Unicameral Update: The "Murder Sheet"

As I predicted in my last update, the budget process has been messy.  As senators were checking in for the day last Tuesday, a few of us were in the Rotunda checking our phones for any new amendments being filed.  That’s when the “Murder Sheet” was distributed to senators - only moments before it was debated.  Many of you got texts and emails from me to alert you to what was happening, but I thought it would be helpful now for the rest of you to understand just how unusual this approach has been to setting the budget. 

The budget advanced by Appropriations Committee was over $200 million short when it hit the floor.  There had been talk of debating the contents of the Committee’s work and then dealing with the deficit on select file, giving senators time to consider alternatives.  Instead, Senator Clements announced that he was pleasantly surprised to find out that an amendment which would fully fund the budget was finished faster than expected, so they would take it up on general file.  Enter the “Murder Sheet” aka the $200 million and where it was coming from.  The sheet reflected a continuing theme we have seen throughout the budget process this year.  One many of us have referred to as the “Peter meet Paul” budget. This budget is heavy on cash fund sweeps and new fees to cover those sweeps.  We also saw the first recommended appropriation from the Cash Reserve Fund.

In order to understand where we are, it is helpful to know how we got here.  Property tax relief has been a priority for Governor Pillen and the majority of our legislature.  However, in past years, we had ample revenue to continue increasing funding for property tax relief.  Said relief now equals just under $2 billion per year and we don’t have any excess revenue to add to that total (or even cover it in out-years).  This is the primary reason for our deficit.  If we want to continue and even increase funding for property tax relief, that money must come from other sources.  Those other sources are cash and funds held for other purposes, and new revenue. 

The $200 million sweep included 55 specific sweeps and cuts to other programs.  These include, the Medicaid Managed Care Excess Profit Fund, the Crime Commission, the University of Nebraska, the Department of Motor Vehicles, the Game & Parks Commission, the Department of Health and Human Services, the State Fire Marshal, and the Racing & Gaming Commission. New revenue would come from proposed fee increases for a number of these same agencies, and some new tax proposals that have yet to be debated. 

Are fees the same as a tax?  It probably depends.  If a fee is being used to fund a specific service then it is traditionally considered a user fee.  For example, a fee paid to the Fire Marshal to review building plans or do safety inspections is acceptable to cover the cost of providing those services.  Buying an annual State Park permit is an acceptable fee for being able to enjoy our state parks.  When an individual or business needs to get copies of records, we expect to pay the cost of providing those records.  However, if those fees are being set at an artificially high rate so that they can fund other needs within a specific agency or be swept for completely unrelated uses, past legislatures would have never considered them. 

For example, the Legislature has advanced several measures this year that would greatly increase certain fees and then subsequently supported a sweep of cash funds from the agencies that will be assessing those fees.  The Department of Motor Vehicles is slated to more than double the cost of obtaining records, and this increase was originally argued to be necessary to cover the cost of a new computer system  However, on the “Death Sheet,” it was proposed (and adopted) to sweep $12.5 million dollars – I guess they don’t need that new system after all.  Fees paid to the State Fire Marshall for reviews and inspections were originally proposed to be increased twenty-fold (later just ten-fold) so that the Agency could eventually be completely cash funded by those fees, even though the agency has other obligations.  Senators adopted language that would sweep $4 million dollars from the State Racing and Gaming Commission that will deplete their operating budget and have to be replaced by assessments that are only to be used if the Commission depletes their operating budget – did they deplete it? So were those fee increases just a tax to support unrelated uses?

Just today we learned of a planned attempt to sweep $8 million from the Affordable Housing Trust Fund to cover $8 million in funding the Appropriations Committee cut from workforce housing.  This will be more than $30 million that has been swept from the Affordable Housing Trust Fund in the past year.  Those funds come from a documentary stamp tax that is paid by the seller of real property.  Taking funds from one housing fund to supplement another housing fund results in a net loss to housing.  If housing is a priority for our state, and it is continually argued as such, should those funds be swept for non-housing purposes?  Should someone selling their home pay a tax so that those funds can be swept at the will of the Legislature?

What can our state afford?  What are our priorities?  What will all of this look like in two years?  These doesn’t seem to be a clear answer to any of these questions as debate continues on our state’s budget.  

The debate continues this afternoon.  Perhaps we will get some answers.    

Korby M. Gilbertson
Radcliffe Gilbertson & Brady