Gov. Jim Pillen announced Wednesday that he had vetoed millions of dollars out of the two-year budget package passed by the Legislature last week.
In a message to the Legislature, Pillen said the cuts were needed to provide for the “transformative tax relief measures” that lawmakers have pending. He said Nebraska taxpayers are demanding their money back.
“We must continue to fight against excessive governmental spending to deliver dollars back into the pockets of Nebraskans,” he said.
Lawmakers are scheduled to vote Thursday on final passage of major income tax cut and property tax relief bills, along with a bill providing more state aid to Nebraska schools. The three bills were introduced on behalf of the governor.
Even without the governor’s budget vetoes and with passage of all bills at the second and third stages of consideration, the state was projected to remain in the black through June 30, 2025, the end of the two-year budget period. However, projections suggest that it would slip into the red during the next two-year period.
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Pillen’s largest budget vetoes were to the payment rates for hospitals, nursing homes, child welfare providers and other health and human services providers. He let stand a 3% increase in rates for the first year of the budget period but eliminated the 2% increase that lawmakers had approved for the second year.
He said funding for higher reimbursement rates would not address any of the systemic workforce shortages affecting hospitals and “will only provide a Band-aid to hospitals’ bottom line, without providing any relief for health care costs paid by everyday Nebraskans.”
For child welfare providers, he said the second year of the rate increases would be replacing federal American Rescue Plan Act dollars. He said it would be a harmful practice for the state to replace temporary federal dollars with state funds.
The Appropriations Committee initially had used state dollars for both years of the rate increases but tapped unused federal money to reduce state spending.
Pillen also eliminated funding for a pilot program to work with children suffering from post-traumatic stress disorder because of their exposure to gun violence. He explained the cut by saying that the state already has devoted more than $500 million to economic recovery projects, of which most were focused in North and South Omaha.
The governor eliminated money to expand home visitation for families of young children and to expand aid for court-appointed special advocates, who advocate for children in the foster care system. He also eliminated money aimed at helping a Cedars, a Lincoln child welfare provider, to offer housing for homeless youths who are pregnant or parenting.
Pillen also vetoed money for the Rural Workforce Housing and Middle Income Housing programs, which was to have come from the state’s cash reserve fund. He said the vetoes would protect the cash reserve and “avoid flooding the housing market with government subsidization.”
He cut $10 million earmarked to help Kimball with the infrastructure needed to handle an influx of workers replacing Minuteman missiles in the area and $7 million earmarked to help with a rural drinking water project in Cedar and Knox counties.
In the first instance, he said, he would help Kimball get money from the federal government for those costs. In the second case, he said, the state already had put significant money into the project.
Members of the Appropriations Committee are slated to meet Thursday morning to decide whether to recommend any overrides of the line-item vetoes.
Pillen’s budget announcement came one day after lawmakers voted to reduce the cost of a tax omnibus measure. LB727 includes 27 tax-related measures, which were combined by the Revenue Committee as a way to bypass the session-long filibuster mounted by opponents of a proposed ban on transgender health care for minors.
As advanced from first-round debate, the bill would have reduced state general fund revenues by more than $194 million over four years. Changes made during second-round consideration brought the price tag down by nearly $100 million over four years.
The changes included eliminating a contentious provision that would have allowed people to use state-sponsored, tax-deductible college savings plans to pay for K-12 tuition and pushing back the start date for a bill allowing contractors to buy products tax-free based on the tax-exempt status of the entity that hired them.
Other changes included putting lower caps on tax credits for biodiesel retailers, rural development projects and renovation of historically significant buildings. The amended bill would allow tax credits for research and development expenses in the future, but credits would not be allowed for prior years.
