- Associated Press - Sunday, November 27, 2016

LINCOLN, Neb. (AP) - Nebraska lawmakers will face substantial budget challenges in next year’s legislative session, but some are wary of draining too much from a rainy-day fund to cover state expenses.

Although members of the Appropriations Committee say they’re likely to draw some money from the cash reserve to balance the budget, they also want to keep emergency cash available in case state revenue remains sluggish.

“We have to be very cautious,” said Sen. Kate Bolz of Lincoln. “Not only do we need to manage this year’s budget, we need to make sure we have sustainable funding for programs and services into the future.”

Sen. John Stinner of Gering said he expects a lot of discussion over how much money to draw from the reserve to address the state’s short-term needs, especially if revenue keeps falling short of expectations beyond the next budget cycle.

“If this is a four-, five-, or six-year cycle, we’re going to be depleting that fund considerably,” said Stinner, who is running to become the committee’s next chairman.

Stinner said any legislation that costs a lot of money probably isn’t going to pass next year.

“We simply don’t have the cash,” he said.

Nebraska is projected to have roughly $630.5 million in its cash reserve by June 30, 2019, but faces a projected shortfall of $911 million, according to the Legislative Fiscal Office. If no other changes are made, the shortfall would grow to an estimated $1.2 billion by 2021.

The cash reserve is generally used for one-time expenses and emergencies. To balance the budget, lawmakers can also draw from other separate cash accounts, reduce spending or raise taxes. Gov. Pete Ricketts has already imposed spending restrictions on state agencies, including a hiring freeze for non-critical positions and a moratorium on non-essential travel.

Budget officials have said low farm commodity prices are largely responsible for state revenue coming in below projections, as is a strong dollar that has cut into U.S. exports.

In a budget meeting earlier this month, state Tax Commissioner Tony Fulton said the commodity prices have hurt farm incomes, creating a drag on the state’s largest industry and reverberating through other parts of the economy as farmers reduce their spending.

Right now, the state’s cash reserve is projected to fall below the amount recommended by a leading government finance organization. The Government Finance Officers Association suggests keeping a cash reserve balance equal to one-sixth of a state’s annual general-fund spending - enough to cover two months’ worth of expenses.

The state is currently projected to spend more than $4.8 billion from its general fund in fiscal year 2019, so meeting that requirement would require a cash reserve of $801 million.

Despite the shortfall, Nebraska needs to keep putting money into the state’s short-staffed corrections system to ensure that the public, corrections officers and inmates remain safe, said Sen Dan Watermeier of Syracuse. Property tax reforms, a major concern for many farm and ranch landowners, may have to wait until future years, he said.

“I think tough times like this are good for us,” Watermeier said. “It forces you to address what really is a priority.”

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