A revised gubernatorial tax reduction plan focusing increased attention on property tax relief was tossed into the legislative ring Wednesday, prompting more sparring than slugging from some state senators who reacted warily to the evolving proposal.
Although the revised plan is more likely than not to attract majority support in the Legislature, it faces a struggle to gain final enactment.
Sen. Jim Smith of Papillion, chairman of the Legislature's Revenue Committee, described the proposal as "a work in progress," which he will attempt to guide to enactment along "a clear, but very narrow, path to success that will require 33 votes."
That's the number required to break a filibuster in the 49-member Legislature.
"We're going to have some nips and tucks along the way," Smith said, "but it will be recognizable at the end."
The plan seeks to provide increased property tax reduction by restructuring the state's current property tax credit fund into a new, refundable income tax credit available only to owner-occupied households in Nebraska and agricultural landowners who live in the state.
Those property owners would receive a credit on their state income taxes equal to 10 percent of the tax bill on their home or farm. The credit for homeowners would be capped at $230.
Additional property tax relief would be pumped into the program in the future any years when state revenue exceeds revenue forecasts.
Personal and corporate income tax rates would also be reduced under the new tax proposal:
* The top personal rate — paid on income of more than $29,830 for single taxpayers and $59,660 for couples — would drop from 6.84 percent to 6.75 percent in 2019, then to 6.69 percent in 2020.
* And the top corporate rate — paid on income of more than $100,000 — would drop from 7.81 percent to 6.75 percent in 2019, then to 6.69 percent in 2020.
The proposal will replace the governor's previous tax plan (LB461) that was trapped by a filibuster last year.
"It's time to pull agriculture and nonagriculture interests together for the common good," Smith said during an interview.
"We have to find a path to unite their interests and make Nebraska more attractive for business to want to expand in the state."
The new bill would provide "greater certainty for property tax relief," Smith said.
"Property tax relief grows as the economy grows," he said.
Sen. Steve Erdman of Bayard, sponsor of a competing proposal (LB829) that would provide $1.1 billion in property tax relief through state income tax credits and refunds equal to 50 percent of local school property taxes paid, deferred reaction to the governor's new plan until he's had an opportunity to study it more.
"I haven't seen the bill," he said. "I'll look at it."
The Nebraska Farm Bureau Federation, an influential player in the property tax arena, said it was encouraged by the governor's increased emphasis on property tax relief, but still open to an initiative proposal that would be submitted to Nebraska voters on the November general election ballot if the Legislature does not enact Erdman's bill.
"We will keep all options on the table for our members, including a ballot measure that would give Nebraskans the opportunity to vote and demonstrate their desire for property tax relief," Farm Bureau President Steve Nelson said.
Sen. Bob Krist of Omaha said he'd like to see the Legislature also consider some opportunities to increase revenue without hiking tax rates as it struggles with a revenue shortfall.
One way would be to collect state sales taxes already owed by Nebraskans for purchases on the internet, he said.
Krist, a former Republican who will be a third-party candidate for governor in November challenging the Republican governor's re-election, said the Ricketts administration has "not moved" to try to collect that revenue at a time when state government is experiencing fiscal distress.
In addition, Krist said, the Legislature should be open to elimination of "some sales tax exemptions and give-away programs" to meet the state's fundamental budget needs.
Sen. Burke Harr of Omaha, a member of the Revenue Committee, said he was pleased to see Ricketts appear to be "much more conciliatory and less partisan" in his State of the State address to the Legislature.
"I think the tax plan is introductory," he said. "I believe he's willing to work more on common ground. He realizes there have to be compromises."
Harr, a Democrat in the nonpartisan Legislature, enthusiastically agreed with the governor's stated priority of workforce development as one of his 2018 legislative initiatives.
Ricketts included a proposal for an additional $10 million in workforce development funding over the next two years as part of his State of the State address.
During a briefing with news media Tuesday night previewing his speech, Ricketts said he expects the revenue trigger built into his tax bill could result in increased property tax relief six out of 10 years.
Ricketts said "we are still talking" with supporters of the alternative billion-dollar property tax relief proposal to seek agreement.
"Maybe we're not there yet," he said, "but if we can come to agreement with agriculture, they might not see a need for the initiative."
