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State of the State

Gov. Pete Ricketts delivers the State of the State address in the legislative chamber on Thursday. The governor said his overall plan is based on "controlling spending."

As with any proposed budget document, the devil -- and angel, as it were -- are in the details.

And details filled Gov. Pete Ricketts' nearly 100-page, $8.9 billion biennium budget proposal, released Thursday with his State of the State address to the Legislature. 

"He gave a lot of proposals, but I don't know what the real world ramifications are," said Omaha Sen. Burke Harr. "I was a little disappointed there wasn't anything in there that directly addressed how to grow our economy in our state. ... I want to know what we're doing today to help stimulate and grow the economy."

A number of senators said they appreciated Ricketts' proposals. 

"I thought what was laid out in front of us was a very responsible approach to our state government spending," said Lincoln Sen. Mike Hilgers. "And it was geared to giving tax relief to hardworking families.'

Besides outlining how he proposes to spend tax money, he has numerous proposals for cutting spending in specific agencies, part of a plan to address the projected revenue shortfall of close to $900 million in the next two years.

Some senators were sorry to see proposed cuts within the Department of Health and Human Services, including 2 percent to 3 percent cuts in rates for community providers for children and family services, developmental disabilities and Medicaid services.

In the development disabilities community, providers are the wheels on the car, said Omaha Sen. Bob Krist. And if those providers are not equitably paid, they will be lost.

Annette Dubas, executive director of the Nebraska Association of Behavioral Health Organizations, said providers have a lot of financial ground to make up from years of low rates. Over the past several years those rates have been slowly going up, but this would be a step backward.

Cuts would affect access to essential services for the state's residents who need them, she said. "We'll be seeing consequences in other areas, whether it's Corrections, emergency services or what have you."

The governor would take $75 million from the state's $637.6 million cash reserve to pay for a Reception and Treatment Center at Lincoln Correctional Center that would provide critical health care beds and expand core support functions for the prison and the Diagnostic and Evaluation Center.

It is Corrections Director Scott Frakes' highest priority for capital investments, Ricketts said.

With 33 years experience, "he knows this industry," the governor said. "When he tells me this is his next priority, I believe him." 

But Krist said reducing the cash reserve to $500 million would leave it about $120 million too low, according to the Legislature's fiscal analysts and outside economists.

He also has concerns about paying for new construction for the prisons, he said. Given the financial outlook, constructing buildings may not be the best idea at this time. 

Sen. Mike Groene of North Platte, chairman of the Education Committee, saw Ricketts' proposals for spending as a bit optimistic, believing that the Nebraska Economic Forecasting Advisory Board, which meets in February and again in April, could lower the projections for tax collections in the coming years because of the prospects for the agricultural economy.

"In ag, I haven't seen any indication we're turning around," Groene said. "Ag will pay some taxes this year because of carryover incomes from '15, but '17 ... is going to be worse, unless something drastically happens between now and harvest of next year." 

The University of Nebraska took some hits with budget cuts, which Groene, the Education Committee chairman, thought were OK.

"They're bloated," he said. "The governor made a good point. We spend more for that one (institution) than we do for basically all of state government, all the departments. ... I would say a lot more Nebraskans get affected by the state departments than the university."

The governor's farmland valuation proposal, to value ag land based on income potential rather than market value, is not a fix for high property taxes, Groene said. It's more like a tweak. If valuations are lowered, and state aid doesn't make up the loss to school districts, those districts will just increase their tax rates, he said.

Ricketts had been conferring with his state agencies since June on getting the cuts needed to meet the projected $900 million revenue shortfall, and had put spending constraints in place to balance the budget, which is required by state law.

Sen. Jim Smith of Papillion said there's no way to create a budget with a shortfall that size that everyone would be pleased with and that wouldn't cause pain for someone, somewhere.

The governor's proposals are fair, he said, and he liked the governor's idea of using revenue growth triggers for cutting income tax rates over time.

He expects competing bills to address property taxes, in addition to that proposed by Ricketts and introduced by Sen. Lydia Brasch of Bancroft. 

"This is a long session. A lot of times what we end up with (in Revenue Committee) at the end of the year is not what we started out with," Smith said. 

Sen. Bill Kintner of Papillion also liked Ricketts' income tax cut proposal, saying it was responsible to go slowly, waiting for rising revenue triggers and cutting spending along the way.

Was it soon enough for the tax cut crusader?

"It is what it is, and we'll take it. I'll cut any tax, any time, any place," Kintner said, paraphrasing economist Milton Friedman.

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Reach the writer at 402-473-7228 or jyoung@journalstar.com

On Twitter @LJSLegislature.

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State government reporter

JoAnne Young covers state government, including the Legislature and state agencies, and the people they serve.

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