- Associated Press - Tuesday, April 25, 2017

LINCOLN, Neb. (AP) - Nebraska lawmakers kicked off a contentious debate Tuesday over a proposed $8.9 billion, two-year budget package in the midst of a projected revenue shortfall.

The plan would balance the budget using a combination of tactics. The biggest changes include drawing money from state cash accounts that are separate from the general fund, cutting money to the University of Nebraska, and relying on an increase in federal Medicaid dollars.

The budget could see more cuts depending on the outcome of a new state revenue forecast slated for Wednesday. Senators adjourned for the day without voting on the main budget bill.

The package would increase funding for K-12 public schools, accounting for roughly 44 percent of the total budget, and provide a boost to the ongoing efforts to reduce prison crowding.

Sen. John Stinner of Gering, the chairman of the Appropriations Committee, said the budget-crafting effort was one of the most difficult ones that longtime legislative staff members could recall.

“This current budget is really about us, what we think is really important at this point in time,” Stinner said in remarks to fellow senators.

Lawmakers faced an unusually large projected shortfall of nearly $900 million this year, in part because of falling commodity prices that hurt agriculture, the state’s largest industry.

The proposed budget would increase spending by an average of 1.1 percent annually over the next two-year cycle - far less than the average growth rate. It would cover state expenses from July 1, 2017 to June 30, 2019.

Some senators voiced concern about the proposed cuts and a major tax package championed by Gov. Pete Ricketts. The tax plan would automatically reduce the state’s top personal income tax bracket in years when state revenue grows by more than 3.5 percent.

“We have placed ourselves in a very precarious situation by cutting and cutting and cutting,” said Sen. Paul Schumacher of Columbus. The tax cuts “are so small in most people’s cases that they amount to a sack of peanuts.”

Schumacher said lawmakers need to maintain a healthy cash reserve for state emergencies or major investments that would promote economic growth. The so-called rainy-day fund had been projected to reach a record high $729 million in June 2016, but is now expected to slip to $379 million by June 2019 under the current proposed budget.

Speaker of the Legislature Jim Scheer said any lawmaker who wants to increase spending will have to show where they propose to get the money. Those who want to reduce spending will have to outline where they intend to cut, Scheer said.

Lawmakers also gave first-round approval Tuesday to a funding bill for ongoing construction projects, $75 million for a new reception and treatment center for the state prison system. The bill would also provide a $10.6 million installment for ongoing ventilation system upgrades at the Capitol.

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Follow Grant Schulte on Twitter at https://twitter.com/GrantSchulte


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