State of the State: Nebraska
Halfway through his four-year term, Governor Pete Ricketts recently delivered his State of the State address in Lincoln, Nebraska. He focused heavily on the need to increase government efficiency, cut spending, balance the state’s budget and deliver tax relief to all Cornhuskers. The state is facing a revenue shortage largely due to reduced tax receipts from farm revenue, but the governor promised with a little “Nebraska grit” the state will continue its successful trajectory.
The 49-member unicameral Nebraska Legislature is the smallest state legislative body in the nation, and the governor seems intent on making the entire state government structure as small as possible. Ricketts discussed combining various agencies to eliminate redundancy, such as the Division of Veterans Homes with the Nebraska Department of Veterans Affairs. He also touted the success of several agencies significantly reducing wait time for their services, which resulted in saving the state millions of dollars. Similarly, the governor wants to rid Nebraska of unnecessary occupational licensing regulations, which create onerous barriers to work in certain professions.
I know that unnecessary regulations hamper job growth. This year, we need to continue to get rid of unnecessary regulations to empower everyone from car sales people, barbers and cosmetologists to audiologists and massage therapists. We’re going to help people who want to work in these professions get to work more quickly.
In terms of the state budget, revenues were $95 million below forecast of last fiscal year and $172 million below forecast for the current fiscal year. Much of this is due to lower farm income, as agriculture continues to be one of the largest sectors in the Nebraska economy. Governor Ricketts declared he will balance the budget in a responsible manner while prioritizing education, children and family services, public safety and infrastructure. His budget recommendation for the upcoming biennium was informed by several principles, including addressing the revenue gap without increasing taxes and maintaining around $500 million in the cash reserve. Ricketts emphasized the need to control spending before moving forward with tax reform.
Governor Ricketts bemoaned the fact property taxes have been so harmful for Nebraskans, particularly farmers. He noted, “Between 2003 and 2013, property taxes on farmers and ranchers rose by 137 percent.” He suggested valuing agricultural property based on income potential, which is the system in nearly all nearby Midwestern states, to ensure property taxes are reasonable based on income derived from farmland. Ricketts also discussed reducing personal income taxes, as Nebraska has one of the highest top rates in the region. His proposal includes reducing the top rate by one-tenth of one percent per year, starting in 2020, until the rate is under 6 percent. The reduction each year would only materialize if revenue growth exceeds 3.5 percent. Ricketts emphasized this is not a tax break for the rich, as the top personal income tax rate in Nebraska kicks in at $29,831 for a single filer and $59,661 for married couples. Importantly, he pointed to the need to control spending before reducing taxes:
Detractors of this tax relief will point to states that reduced taxes before reducing spending and then struggled to catch up. That’s not how we do things here. We are controlling spending first. That is responsible budgeting and responsible tax relief—it’s the Nebraska way.
His focus on pro-growth fiscal reforms that will make Nebraska more economically competitively place Governor Ricketts in the running for our annual “best of the best” competition, the results of which will be announced once all governors have given their speeches. As he enthusiastically noted, 2017 presents an “opportunity to demonstrate what a little Nebraska grit and a free economy have to offer.”