Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to johnc@cfra.org.

Monday, January 24, 2005

Lengthy Nebraska Legislative Tracking Update from the Center for Rural Affairs

-- from the desk of Jon Bailey, Director, Rural Research and Analysis Program

Legislative Update
January 24, 2005

The Nebraska Legislature is in full swing with the time for new bill introductions over and committee hearings proceeding and some bills being advanced to the floor.

The 2005 session is taking on the look of the “Tax Credit and Task Force” session. With state funds still tight, and with many mandatory spending items like Medicaid and education consuming a larger portion of the state budget, legislators appear to be turning more often to tax credits and task forces to accomplish policy goals.

The first major event of the session occurred last week with the release of the Governor’s budget recommendation. Our take on the Governor’s proposed budget and a first look at new bills is included in this issue of the Legislative Update. But first, a review of the transition in the highest levels of state government.

We apologize for the length of this Update – the first Bills Update is always the longest!

State Government Transition

Governor Johanns officially became Secretary of Agriculture (and former Governor Johanns) upon his confirmation by the U.S. Senate on January 20. Dave Heineman officially became Governor the afternoon of January 20.

On January 24, Governor Heineman appointed Rick Sheehy of Hastings as the state’s new Lieutenant Governor. Sheehy was serving his second term as mayor of Hastings. Sheehy is a paramedic and has worked for a Hastings-area ambulance service since 1982. Sheehy has served on the Hastings City Council since 1994 and as mayor since 2000.

Governor Heineman is scheduled to give his first State of the State speech to the Legislature on January 27.

Governor’s Budget Recommendation

On January 13, then-Governor Johanns and then- Lt. Gov. Heineman released the Governor’s budget recommendation for the budget biennium beginning July 1, 2005.

The Governor’s budget recommendation calls for a two-year average growth in spending of 5.8%. Four items – K-12 state aid to schools, Medicaid, higher education, and state employee salaries and benefits – account for nearly 83% of all recommended spending growth in the budget. In addition, the Governor’s budget proposal calls for full payment in the amount of $145.8 million of the settlement of the Low-Level Waste Lawsuit. Many legislators are calling for payment in installments.

In general, the Governor’s proposed budget does well by rural Nebraska. Education and entrepreneurship – major parts of rural communities – are the big winners of the Governor’s budget recommendations.

Education – Funding for K-12 education is the largest proposed spending increase in the Governor’s budget. The Governor’s budget proposes to fully fund Nebraska’s K-12 school aid formula, in stark contrast to cuts in public school funding that occurred at times over the past several years. The Governor’s budget proposes spending over $186 million more over the next two years for public school aid. Of course, how this funding is divided among school systems will be the real test of how rural schools fare in the ultimate state budget. However, it appears that rural schools and rural taxpayers may be among state budget winners.

Entrepreneurship – The Governor’s budget proposes a major small business and
entrepreneurial policy and budget initiative. Other states have enacted similar initiatives over the past few years, and the term “entrepreneurial” is often lifted to promote economic development policies that do not benefit small business development in rural communities. While the Nebraska entrepreneurial initiative has some of this, the proposals in the Governor’s budget specially target programs that have proven to work in rural communities.

The Governor’s budget and entrepreneurial initiative supports that by proposing to restore and double the funding for the Nebraska Microenterprise Partnership Fund and by funding the Enhancing, Developing and Growing Entrepreneurs (EDGE) program, an entrepreneurial training program administered by the University of Nebraska (the Center’s REAP program is a recipient of funds from the Nebraska Microenterprise Partnership Fund). The Governor’s budget also proposes to create and fund tax credit and grant programs that would provide incentives to invest in entrepreneurial activities in communities and neighborhoods that are experiencing high levels of out-migration or low per capita incomes. Many rural communities in the state could benefit from such programs.

Unfortunately, the Governor’s budget recommends terminating funding for the Main Street Program, another rural small business development program. This program has benefited many rural communities and should be continued.

