A Legislature with no money

Lincoln Journal Star | By Nancy Hicks and JoAnne Young on January 3rd, 2010

Some senators would like to provide money so that more poor working parents could get help with day-care costs.

Other senators want DNA testing expanded to all convicted felons.

Some would like the Department of Education to develop guidelines for schools to deal with life- threatening allergies.

Many would love to lower tax rates.

These are all good ideas that in another year might have gotten support from the state Legislature.

But they cost money.

And this year there is no money.

“The word around here is that if your bill has a fiscal note (costs money or results in a loss of tax revenue), it’s not going anywhere,” said Lincoln Sen. Bill Avery, about the legislative session that begins Wednesday.

“We’re not going to spend a dime. There’s no new money,” said Lincoln Sen. Tony Fulton, a member of the Legislature’s Appropriations Committee.

That’s also Gov. Dave Heineman’s message.

“The next 12 to 18 months are going to be a time of economic uncertainty. And clearly 2010 will be a year of limited financial resources,” said Heineman in a telephone interview.

“I think everyone knows that.”

No one’s been talking to the governor about new spending ideas.

In fact, many senators won’t even be pursuing bills left over from last year that cost money – unless they can find money that isn’t being used.

“The only way to get money will be creative thinking, finding money that can be converted to another use,” Avery said.

“People are looking under every rock” for money, he added.

The Legislature will deal with other issues, however.

Creating a better climate for wind production, solving the community college fight over money, an attempt to eliminate in-state tuition for undocumented students, outlawing texting while driving, a contentious debate over states’ rights as defined the U.S. Constitution’s 10th amendment – all will be on the 2010 agenda.

The issues this session will be more philosophical in nature, but with no significant cost associated with them, said Heineman.

And money – lack of money now, a nagging worry about the future – will be a major underlying theme in the 2010 Legislative session.

State tax revenue has been dropping. For two years in a row it is lower than the previous year.

And there’s no guarantee tax revenues won’t continue to plunge, requiring even more cuts than the $336 million trimmed from the $6.7 billion two-year budget during the November special session.

“There’s too much uncertainty left in the budget process,” said Omaha Sen. Steve Lathrop.

“We don’t know if we are going to come out of the recession right away,” he said.

The worry for the short term is that tax receipts will be lower than the October projection, creating the need for more cuts in the two-year budget that ends June 30, 2011.

Senators probably won’t know that answer until after the session ends in mid April.

December receipts, expected to be about $319 million, will provide some insight, said Tax Commissioner Doug Ewald.

But the real test will be income tax receipts in April.

“It could be OK. Or we could be sacked with a big down side. We really won’t know until the end of April, and senators will be long gone home,” Ewald said.

Heineman is cautious.

“History would indicate there might be one more downward adjustment, not the same magnitude as the previous one,” the governor says.

There’s also concern about two years down the road, when the federal stimulus funds disappear.

It’s called “the cliff.”

And it’s a big cliff, particularly if state tax revenue doesn’t pick up dramatically.

Nebraska used about $555 million in federal stimulus funding over a three-year period, money the state will have to replace in the future.

That is the main reason for maintaining a healthy cash reserve, about $325 million, said Sen. Lavon Heidemann, chairman of the Appropriations Committee.

The short-term nature of the federal funds was a concern, said Heidemann.

“When it does go away, the Legislature is going to have to take some action, he said.

Nebraska is in a better position financially than most states, according to the governor.

State leaders have cut spending, are not planning any big expenses or tax cuts, and have stashed some cash in the reserve.

Nebraska has the second lowest unemployment rate in the nation, and some new businesses are starting up, Heineman said.

That’s a reason to be cautiously optimistic.

But this will be a “watchful session,” he said.