- Associated Press - Monday, March 10, 2014

LINCOLN, Neb. (AP) - Nebraska lawmakers kicked off a budget debate on Monday focused on property taxes and a proposal to spend $2.5 million on cast-bronze fountains at the Capitol.

The disputes revolved around relatively small items within Nebraska’s $7.8 billion, two-year state budget.

The new proposed budget includes millions of dollars for state park maintenance, water conservation and flood protection projects, prison overcrowding, job training programs, pediatric cancer research and services for people with developmental disabilities.

Sen. Heath Mello, chairman of the budget-writing Appropriations Committee, said the new proposal represents a “balanced, sensible approach” focused on short- and long-term priorities.


“We have tried to address some overarching issues that our state has failed to address in the last six years,” Mello said.

Lawmakers rejected an attempt to add another $20 million to a state property tax credit program, on top of the $25 million boost already proposed. The money is distributed each year as a tax credit to property owners throughout the state.

The current property tax credit program distributes $115 million per year, an amount that has stayed in recent years even as farm and ranchland values - and the accompanying property taxes - have soared. The current budget proposal would increase the total fund to $140 million.

Sen. Galen Hadley of Kearney urged lawmakers to add even more money, so that the new credit would nearly match what property owners received in 2008. The proposed $25 million increase would reduce an owner’s tax bill by $74.11 for every $100,000 of taxable property. Hadley proposed a $45 million increase, which would amount to $84.70 in tax relief for every $100,000.

Hadley, chairman of the Legislature’s Revenue Committee, said the increase would signal to Nebraskans that their voices were heard at a series of summer tax hearings. Many residents at the time complained about property taxes, which are set by local counties and school districts.

“Part of it is sending a message to taxpayers: We heard you, we understand the problem, and we will work to try to solve those problems,” Hadley said.

Sen. Danielle Conrad of Lincoln noted that the property tax credit fund only benefits property owners, including those who don’t live in Nebraska and haven’t paid the state’s income and sales taxes. The tax credit - paid for with income and sales tax revenue - effectively shifts money from one person to another, she said.

Sen. Brad Ashford of Omaha said increasing the property tax credit fund would decimate any attempt to reduce Nebraska prison overcrowding. Ashford has introduced a proposal that includes $13.8 million for substance abuse and mental health services to divert more offenders away from prison.

Lawmakers also turned down a motion to pull funding for the fountains, the last unfinished design feature of the Capitol that was built in stages between 1922 and 1932. Fountains were to sit in each of the building’s four open-air courtyards, but the work stopped because of the Depression.

The proposed state budget would increase spending by an average of 5.5 percent per year, according to the Legislature’s fiscal office.

Republican Gov. Dave Heineman’s budget director sent a letter to lawmakers on Monday warning that the increase in general fund spending was actually higher, because $46 million would be moved to other cash accounts before it was spent. When counted as general fund spending, the annual spending increase was closer to 6.5 percent, said State Budget Administrator Gerry Oligmueller.

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