Smith said he will schedule a series of meetings to focus on strategy and develop working coalitions to prepare the ground for consideration of the revised tax plan later this session.
Gov. Pete Ricketts' budget proposals earned compliments Wednesday, for priorities that would cover the costs of child welfare needs, and tackle crowding and understaffing in the state's prisons.
Some senators were unsettled, however, about higher education cuts he proposed.
The Legislature's Appropriations Committee will dig into adjustments to the $9 billion 2017-19 budget beginning Tuesday, with its own reviews of the funding needs of state agencies and education.
The committee's budget recommendation is due to the full Legislature on March 9.
While Ricketts has proposed more funding in critical areas, he's also asked for cuts across the board of 2 percent this year and 4 percent next fiscal year. He will address a $173 million revenue shortfall by reducing spending, transferring money from cash funds and pulling $108 million from the state's rainy day fund.
Ricketts' proposal would bring added spending down to 0.2 percent.
Longtime lobbyist Walt Radcliffe called Ricketts' State of the State proposals "the right speech at the right time."
Omaha Sen. Bob Krist, himself a candidate for governor in 2018, said what was seen Wednesday in Ricketts' budget, on the surface, looked "reasonable." Even so, he didn't like the idea of taking so much money from the state's savings.
"It doesn't seem to me to be the right thing to do," he said. "It needs to be whittled down."
Appropriations Committee Chairman John Stinner of Gering said the committee and the Legislature will examine Ricketts' proposed across-the-board agency and higher education cuts to measure the impacts, calling them short-term decisions that have potential long-term implications.
He was cautiously optimistic about the use of the rainy day fund to help balance the budget. Under the circumstances the state finds itself in, he said, it would not bother him to spend down the state's reserve to $274 million.
The reason for a cash reserve is to cushion the state when revenues come in below forecast, Ricketts said. "And that is certainly where we’ve been for the last more than a year."
The governor plans to get the rainy day fund back up to about $500 million by 2021, as the economy improves.
Proposed cuts to higher education could set up an interesting discussion among Appropriations Committee members.
Lincoln Sen. Kate Bolz is worried about the impacts of across-the-board cuts to the University of Nebraska of nearly $35 million more over two years, added to $13 million in reductions already in this year's plan.
Ricketts said the university was treated "fairly well" in the last budget. It took a 2.3 percent cut, was kept flat in the first year of the current budget, and got a $10 million increase in the second year.
University of Nebraska officials declined to comment on the budget recommendations Wednesday.
The university is a $3.9 billion economic driver for the state, Bolz said, and that is worth serious consideration, including the potential impact from cuts on tuition rates, which are going up 8.6 percent over two years and could go higher.
Cuts to state colleges were the concern for Appropriations Committee member John Kuehn of Heartwell.
"I have grave concerns about what a 2 and a 4 percent cut will do to the overall viability of the state college system," he said. "It's a small amount of dollars but it's a big impact on their already bare-bones operation."
The state colleges serve a significant role in workforce development in the state and should not be ignored, he said.
The University of Nebraska got special treatment in the last budget, Kuehn said, and has more levers to pull and options for making adjustments than does the state college system.
One of Ricketts' priorities for increased funding was the Department of Health and Human Services' child welfare system. He is recommending an additional $35 million for child welfare and public assistance over this year and next.
The state has seen a significant increase in the number of children coming into the child welfare system, the governor said. Annually, the number is up about 9 percent, or about 485 kids. At the same time, the rate at which cases are being closed is relatively flat.
"That is heartbreaking," Ricketts said. "We must take care of our kids."
Significant increases have also been recorded in payments for adoption assistance and guardian subsidies.
The department reports that in the first seven months of 2017, parents using methamphetamine were a factor in one of every three removals of children from their homes.
"We have to get to the bottom of this disturbing trend and all of the other contributing factors," Ricketts said.
He's forming a new child welfare task force to determine the root causes of the growth in the number of children coming into the system. Spokesman Taylor Gage said the details of the task force will be finalized in coming days.
"I think we're all puzzled about what utilization is, what this population is and what's causing it," Stinner said. "I think the governor is prudent in putting together that task force."
Bolz is proposing a special oversight committee of child welfare, especially in light of a state inspector general's report on sexual abuse of state wards and children adopted from the system.
