Nebraska governor warns state must tighten belt

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BY NANCY HICKS / Lincoln Journal Star

Gov. Dave Heineman’s budget plan is slim pickings.

Based on the assumption the national recession will soon hit Nebraska full force and state revenue will not grow at all next year, the governor recommends most state agencies live with less than 2 percent growth.

And at least 27 of the 47 agencies that use state tax dollars would see no increase in state funding the first year of the budget cycle, under Heineman’s $7.4 billion two-year budget plan.

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Gov. Dave Heineman greets senators after giving his State of the State Address on Thursday. (William Lauer)

Gov. Dave Heineman greets senators after giving his State of the State Address on Thursday. (William Lauer)

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Gov. Heineman State of the State

Gov. Dave Heineman delivers the annual State of the State Address on Thursday at 10 a.m. (Anthony Roberts / JournalStar.com)...

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“We must prepare for a slowing economy. Clearly we are heading into uncertain times. State government must tighten its belt just like Nebraska families and businesses are doing,” he said as he offered his plan in a Thursday morning State of the State speech.

“The governor’s plan is a good starting point for us,” said Lincoln Sen. Danielle Nantkes, a member of the Legislature’s Appropriations Committee that will craft its budget plan over the next few months.

“It sets the appropriate tone to assure that we shore up resources in light of economic uncertainties,” she said.

The budget covers the two fiscal years that begin July 1, 2009.

“We will have to work together to get to the other side of this,” Appropriations Committee Chairman Lavon Heidemann said.

The committee uses the governor’s plan for guidance, but will create its own budget plan to send to the full Legislature, he said.

And there will be disagreement over specific issues.

Nantkes pointed to two areas in which she disagrees with the governor: the slim increase to the University of Nebraska and limiting what the state would pay day care providers who look after children in low-income working families, a change Nantkes says would discourage day care providers from participating and make it harder for low-income mothers to find quality day care.

Heineman pointed out that Nebraska state government is better off than many other states — Iowa, for example, made 1.5 percent across-the-board cuts to current budgets — partly because frugal state leaders stashed cash in a special cash reserve fund that can be used to ease some of the pain of a recession.

Heineman suggests spending about half the $564 million cash reserve fund over the next two years, most of it for three big unknown expenses:

* Shoring up state “defined benefit” pension funds in light of the stock market crash. “It’s going to be a huge number,” Heineman said.

*  Water litigation.

* The possibility the state will lose, for six months to two years, about $28.6 million a year in federal funds that pay for more than half the cost of running the Beatrice State Developmental Center.

Heineman recommends saving the rest of the cash reserve for the next two-year budget cycle, in case the recession lingers.

“The cash reserve is our rainy-day fund, but we need to be mindful that it is only beginning to rain,” he said. 

The governor’s speech and briefings for reporters and senators focused on big-picture issues and didn’t fully explain how agencies will live with strict rations, including fitting a 2.9 percent salary hike into budget increases of less than 2 percent.

But there was a glimpse of some cutbacks:

* The Nebraska State Patrol will have at least 20 fewer troopers.

* The state transportation division will slow down its car replacement program, buying fewer cars than it normally would.

* State agencies will not be required to pay their share of deferred maintenance projects.

* No new construction projects will start.

Heineman’s plan also has no money for reducing the list of people with developmental disabilities waiting for services in their home communities.

“I don’t know where we would get the $160 million over four years,” he said.

Doctors and counselors who provide care and counseling to Nebraskans on Medicaid would get 1 percent provider rate increases under the Heineman plan.  But agencies that provide services to people with developmental disabilities in local communities would get a 2.5 percent increase, an attempt to improve and increase services in communities.

Heineman’s proposal also would limit the increase in state aid to schools — $100 million over the two years, rather than the $230 million the state aid formula would send out.

“At least it is an increase; that’s better than what a lot of others are getting,” said Sen. Greg Adams of York, chairman of the Education Committee, which will recommend any changes in the formula to the full Legislature.

Heineman pointed out that his budget plan gives 85 percent of the new money to be spent over the two years to education. He would provide $147.86 million in new money to education over the two years.

And, he suggested that schools should not raise local property tax rates because they don’t get as much state aid as expected.

“Everyone will be tightening their belts,” the governor said during a Wednesday night budget briefing. “Schools are going to have to tighten their belts, too.”

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.