Lawmaker Limbo – A Trip To the Unicameral at Halftime

Tax Cut or Tax Expenditure?

by Kandra Hahn

As the 103rd Nebraska Legislature tipped over the halfway mark of its short session, a haze of tentativeness seemed to hang in the hallways and hearing rooms at the Capitol. 

Exigent issues had not, at that point, dislodged the long-predicted targets of tax change and Medicaid expansion, known as “Wellness in Nebraska,” for the name of the proposal (LB887), as the big items that would seize the final days of the session coming in April.

There had been 18 working days for the Legislature in February with multiple hearings before several committees filling the afternoon of every one of those days. Public hearings can make for very long days, no matter what the clock says.

The Legislature as a whole shows extraordinary courtesy to all who come forward to speak on matters before them, although the decorum of individual senators may vary. Patience is required if each person who appears is to be given the attention their trip to the Capitol, preparation and courage deserves. And enduring the behavior of other senators may sap energy. 

Watching the Legislature on NET2

For observation of the full Legislature and floor debate, which in the first half of the session usually occurs only in the morning, The Reader turned sporadically to public television’s daily coverage on NET2 to keep an ear on legislative happenings. 

TV coverage is not exactly like watching paint dry. It is more like watching paint debate. It is, at least, punctuated frequently by the colloquy of Senator Ernie Chambers of Omaha who may hold forth on any topic, as required, incorporating references from the “Holly Bibble,” his name for the Bible, of which he displays a masterful command; the constitutions of the United States and Nebraska, with which he has an unrefuted familiarity; grammar, syntax and vocabulary in English; and those parts of American history which most did not learn in school, to name but a few areas displayed this year.

Wellness in Nebraska

Whether Nebraska would close the hole blown in the Affordable Care Act (Obamacare) by the U.S. Supreme Court would remain unanswered until at least March 18 when the Legislature had scheduled floor debate on the Wellness in Nebraska Act.

There had been an hours-long hearing on LB887 before the Health and Human Services Committee January 29. Lincoln Senator, Committee Chair and lead sponsor Kathy Campbell left the Chair’s seat to introduce the bill. She had to because the 32-page measure was written in the kind of language scrutable only to longtime followers of public assistance policy.

Campbell told the Committee that she had taken a lesson from the Legislature’s defeat of a simpler bill to simply expand existing Medicaid in 2013. She said she conducted “a thorough study of what’s happening in other states.” She told listeners that LB887 was not designed “just to get votes” but that it was “a more comprehensive bill that really does address good health policy.”

The bill was intended to produce a “Medicaid expansion demonstration waiver” application to the Federal government. It envisioned assistance to 55,000 Nebraskans too poor to qualify for assistance in the current insurance “marketplace”—the one to which all the uproar about a bad website had been directed—and too well off for ordinary Medicaid.

For those not covered now whose income is at 100 to 133 percent of the Federal Poverty Level, the bill proposed to buy a health insurance policy in the marketplace or, if possible, to pay the employee part of a workplace policy. Such people who were at zero to 100 percent of the poverty level, would be covered by Medicaid managed care, as well as any person from zero to 133 percent who is “medically frail or with an exceptional medical condition.”

Incentives and sanctions for recipient behavior were also built into the bill—token premium payments that would be phased out for good behavior and penalties for improper use of emergency rooms, for instance.

Some 29 people testified in favor of the bill, six of them individuals and the rest representatives of groups who work with or for uninsured people.

Nine people appeared against the bill, three of them individuals and three of them representing the Heineman administration, including Kerry Winterer, Director of Health and Human Services, who would administer the bill, if passed.

The Preliminary Report and the Biennia

Early in February the Appropriations Committee had issued its “Preliminary Report,” containing a financial projection of the State’s General Fund for the rest of the current biennial budget and for the following one. The state works in biennial (two-year) budget periods. This is fiscal year (FY) 2013-14, the first year of the biennium that will end in FY2014-15. The next biennial period will be FY2015-16 to FY2016-17. The “Preliminary Report” is supposed to help the Legislature plan as it adjusts spending for the second part of the current biennium and into the future.

