KVNO News

2013 Legislature To Grapple With Issues Including Health Care, Taxes

By Fred Knapp, NET News

January 8th, 2013

Lincoln, NE — As the Nebraska legislature prepares to begin its 2013 session on January 9th, issues such as Medicaid and state aid to higher education are at the forefront.

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The Nebraska Legislature begins its 2013 session Wednesday without a looming crisis facing the state. Nevertheless, lawmakers will have to make some big decisions about the future.

One of the biggest decisions is whether or not to expand Medicaid, as allowed under federal health care reform, to cover up to 100,000 more Nebraskans.

One key lawmaker who favors the idea is Sen. Kathy Campbell, chairwoman of the Health and Human Services Committee.

“I feel strongly we should put (it) into place for all populations of Nebraskans. Where I hope that we will spend time is double-checking all the figures, knowing what the costs will be if we put it in place. But conversely, knowing what the costs would be if we do not put it in place,” she said.

Federal tax dollars are supposed to pay all the costs of expansion for the first three years, gradually declining to 90 percent after that. But Gov. Dave Heineman has said the state can’t afford the portion it would be left responsible for. In November, he said that expense would draw money away from other needs.

“If Medicaid expands, let me tell you who’s going to get hurt: state aid to the Lincoln Public Schools, to the Omaha Public Schools, to the Bellevue Public Schools, the Kearney Public Schools,” Heineman said. “Funding to UNK, UNO, the Med Center and the University of Nebraska’s going down. Or, you’re going to raise taxes on middle class families. And I’m opposed to every one of those” possibilities.

As the governor’s comments suggest, the amount of funding for schools from state sources, like sales and income taxes, as opposed to local property tax, will be up again for debate. The Legislature has cut state aid below what the formula called for in recent years. But in the process it removed controls on future growth. Sen. Greg Adams, outgoing chairman of the Education Committee, said that leaves the state facing a huge jump in projected aid it can’t afford.

“Originally, we were looking at a 20 percent increase in state aid to schools” under the formula, Adams said. “There have been revisions to that now that look more in terms of 10-11 percent. We’re not going to see 20 percent. We really probably cannot afford to see a 10 percent increase. So what we need to do is put some controls back on that get us somewhere, I think, between a 5 and 6 percent range.”

Meanwhile, the governor has proposed boosting state funding for higher education nearly $50 million by 2015, in exchange for commitments from the University of Nebraska and the state colleges to freeze tuition for the next two years.

Whatever the level of state funding for education, it has traditionally been paid for out of the two main sources of state revenue: the sales tax and the income tax. Last year, the governor proposed significant cuts to the income tax; for this year, there have been rumblings he might even propose to abolish it.

The governor is not saying yet what he’ll put forward. But Sen. Galen Hadley, who’s running for chairman of the Revenue Committee, said trying to squash down income tax receipts would create pressure elsewhere. “If there is going to be a significant reduction in the income tax, it’s going to have to come from sales tax. That’s the only place that I can see,” he said.

One way to avoid simply raising sales tax rates would be to end existing exemptions to the sales tax. But Hadley warns ending exemptions is easier said than done. “Most of them are just common exemptions that every state has: ag inputs. Items for resale. Component parts,” Hadley said. “These are things that you just have to exempt because you can’t put Nebraska businesses at a disadvantage by putting a tax on a tax.”

Sen. Heath Mello, who helped negotiate a scaled-down version of Heineman’s tax cut proposal last year, said it would be better to take a step back and look at the big picture.

“I’m a big believer in looking at our property tax system more than our individual or corporate income tax system,” Mello said. “My underlying policy preference would be for the Legislature to really sit down together and explore the comprehensive approach of reforming our tax system, not simply trying to cherry-pick one area over another.”

There will be plenty of time to debate this and other issues, including a new two-year budget, questions of further reforms to the child welfare system, Access Nebraska — the online social services intake system — and proposals for charter schools.

As this is going on, Omaha Sen. Scott Lautenbaugh said, the personal dynamics will have changed. “We’re all going to have to figure out how to function together, with a very changed body,” he said.

Term limits forced out nine of the 49 senators last year, including the Speaker and the chairs of the Appropriations, Revenue, Transportation and Telecommunications, Banking, Commerce and Insurance, and Natural Resources Committees.

There will be 11 new senators this year, including Ernie Chambers, a former senator returning after being forced out by term limits four years ago. And while registered Republicans still dominate the officially nonpartisan Unicameral, their numbers have declined from 33 to 30, while Democrats have increased from 15 to 17, and independents from 1 to 2.

It should be a recipe for an interesting, and unpredictable, legislative session between now and its expected adjournment in early June.

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