Gov. Pete Ricketts called on lawmakers to slow spending growth, cut the budget, and take steps to cut property and income taxes during his State of the State address.
Ricketts highlighted proposals in his $9 billion budget for the next two fiscal years and his agenda for the legislative session during the speech before the legislature and guests in a packed George W. Norris Legislative Chamber at the Capitol.
Ricketts began by giving a nod to the celebration of the state’s 150th birthday this year, telling legislators, “…you all are now part of our unique history.”
The governor touted efforts in his administration to cut regulations and improve efficiencies. He reviewed announcements made this week, when he called for the Division of Veterans Homes to be merged with the Nebraska Department of Veterans Affairs. Ricketts also is proposing the Department of Roads be merged with the Department of Aeronautics to create the Department of Transportation. Another proposal unveiled earlier was the elimination of certain occupational licenses.
“With initiatives like these we have built a strong foundation in state government,” Ricketts stated. “And the state of the state is strong.”
Yet, budget challenges loom this session.
“Now, we also know that we have challenges,” Ricketts acknowledged. “Farm income has gone from $7 ½ billion just a few years ago, to $4 ½ billion in 2015 and closer to $4 billion last year.”
Falling farm income has caused state tax revenue to drop dramatically.
Ricketts has proposed a mixture of budget cuts to deal with the revenue shortfall, telling lawmakers his proposal balances the state biennium budget without raising taxes.
“I will not support any effort to raise taxes on Nebraskans,” Ricketts said.
A forecast issued by the Nebraska Economic Forecasting Board projected a $900 million revenue shortfall over the next biennium. Budget officials within the Ricketts Administration say that forecast was based on state government growth of 4 ½% a year. Ricketts proposes average growth of only 1.7% over the next two fiscal years, bringing the projected budget gap closer to $600 million.
The $9 billion state budget submitted to the Unicameral by the governor would actually increase spending on public schools by 5.4% over the two-year period, bringing total state school aid to $2.05 billion. It would hold the Department of Correctional Services off-limits to budget cuts, increasing workforce programming and security and proposing to use $75 million from cash reserves to finance the Reception and Treatment Center at the Lincoln Correctional Center.
Higher education would be cut under the governor’s budget. The University of Nebraska system would be cut by two percent, budgeted for a total of $1.15 billion over the next two fiscal years. State aid would be cut to states colleges by 1.4% with a total of $104.2 million budgeted. Community colleges would take the biggest budget hit, a 3% cut for a total of $195.6 million.
Ricketts said he has proposed targeted budget cuts, rather than recommending across-the-board cuts. Among the cuts proposed would be a 3% cut to certain Medicaid providers.
The two top proposals by the governor for this legislative session would be to change how agricultural land is assessed, shifting it from a market-based assessment to an income-based assessment for property tax purposes. The governor also proposes the top income tax rate be reduced by one-tenth of a percent each year state revenue grows by at least 3 ½% until the rate is dropped from the current 6.84% to 5.99%.
“Let’s roll up our sleeves and do what needs to be done to set a course for future prosperity.”
AUDIO: Gov. Pete Ricketts delivers the State of the State address. [30 min.]
AUDIO: Brent Martin reports [:50]