The ways to skin an appropriations cat

The Reader stopped by the Appropriations Committee on February 18 to observe hearings, not usually televised, as three senators offered bills responsive to testimony the Tax Modernization Committee had heard in its travels across Nebraska after the last session. At those hearings, people asked mostly for property tax relief. The committee reported this to the Legislature along with their recommendations.

First up in the attractive and egalitarian hearing room where senators, testifiers and observers all sit at the same eye level—something rare in hearing rooms and a point of Nebraska pride–was Senator Beau McCoy. McCoy represents northwest Omaha District 39, a territory roughly north of Harrison Street, as far east as 180th in some places and 204th in others, all the way to the Douglas County border on the north and west.

In 2013 McCoy brought forward a bill—and rapidly withdrew it–to eliminate income tax at the behest of Governor Dave Heineman whom he hopes to succeed as governor. Touting his closeness to Heineman this year in television commercials, McCoy, nonetheless, in 2014 is taking his guidance from the legislative report and is seeking a one-time transfer of $85 million from the State’s Reserve Fund to the Property Tax Credit Fund to beef up the rebate to property taxpayers through the state’s counties. (You may be able to find the current credit on your own property tax notice.)

Senator McCoy Opens

Senators customarily open the hearings on their own bills with a statement. McCoy opened the hearing on his LB669 citing national data that Nebraska had the “third highest property tax burden in the U.S.”

Members of the Appropriations Committee then had a chance to ask him, as introducer, questions. Senator Danielle Conrad of Lincoln asked him what the average credit to a taxpayer would be under his plan. After some talking, McCoy said he thought it would be in “the mid $90’s.”

Conrad asked him why he chose $85 million. McCoy said he thought it would create a real benefit and more than that would be a challenge for the state to handle. He said the Legislature was not far from having to deal with the issue of rapidly rising valuations of real property and added he had another bill (LB670) to reduce for tax purposes valuation of agricultural land that has skyrocketed in value lately.

Conrad told McCoy that she had heard him argue against government spending many times. Yet, she told him, she saw this as a spending bill. McCoy told her he saw it as “returning overtaxing.”

Senator Jeremy Nordquist of Omaha asked McCoy if restoring state aid to education would produce property tax reduction. Though there was discussion around the issue—with McCoy and other committee members — no one was willing to give Nordquist a clear “yes.”

Senator Kate Bolz of Omaha asked, somewhat rhetorically, if McCoy had considered what to say to people when property taxes go back up after one-time relief.

Senator Pirsch Opens

Second to present a property tax credit expansion bill funded from reserves that afternoon was another State executive office candidate, Senator Pete Pirsch, once an announced candidate for State Auditor but at this writing a candidate for State Attorney General. Pirsch represents Omaha District 4 which, to oversimplify, runs from 132nd to 180th and from Pacific to Maple with some additions, north and south.

Pirsch opened his LB1086 saying he wanted to double the current property tax credit in 2014 and 2015 at a cost of $115 million each time for a total of $230 million.

Again Senator Conrad asked a series of questions leading to her assertion that his bill was two years of $115 million of additional spending. Pirsch said that he saw the source as “the people’s money in the cash reserve.” “What is appropriate for a cash reserve?” asked Conrad. Pirsch did not answer her question.

Senator Davis Opens

Finally, Senator Al Davis, the arts-loving rancher from Hyannis, appeared to introduce his LB1094 which would transfer $25 million from reserves to property tax credits. The modesty of his proposal prompted Omaha Senator John E. Nelson, a committee member, to tell Davis good naturedly, “You’re a piker!” comparing his bill to previous proposals.

Davis said he thought his bill was “reasonable and sustainable.” Then he commented that increasing agricultural and declining residential values were really a bigger tax problem.