Another priority this year is the Department of Correctional Services.
Ricketts is recommending expanding the number of corrections officers and reinvesting $6 million in unspent funds back into the prisons.
Twenty-six full-time positions were funded for the 2017-18 fiscal year, even though 55 were requested. The Department of Correctional Services is asking to fill the rest of that request. It also wants to hire 35 new health services positions at Tecumseh State Correctional Institution.
Those positions would not require more money, only permission to spend money on the positions already in the department budget.
Corrections would also use $6.5 million in savings from another project to add a 100-bed dormitory at the Nebraska State Penitentiary.
Two long-sleeved shirts, a sweater, a fleece jacket, two scarves and two pairs of socks.
That has been Karen Ericson's go-to outfit in her office in Des Moines, Iowa, in recent weeks.
"I am still shivering," the 39-year-old graphic designer said recently, estimating the temperature in the office was in the mid-60s while outside, the city hit 19 below zero at one point. "Living in the Midwest, I'm well-trained to dress warmly and in layers, but this deep freeze has been difficult to endure, especially when I expect to be comfortable — or at least not shivering — inside."
As much of the nation muddled through bitter weather in recent weeks, office dwellers found they still had to brave the cold even when indoors. Many relied on winter parkas, gloves, blankets and space heaters just to keep working.
"Today I've got two sweaters, a scarf, ear coverings, gloves and a blanket over my lap," Rebecca Miller, a 27-year-old academic adviser at Tennessee State University in Nashville, said last week as temperatures barely ticked above 50 degrees in her office while outside it was 20 degrees or lower in the daytime. "But I'm still having a hard time working. I'm shaking cold, and it's hard to focus. The gloves make it hard to type, and the bulky layers make it difficult to move around."
Like thousands of other chilly Americans, she snapped selfies of herself at her desk in attire usually reserved for the ski slopes and shared them on social media.
Office developments are built with centralized heating systems that make the buildings suitable for a range of uses over many years. The down side is that they provide little climate control to individual tenants — sometimes purposely, said Khee Poh Lam, architecture professor at Carnegie Mellon University in Pittsburgh.
Thermostats are often tucked into hard-to-reach spaces such as false ceilings and air ducts so office tenants can't mess with them, Lam said. Other buildings have dummy units out in the open that don't actually do anything except give desperate workers the illusion of control.
Finding the right temperature to please everyone has been an elusive goal for office designers and builders, said Stefano Schiavon, architecture professor at the University of California, Berkeley, who co-wrote a 2012 study that found roughly 40 percent of U.S. workers were satisfied with their office's temperature. Design standards call for an acceptability rate closer to 80 percent, he said.
The challenge isn't just confined to the winter, of course. Chilly offices have long been the bane of women who complain air conditioning is cranked up in the summer to appease their male, suit-wearing counterparts. And there are certainly many offices with overzealous furnaces that prompt workers to crack open windows even on the coldest days.
Optimal temperature for office work is 72 to 79 degrees — or nearly 10 degrees more than what many buildings typically set their thermostats, said Alan Hedge, a design professor at Cornell University in New York who has researched how temperature affects productivity.
Schiavon suggested that companies, even those based in the draftiest old offices, can invest in safe, relatively inexpensive technology to keep workers warm and productive, such as heated chairs, electric blankets and heated floor mats.
"The bottom line is that central heating won't work for everyone, even if designed right," he said. "We're very different people and need some sort of personalization of our environment."
Ericson, the Iowa resident, said the key to getting through the work day has been reminding herself the cold is only temporary.
"Every day that passes," she said, "is a day closer to spring."
Call him the businessman governor. Or maybe Governor Businessman.
Nebraska’s CEO, Gov. Pete Ricketts, now in the last year of his first term, touted the state's accomplishments in growing the economy while shrinking its government during his State of the State address Wednesday.
Heaping praise on both Republican and Democratic lawmakers, Ricketts struck a conciliatory tone as he introduced his plans to push more state budget cuts and rework tax policy, which he says will spur growth while providing relief to farmers, ranchers and homeowners alike.
“In the spirit of cooperation, we come together each year to accomplish the priorities that matter most to Nebraskans,” Ricketts said during his fourth annual address.
