State of the State: Nebraska

Last week, Governor Pete Ricketts delivered his second State of the State address to the Cornhusker State. He shared accomplishments from last year but also focused on how he plans to expand upon those policies and deliver tax relief and infrastructure investment for Nebraskans during this year’s legislative session.

While agriculture is the largest economic sector in the state, making up nearly 25 percent of Nebraska’s economy, the industry faces challenges. In recent years, farmers across the state have seen flat or declining commodity prices, yet their property tax bills are increasing. Last year’s legislature enacted a property tax relief tax credit, yet there is more work to be done to comprehensively reform Nebraska’s tax code.

The governor declared this issue his top priority for the current session, and to remedy the problem he is supporting structural changes to the state’s property tax. He plans to do this by reducing spending and levying limits on the statewide aggregate growth of agricultural property valuations. Not alone in this endeavor, he publicly announced he and two committee chairs have worked together to draft legislation making this substantive change to the tax.

Most any tax reduction should be lauded. Governor Ricketts’ proposed property tax reform would help Nebraskans manage the cost of everyday life, but the state’s tax reform agenda should not stop there. By setting priorities and respecting hardworking taxpayers, the governor and legislature can work together to make corporate and personal income tax rates more competitive with neighbors Colorado, Kansas, and tax-free Wyoming and South Dakota.

Another major focus for Ricketts was a plan to reform sentencing and corrections, including a new automated system to perform sentence calculations that the Department of Corrections’ director believes will expand its capacity for re-entry programming.  While an initial investment would be necessary, Ricketts argued future budget savings, saying, “Our goal is helping offenders avoid becoming repeat customers and ultimately reduce recidivism.” The governor is onto something. A Vera study conducted in 2010 indicated that, at the time, Nebraska spent more than $35,000 of taxpayer money per year, per inmate.

Wrapping up his address, Ricketts called for lawmakers to avoid growing the state’s Medicaid program and once again reject the idea of expansion. He then shared his growing fear of the federal government and looming insolvency. Nebraska receives a significant amount of federal funding, and Ricketts believes one-day Washington’s commitment will disappear.

The state has room to improve, but also holds top ten ranks in some of the factors weighed by the eighth edition of Rich States, Poor States, including recent legislative changes in tax liability. With proper reforms to taxes and spending, Nebraska has a strong chance to be as economically competitive as many of its closest neighbors.

This is an entry in the ALEC Center for State Fiscal Reform series, “State of the States 2016,” which will perform analysis of tax and budget issues raised in every state of the state address delivered by America’s governors. Check back frequently over the coming weeks to see the results for your state.