Senator Harms Speaks

Speaking generally, Committee Member Senator John Harms of Scottsbluff, said he was concerned about funding property tax relief from reserve funds in any amount. “We could fund this out of (removing income tax) exemptions, but that would take courage,” he said. He added that the Legislature could fund relief “now and forever” by fixing the public school funding formula.

“I don’t think $85 million or $230 million gives anyone relief,” said Harms. “Senator Bolz is right. People will be back.”

A representative of several agricultural producer groups spoke in favor of the bills as did a representative of Nebraska Taxpayers for Freedom.

Open Sky Policy Institute Data

Renee Fry appeared for the Open Sky Policy Institute to oppose the bills because they proposed use of Reserve Funds. Looking backward, Fry reminded the Committee that Nebraska entered the recent Great Recession in FY2008-09 with a healthy reserve of about 17 percent of the State’s General Fund, the minimum recommended by the Government Finance Officers Association. But the State needed the entire Reserve and federal stimulus funds which together equaled 24 percent of the General Fund to get by, even though it made cuts to schools and other services. 

In the recession prior to that, in the early 2000’s, Fry said, which hit when the State had cash reserves smaller than seven percent of the General Fund, the State was forced to raise taxes.

Fry told the Committee the Reserve Fund stands at $679 million or 16.7 percent of the General Fund. The Open Sky Policy Institute recommends future reserves of $695 million at the end of FY2015; $728 million for FY2016; and $771 million for FY2017, based on projected General Fund levels. 

The following day, the Appropriation Committee met in executive session, with doors closed to the public, as is customary, and voted all three bills out to the full Legislature.

A Positive Forecast

On February 28, the Nebraska Economic Forecast Advisory Board met to consider and adjust estimates of the amount of revenue the state should plan for. The board pushed the amount  up somewhat, increasing by $63 million the imaginary amount of money the senators could expect in the General Fund.

It happened that Open Sky Two days earlier had released an estimate of the total of spending bills that had been forwarded to the floor of the Legislature by all the Legislature’s committees on that date. 

The Institute’s total showed a mere $2 million in additional appropriations pending for the current year, FY13-14; but for FY14-15, a possible $43 million; for FY15-16, $53 million; and for FY16-17, $92 million. These are just the roughest of figures, of course, and only a starting place for discussion, weeding out, paring down and elimination. That is a lot of the work of the second half of the short session of the 103rd Legislature.

The Effects of Term Limits

Alive only in the memories of long-time observers of the Nebraska Legislators are the horse-trading citizen lawmakers who would have been busy dealing in and dealing out the issues that would survive beyond the mid-point and in what form. Those senators might have been making winnowing deals in quiet clusters in the Statehouse halls, in walking consultations, in certain select senator offices or in the bat-infested, fire-trap offices where none should have been and which are no more in the Capitol tower.

Or after hours, such lawmakers might have been seen in the restaurants and bistros of Lincoln, both high and low, honing down the body of business. It might sound sleazy but mostly it was not. Long-serving elected senators were working with each other and their staff to make  decisions. Compare Nebraska with any other state for its record of scandals and fraud to judge.

Now the halls are mostly empty and senators are mostly missing from the social scene they once created near the Capitol.

Senators, limited to no more than two consecutive four-year terms, may just be starting to get a feel for the long course of law making in Nebraska when their time is up. It is almost as if just at the moment when the best of them might prove useful to constituents, they must leave. For those who come with some comparative experience that allows them to gain a foothold quickly, there is an almost visible panic in the last couple of years as they strain to make even the tiniest part of the difference they came to make. For many others, sadness seems to engulf them.

Meanwhile, the professional staff watches them come and go, training wave after wave of good citizens. The hand of the lobbyists grows stronger, whether they want it to or not. But one senses they miss the knowledgeable long termers who may have had more ways of talking back to them.

As the era of term limits matures, some observers agree that the senator who leaves for four years and returns for a third, and perhaps a fourth term is as a sighted person in the land of the blind.

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