“Our work together is helping to grow our state and keep Nebraska the best place in the world to live, work and raise a family,” he said while addressing the Legislature and state employees gathered in the George W. Norris Legislative Chamber.
Individuals and businesses from across the U.S. are taking note, Ricketts said. Last year, Nebraska recorded record levels of employment — “1 million nonfarm jobs” — while also the lowest unemployment rate — 2.7 percent — since 1999.
Nebraska’s population also inched higher in 2017, topping 1.92 million people for the first time, the governor added.
Ricketts attributed the growth to international trade partnerships, growing investments in Nebraska’s workforce and transformations to state government in the form of slowed growth and greater efficiency to citizens — what he calls a “more customer-focused” approach.
He heralded Nebraska being awarded the Governor’s Cup, a top award from Site Selection magazine bestowed on the state with the most economic development projects per capita, and pointed to high rankings for Nebraska’s business climate by Forbes and Chief Executive magazine.
“Folks, this matters, because when companies move here and invest, they create job opportunities for people,” he said.
Ricketts credited those opportunities as the result of work done by lawmakers in crafting policies friendly to new businesses — cutting regulations, making licenses easier to obtain — and for the state’s ambassadors reaching beyond U.S. borders to open new trade possibilities.
Trade missions to Canada, China, Japan, Denmark and elsewhere have spurred growth on the Great Plains, Ricketts said.
A trip to Canada in August helped snag a small plant for Agri-Plastics in Sidney that has created 20 jobs, Ricketts said, while the Denmark-based Novozymes launched a new investment in Blair after state leaders visited.
Ricketts introduced Eric Jones, a production worker at Kawasaki who landed a spot in the plant’s new aerospace division in Lincoln — a move the governor said was supported by a 2015 trade mission to Japan.
“Eric told me Kawasaki is great for Lincoln,” Ricketts said. “Besides the good-paying jobs and investment, Kawasaki supports local charities and uses local vendors.”
From the ranchlands of western Nebraska, Ricketts said beef has found a new destination after a 14-year hiatus: China. “I’m excited to report that over half the American beef in China now comes from Nebraska,” Ricketts said.
Other ag commodities are also finding new markets worldwide, Ricketts said, which are being opened by efforts from the Department of Agriculture and Department of Economic Development.
U.S. companies, too, have sought investments in Nebraska, the so-called Silicon Prairie. Ricketts pointed to a 970,000-square-foot facility under construction to serve as a data center for Facebook in Papillion, and a Costco chicken processing operation in Fremont.
Ricketts said his 2018 priorities will seek to create more opportunities for businesses to invest in Nebraska while also providing much-sought tax relief to Nebraska landowners and homeowners living in the state.
His threefold plan includes restructuring existing property tax credits into a new tax credit for Nebraskans and not “absentee landowners,” which the governor said would provide $4 billion in property tax relief over the next decade.
Next, Ricketts’ plan will reduce property tax rates incrementally if the state’s growth exceeds revenue projections by the state’s forecasting board. The plan uses existing tax credits to achieve a permanent reduction in the state’s individual and corporate tax rates.
“Right now, 90 percent of individual income taxes paid by Nebraskans are at that top rate, and 90 percent of Nebraska businesses pay at the top individual rate,” he said.
The third and final part of the plan, injecting $10 million into workforce development programs offered by the state over the next two years, would also be a boon to businesses looking to locate in the state, he said.
“We have our work cut out for us, but I have no doubt we are up to the challenge,” he said. “Nebraskans expect results.”
To help balance the budget with those proposed cuts, Ricketts proposed slowing state spending from a 0.6 percent increase this year to 0.2 percent next year.
His decrease calls for across-the-board spending cuts, with the caveat they won’t touch state aid to K-12 schools, investments into the Department of Corrections, which include nearly $6 million to build 100 new prison beds, or aid to the state’s population of developmentally disabled individuals.
Receiving 33 votes to get those priorities onto his desk for signing is going to take a bipartisan effort, however. Ricketts praised lawmakers from both sides of the political aisle for their efforts last year to bring him “many great things.”
Ricketts urged the Legislature to once again “roll up our sleeves and get the job done” in cutting red tape, balancing the budget and delivering tax relief.
“We have our work cut out for us, but I have no doubt we’re up to the challenge,” he said.