Pillen touts his tax cut and education initiatives in State of the State speech

LINCOLN, Neb. (Nebraska Examiner) - New Gov. Jim Pillen plans to hold the line on state agency spending, while devoting the state’s massive revenue surplus for tax cuts, increased state aid to K-12 schools and building the Perkins County Canal.

The Republican governor’s budget only provides spending growth of 1.3% over the next two years — including only a .01% increase in the second year and a 2% funding boost for the University of Nebraska. That is less than the goal of 3% annual spending growth touted often by his predecessor, Pete Ricketts.

“We have asked agencies to tighten their belts and focus on what is needed, not what is nice,” Pillen told state lawmakers during his first “State of the State” speech Wednesday.

Pillen, a 67-year-old former member of the NU Board of Regents, has frequently mentioned that he has said “no” to new spending ideas so funds can be invested in education and tax cuts that would reduce the state’s top income tax rate gradually from 6.84% to 3.99%.

“Our tax policy chases our kids and grandparents out of the state,” the governor said Wednesday. “We can’t grow Nebraska that way.”

But his budget also includes setting aside $574 million to build the Perkins County Canal, a long-dormant project designed to collect and store water from the South Platte River for use during dry periods. The project was promoted last year by Pillen’s predecessor, Gov. Pete Ricketts.

The austere budget elsewhere is likely to get some pushback from state lawmakers who have proposed a bevy of their own spending proposals, including funds for a convention center in Lincoln, affordable housing and behavioral health initiatives and improvements to Fort Robinson State Park.

Pillen absent at briefing

In a break from tradition, the governor did not attend a pre-State of the State briefing for reporters, held Tuesday afternoon with state budget officials. It was explained that Pillen’s schedule had changed due to the recent death of his mother-in-law.

A couple of his main objectives were announced last week.

One was to devote $2.5 billion to increase state aid to K-12 schools, on a per-pupil basis, to schools not getting state aid now and to hike spending to educate special needs students.

Another was a package of tax cuts that would lower the state’s top income tax rate for individuals and corporations, decrease property taxes by giving another $300 million a year in property tax credits and shifting community colleges to a state, rather than a local property tax, obligation.

It was clarified Tuesday that his proposal to phase out state taxes on Social Security would not take effect until the 2024 tax year.

It was also clarified that Pillen’s intent for the 3.99% tax is not for a “flat tax,” as the governor told reporters last week, but for reducing the top two brackets — two current state income tax brackets that are below 3.99% for low-income Nebraska would remain the same, reporters were told Tuesday.

Final funds for new prison

The governor’s budget would give final funding to replace the aging State Penitentiary in Lincoln, a $96 million allocation for a 1,500-bed prison now expected to cost $350 million in total. The exact location of the prison, to be located somewhere in the Omaha and Lincoln areas, was not revealed by his administration.

During the budget briefing Tuesday, Lee Will, the governor’s chief budget administrator, pushed back on early criticism that Pillen’s tax-cut plans were financially unsustainable and that the $1.9 billion revenue surplus would be quickly exhausted under his proposals.

Will said that even under the worst scenario — a recession that would decrease state tax receipts as in 2008-09 — the state would have a record $1.6 billion cash reserve to tap.

More infrastructure funds

Among his other budget priorities:

• Devote $100 million in state matching funds to obtain $400 million in federal funds from the infrastructure bill signed into law recently by President Joe Biden. Will said the funds would likely be used for things like “shovel ready” highway construction projects.
• Devote $39.4 million to 4,200 higher education “career” scholarships, targeted at high-need fields like nursing and education where job vacancies are a problem. “We need more engineers, actuaries, accountants, architects, geneticists, scientists, nurses, and teachers,” Pillen said Wednesday. “We need more welders, auto technicians, electricians, and technicians to fix computing dependencies on cars, trucks, tractors and combines – almost everything.”
• Fund salary increases for state workers, which includes a 22% increase for state troopers and raises ranging from 10% to 27% for other state workers. The raises are designed to address workforce shortages among snow plow drivers and health aides. Similar raises, Will noted, have helped fill vacant posts at state prisons in recent months.
• Spend $10 million for retention grants for teachers, nurses, veterinarians and other health professionals.
• Reserve $25 million in tax credits for donations to “opportunity scholarships” for kids attending private schools. It has been portrayed as a means of giving kids another choice in K-12 education, but some critics have decried it as a way to devote public funds for private schools.
• Provide $10 million to hire mentors to help improve reading among schoolchildren in grades 1 through 4.

Nebraska Examiner political reporter Aaron Sanderford contributed to this report.

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