Capitol: Shadow-boxing continues over tax cut

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March 20th, 2012

Lincoln, NE – There was more shadow-boxing over the budget in the Legislature Monday. But the main battle, over a shrinking tax cut proposal, remains to be fought.

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Speaker Mike Flood drew an explicit connection between the two. He proposed cutting $2 million from Medicaid this year and next.

Speaker Mike Flood proposed cutting $2 million from Medicaid this year and next. (Photo courtesy Nebraska Legislature)

Supporters of the proposal say Medicaid, which gets hundreds of millions of dollars a year from the state, is spending less than had been appropriated for it.

Opponents called said the move risky in an era of rising costs.

After the proposed cut fell one vote short on the first vote, Flood quickly called on lawmakers to reconsider. And he made the connection between budget cuts and tax cuts again. “I present these ideas with the idea of making room in the budget for what I think is going to be a decision we make here soon, not only on a tax cut but also other A bills that are before us,” he said.

“A bills” is legislative jargon for proposals that cost money. And there are plenty of them, competing with proposed tax cuts and pulling legislators in opposite directions.

Lincoln Sen. Danielle Conrad complained that Flood’s proposed savings in Medicaid were one-time savings, while the tax cuts would be ongoing. “What those kind of cuts are, using one-time funding strategies to take care of ongoing needs, it’s putting together the budget with bubble gum and baling wire, and that’s not sound fiscal policy,” she said.

Sen. Danielle Conrad says Flood's proposal won't lessen the fiscal blow of ongoing tax cuts. (Photo courtesy Nebraska Legislature)

On its second try, Flood’s amendment was adopted with three votes to spare.

Meanwhile, efforts continued behind the scenes to further reduce the size of the proposed tax cut.

Faced with legislative opposition, Gov. Dave Heineman has already given up on the part of his proposal that would have eliminated the inheritance tax and cut corporate income taxes. But he’s continued to press for individual income tax cuts.

The Open Sky Policy Institute, which is critical of the proposal, has estimated it would cut state revenues by $123 million a year when fully implemented. Sen. Abbie Cornett, Revenue Committee chairwoman, said Monday afternoon that numbers are now being crunched on alternatives that would cost less than half that, in the neighborhood of $50 million.

That’s not likely to satisfy critics who have previously objected that the cuts amount to less than $10 a month for a family of four with an income of $50,000. On the other hand, senators who support the proposal argue that there’s virtue in letting people hold on to more of their own money. Debate on the tax bill is tentatively expected to begin Tuesday afternoon.

Also on Monday, lawmakers gave first-round approval to a bill requiring state agencies to submit proposed privatization contracts for review before signing. Supporters say the bill aims at avoiding problems with future contracts like those the Department of Health and Human Services signed with child welfare lead agencies. The bill says for any contracts of more than $15 million, a state agency must explain why it’s better to hire a private contractor to provide the services rather than having state employees perform them.

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