Nearly eight years ago, in his inaugural address, Gov. Pete Ricketts pointed to the challenges Nebraska faces in creating jobs.
“There’s a barrier to creating jobs here in the state. And it’s Nebraska’s high taxes. We must cut taxes,” Ricketts said.
In April 2022, Ricketts signed into law a $900 million tax cut that lowers the top individual and corporate income tax rates, gives property owners a refundable tax credit and phases out the state’s tax on Social Security income.
During Ricketts’ tenure, the state’s economy has remained relatively stable, with the exception of the pandemic-induced economic downturn. When he took office in January 2015, the unemployment rate was at 2.9%. As of August 2022, it sits at 2.1%.
With his time in office coming to an end, it’s time for Nebraska to choose a new governor. It will likely be one of two candidates: Jim Pillen, a Republican, or Carol Blood, a Democrat.
What Can a Governor Do?
The Reader asked two economists about the top economic challenges facing the state and how the next governor could address them.
Chris Decker, who teaches economics at the University of Nebraska at Omaha, said the governor’s office is an effective tool for promoting economic growth. He also said governors have a voice nationally to influence federal economic policy.
“Governors facilitate trade with other countries and support educational opportunities … which can help stimulate job creation,” Decker said.
Decker said the biggest overarching challenge for the state’s economy is the labor force. Participation in the Omaha metro workforce has fallen by 5% since 2000, he said, and the decline is playing out across the state.
“Population growth is, at best, slow-growing. It’s pressuring wages up, which in turn pressures other prices in the economy up, and it makes it very difficult for businesses to meet growing demand,” Decker said.
With declining workforce participation, a shrinking tax base could make social services harder to fund, Decker said, which makes it more challenging to provide tax relief.
“[Tax relief] has been done extensively over the last four decades. I honestly don’t know what more can realistically be done, but we will almost certainly hear about it,” Decker said.
Eric Thompson, who chairs the economics department at the University of Nebraska–Lincoln, said setting spending policy is the most important role of a governor in growing the state’s economy. Thompson said a governor’s role in creating and curating an efficient state government helps attract both professionals and businesses.
“Obviously, it’s workers and businesspeople that play the biggest role in building the economy. But the governor can play a role in several ways — making sure that money is spent in a way the public appreciates or in ways that are highly productive for the economy,” Thompson said.
Unlike Decker, Thompson thinks tax relief can still be done, but it needs to be less targeted than in previous years.
“A lot of what the state did … eliminated or reduced taxes that only impacted a certain part of the population, like inheritance taxes or Social Security taxes,” Thompson said.
Thompson said the state’s economy would benefit with a sales tax cut or with fewer transfers to local governments to keep property taxes low.
“The advantage of tax reform is that you can still raise the same revenue while making the economy more efficient,” Thompson said.
Plans and Playbooks
The Reader reached out to both candidates’ campaigns to ask about their economic priorities. Pillen’s campaign didn’t respond to multiple requests for an interview, but Blood’s did. She said the very first thing that needs to be done is to put together an all-encompassing strategic plan for economic growth.
“The state doesn’t have a strategic plan. We just pay bills and cut the budget,” Blood said. “If we want to be fiscally responsible, we need to go across the state, meet with different communities … and ask what the key issues are in their community.”
Blood said previous attempts to create an economic plan were done by out-of-state consultants who met with everyone but constituents. The D.C.-based consulting firm that prepared “Nebraska’s Next Economy,” a 2016 report intended as an economic development roadmap, met with state agency staff, higher education representatives and business leaders.
“Strategic planning is not just research … it’s one thing to have a report that’s told to people; it’s a different thing to have a report everyone participates in,” Blood said.
Pillen’s campaign website includes the “Pillen Playbook,” a set of policy priorities that he’d implement as governor.
The plan consists of one-pagers outlining his “plays,” a reference to his time as a defensive back on the Husker football team. His economic checklist includes modifications to growing the economy. That section calls for ending tax incentives for out-of-state businesses and a broad call to eliminate regulations as well as “fight federal overreach” and “oppose big-government socialism.”
Lowering Property Taxes
Both Pillen and Blood say they want to lower property taxes. Pillen’s plan calls for a limit on government spending at both the state and local levels as a measure that will help keep property taxes low. He also wants to change the way agricultural land is valued, moving from the current market-based system to an income-potential assessment system.
Pillen’s property tax plan also calls for a “major overhaul” of the school funding formula, aimed at equalizing rural and urban school districts.
Blood’s top priority on property taxes is to address the state’s unfunded and underfunded mandates. In January, she sponsored a constitutional amendment that prevents the state from imposing any financial responsibility for new programs or expanded services on political subdivisions. That amendment was indefinitely postponed in the Legislature.
“My colleagues always say they have trouble with the implementation or the legislative procedure. I think they just don’t want to change how property taxes work because they’d like to be able to campaign on it,” Blood said.
Addressing Nebraska’s Labor Shortage
Pillen’s plan calls for expanding post-secondary opportunities beyond a four-year degree, creating new internship opportunities and expanding skills-focused education. His plan also calls for the state to introduce “patriotic knowledge” into the classroom.
Blood said she wants to bring nonviolent offenders out of the correctional system and into the labor force. She also thinks the state should do more to bring those who retired at the onset of the pandemic back into the workforce.
“A lot of retirees in my Senate district find jobs as paras at the local school or greeters at Wal-Mart just to stay busy. But if we don’t actively recruit them, why would they come back?” Blood said.
The Democrats haven’t won a gubernatorial election since 1994, when Ben Nelson won re-election in a landslide. In 1998, when Nelson was term-limited, the Republican candidate won by a single-digit margin.
Republicans have won every subsequent election by large margins. Whether that changes this year is up to you. Check out pages 10 and 11 of the October issue of The Reader for more information on how to vote.