead proposes to steer that money towards more government spending.”

Ricketts added that he would work to ensure that Nebraskans get the full amount of property tax relief possible this year.

The committee’s preliminary budget also includes no money to increase reimbursements for providers under the state’s Medicaid program. Stinner said those rates generally go up 1.5 to 2.5 percent a year, but the committee is waiting to hear about the effect of federal COVID funding before making a decision.

Also Tuesday, the committee released a report on the impact of the pandemic on Nebraska’s early childhood care and education system. The report found a severe impact and recommended the state explore ways to increase funding. Stinner has a bill this year to increase funding by $2.5 million; the report says an additional $450 million from state, federal and private contributions would be needed to build a high quality system to support the size of Nebraska’s economy.

And the Legislature gave first-round approval to a proposal to adjust the school aid formula to take into account changes caused by the pandemic. The proposal by Sen. Lynne Walz, chair of the Education Committee, would let schools continue to be reimbursed for expenses like early childhood education and summer school, even if they were held virtually. It would also continue reimbursement for transportation expenses – even though students were not be transported, buses were being driven to transport meals. And it delays any reduction in state aid because of enrollment drops, to see if the numbers rebound the following year. Walz said the bill wouldn’t cost any additional money, and is simply a matter of the state providing schools the aid they were promised.

“This bill has no fiscal note because the money was already certified to school districts and was budgeted for. We just need to make sure that it is still available to be properly paid to them,” Walz said.

But Sen. Mike Groene, the previous Education Committee chair whom Walz defeated earlier this year, said schools don’t need the money.

“They are rolling in federal CARES money. Their expenses are way down because they didn’t have to control climate in the buildings. They didn’t have to put fuel in the buses. They didn’t have to pay substitute teachers. I’m trying to figure out why this bill is needed. It isn’t,” Groene said.

According to David Jespersen of the Nebraska Department of Education, CARES Act money came with the stipulation that it was not to replace state funding. He also said school districts have incurred additional expenses for remote learning, including providing students with computers and internet access, and still need to hire substitutes.

Senators voted 29-5 to give the bill first round approval.

And U.S. Sen. Ben Sasse weighed in against the Biden administration’s signaling last week that it’s likely to reverse the Trump administrations’ approval of a work requirement for dental, vision and over-the-counter drug coverage under expanded Medicaid.

“We want to help Nebraskans who are in need, and we also want to help them get back on their feet with work, where possible. The Biden administration should rethink this, and they should let Nebraska keep promoting work, as we always do,” Sasse said.

The state has 30 days to respond to the federal government’s preliminary decision.