Nebraska passes $11 billion two-year budget, closes major projected deficit for now
A budget book for Nebraska's fiscal years between 2025 and 2027 sits on a lawmaker's desk. April 29, 2025. (Juan Salinas II/Nebraska Examiner)
LINCOLN — Lawmakers approved Nebraska's $11 billion mainline budget for the next two years Thursday, leaving themselves with $1.1 million in wiggle room while controlling spending and moving enough money to cover the first two years of a projected deficit.
That figure includes $1.5 million in spending from LB 513, to give all state judges 1.5% salary increases in each of the next two years, which State Sen. Rob Clements of Elmwood, chair of the Legislature's Appropriations Committee, anticipates passing.
On Thursday, no senators spoke during debate in favor of or to defend the budget bills — Legislative Bills 260, 261, 262, 263 and 265, as well as LB 534 to fund legal claims against the state — while multiple opponents said the budget was 'supposedly' but not really balanced.
State Sen. Machaela Cavanaugh of Omaha, for example, predicted the bills wouldn't stop the deficit and that a special session would be needed.
'This budget is based on a number of sleight of hands,' said State Sen. Wendy DeBoer of Omaha. 'It is not actually balanced. We're just making it look like it's balanced.'
Clements said 'there's nothing' to indicate a special session would be needed unless there are 'drastic actions' federally, hinting at possible congressional budget cuts. He said he was pleased with the result of the budget bills that funded salary increases and health insurance benefits for state employees and that state agencies were not 'slashed.'
Clements said his committee's work put the state in 'good financial shape' for the next two years in a budget-writing year that required extra work and he described as stressful. He said he was proud to protect funding for the Perkins County Canal and a new state prison.
'It seemed like an insurmountable mountain to climb, but we did it, and we also did not cut essential services,' Clements said.
LB 261, passed 37-11, and LB 264, passed 35-13, were the main budget bills. Because legislative rules required the budget to pass by the end-of-day Thursday, lawmakers made no last-minute changes, despite criticizing the bills for more than two hours. The bills now head to Gov. Jim Pillen, who can line-item veto any items. Overrides require at least 30 votes.
Clements said he had not been in communication with the Governor's Office on whether to expect vetoes, or how many.
General fund estimates for the current fiscal year and the following two are:
Fiscal year 2024-25: $4.56 billion in net receipts, $5.48 billion in expenses.
Fiscal year 2025-26: $5.36 billion in net receipts, $5.48 billion in expenses.
Fiscal year 2026-27: $5.42 billion in net receipts, $5.52 billion in expenses.
Net receipts for the 2025-26 and 2026-27 fiscal years include $57.6 million in interest, $216 million in cash fund transfers and $147 million from the state's 'rainy day' cash reserve fund, which were used to help close the projected deficit.
DeBoer compared the budget bills to the fairy tale 'The Emperor's New Clothes,' where the ruler is naked but his subjects pretend he has extravagant clothing.
'They talked about how great it is because they don't want to be seen as unworthy,' DeBoer said, noting a young boy in the story called out the facade.
DeBoer and Cavanaugh argued the budget bills were littered with mistakes and unconstitutional provisions that were largely strewn together with sweeps of various cash funds in a budget that offered a two-year average spending growth of 0.9%. The two said some of the sweeps included funds from increased fees on Nebraskans.
Cavanaugh criticized moves to take about $2 million in interest from the administrative account for the Board of Educational Lands and Funds and $15 million in transfers from the Environmental Trust Fund. She proposed taking the amounts from the state's 'rainy day' cash reserve fund to avoid lawsuits for transfers she called unconstitutional.
She said officials overseeing the educational lands have said they might need to sue, and a former state official has suggested a lawsuit to protect the Environmental Trust.
At least $24 million of the budget gap is expected to be filled by seizing unspent agency funds after June 30, the end of the fiscal year. State Sen. Ashlei Spivey of Omaha said at least $7 million of that is contractually obligated in the Nebraska Department of Education.
Some senators have also said the budget doesn't fully consider federal changes, such as in efforts to take away state-dedicated dollars for broadband expansion, because similar dollars came from the federal government. Some of those federal dollars are now at risk.
State Sen. Ben Hansen of Blair, who supported the budget, suggested lawmakers should have been looking at more cuts to prepare for major federal spending cuts, such as to Medicaid.
'It's not about tightening our belt, as it is, we might be having to lop off limbs in order to help pay for our budget,' Hansen said.
Spivey, a freshman member of the Appropriations Committee with Cavanaugh, said it would be 'interesting' to see the budget implications, including for the years farther out, when lawmakers are projected to face a hole of at least $110 million under current projections.
'I hope, as we continue to work on our financial status and sustainability, that folks are more open to discourse and challenging ourselves around our decisions and our approach to how we create a responsible and responsive budget to our constituents,' Spivey said.
DeBoer said cash funds don't sit around for no reason and expects a number of deficit requests next year that the Legislature might need to grapple with.
Of the budget's passing, DeBoer, a senior member of the body, said: 'I guess we need to learn this lesson to do better next time.'
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