Nebraska governor proposes widespread budget cuts

Most Nebraska agencies will feel some pain over the next year and a half if lawmakers adopt the widespread spending cuts Gov. Dave Heineman proposed on Monday.

Heineman's plan relies on a combination of reducing future spending, past savings and some one-time transfers of money from other state accounts. Heineman said he would oppose any plan to increase taxes to deal with the projected $334 million shortfall in the state's two-year budget.

State lawmakers will assemble in Lincoln on Wednesday to begin their work on balancing the budget in a special session of the Legislature.

Heineman said even the programs he believes in strongly, like job training grants, would see a cut under his plan because he tried to make sure everyone shared the sacrifice as much as possible.

"We're all in this together, and we all need to be part of the solution," Heineman said.

State Sen. Lavon Heidemann of Elk Creek, chairman of the budget-writing Appropriations Committee, said the governor's proposal will likely be the foundation for what the Legislature considers.

"I think it's a good starting point," he said shortly after receiving 93-page proposal.

Heidemann said he won't know how many changes might need to be made to the governor's proposal until after public hearings wrap up next week.

Lawmakers will be forced to make some tough decisions about where to cut the budget. But spending on education and the Department of Health and Human Services' programs are almost certain to be scrutinized because together they represent more than 80 percent of the budget.

Almost half the savings in Heineman's proposal - about $154 million - would come from a group of spending cuts, including canceling a planned $47.4 million increase in state aid for K-12 schools in the 2010-2011 school year. But it's not clear yet where in K-12 education the cuts will be made because lawmakers must determine how to adjust the funding formula to save that money.

Other cuts included in that $154 million are: keeping payment levels for health care providers level, adjusting Medicaid payments and canceling a $20 million transfer to the public employees' retirement plan.

The governor is also proposing an across-the-board cut of 2.5 percent at most agencies in the current fiscal year and a 5 percent reduction next year to save $80 million.

The cut for Nebraska's universities, colleges and community colleges will be slightly lower because of requirements of federal stimulus grants. So the state's higher education entities would see a 1.8 percent cut in this fiscal year and a 3.4 percent cut in 2010-2011.

Heineman said state agencies began trying to limit their spending earlier this year because of the troubling economic reports, so the agencies have about $65 million from the previous budget year available that he plans to use.

And the governor proposes transferring $37 million from several budget lines to the general fund.

The governor's budget plan does not call for using any more of the state's $300 million cash-reserve fund.

"Nebraska is in better shape than most states," Heineman said, but it is not immune from the national recession.

The budget lawmakers adopted last spring called for about $6.9 billion in spending over two years. The state's economic forecasting board predicts that over the budget cycle revenue will be about $334 million lower than expected, forcing cuts to be made.

Last week, the economic forecasting board decreased its revenue projections for the current fiscal year and the next one because state tax revenues have been lower than expected as the recession continues to drag on the economy.

So far this fiscal year, revenues are $57 million below earlier projections, with much of the shortfall - $40 million - registered in September.

The decline in state revenue has been primarily due to lagging personal income taxes, an indicator that people are working fewer hours, wages are stagnant and fewer people are employed.