We applaud the Governor’s proposal to restore and increase funding for small business development as an important first step in strengthening the rural economy. But it is only a first step. Until the state gets serious about investing in rural Nebraska the way it invests in metropolitan Nebraska it will never solve its long-term budget problems, because we will continue to have too few economic opportunities and too few people of income earning ages to support services for our children, our retirees and our community institutions.

Legislative Lingo Update

Throughout the course of these updates, we will be using certain terms that describe where a bill is in the legislative process. Here is a brief guide to those terms and some basic legislative procedure:

Each bill that is introduced is referred to a committee, and each bill receives a hearing before the committee of jurisdiction.

Committees have a number of options for each bill – send as introduced to the full Legislature for General File, send to General File with amendments, Indefinitely Postpone (or kill) the bill, or hold the bill over to the 2006 session .

Once a bill is sent to the full Legislature out of committee, it faces three possible stages – General File, Select File and Final Reading.

At the General File and Select File stages a bill can be amended; a bill cannot be amended at the Final Reading stage.

Priority Bills – Each Senator may designate a bill (not necessarily one he or she introduced) and each Committee may designate two bills “Priority Bills.” These bills received preferential scheduling treatment once the bill is advanced to the floor from committee.

Bills Update

As in the past, we will divide the bills we are working on or tracking into categories. Any bill designated a Priority Bill will also have a “P” attached to its number (for example, LB 123P). The chief sponsor of the bill is listed in parentheses.

The words Support or Oppose after a bill description indicate where the Center for Rural Affairs has taken a position on the bill. If neither word is indicated, the Center has not taken a position at this time.

Rural Development

LB 28 (Connealy) – The “Endow Nebraska Act.” The bill would provide a tax credit for a contribution to a qualified charitable organization. The primary purpose is to provide an incentive for contributions to local and community endowments and foundations, thus providing greater resources for rural economic and community development. A hearing was held before the Revenue Committee on January 21, and by a 5-3 vote the committee advanced the bill to General File (Senators Baker, Connealy, Cornett, Janssen and Preister voting to advance the bill, and Senators Landis, Raikes and Redfield voting to kill the bill). Support

LB 59 (Mines) – Would change the provision in the Microenterprise Development Act defining “microenterprise to allow for microenterprise loans up to $35,000 (from $25,000). On January 19 the bill was advanced to General File by an unanimous vote of the Banking, Commerce and Insurance Committee. Support

LB 273 (Cunningham) – Would create the “Building Entrepreneurial Communities” program through a $1 million grant program for each of the next two years. Communities and neighborhoods in “chronic economic distress” (high unemployment, low income or population loss) would be eligible for grants up to $75,000 for projects that seek to build entrepreneurial communities. Support

Agriculture/Livestock

LB 71 (Stuhr) – Would re-authorize the Agricultural Opportunities and Value-Added Partnership Act (formerly the LB 1348 grant program). This program was terminated through budget cuts in 2001 and 2002. This bill would re-authorize the program through 2009. The bill is schedule for hearing before the Agriculture Committee on January 25. Support

LB 132 (Cunningham) – This bill modifies the Nebraska Pasteurized Milk Law by providing exemptions to small-scale dairies and processors to the often-expensive bottling and processing requirements, and by allowing dairies and farmers to advertise on-farm sales of non-pasteurized milk (currently, the sale of non-pasteurized milk cannot be advertised). The bill is schedule for hearing before the Agriculture Committee on February 1.Support

LB 346 (Agriculture Committee) – Would modify several provisions of the Beginning Farmer Tax Credit Act all with the goal to make the tax credit more attractive and to increase usage. The proposed changes include: 1) an income tax credit to the beginning farmer as well as the owner; 2) making spouses, children, siblings of owners and trustees of agricultural assets eligible for the credit to expand the range of eligible assets; 3) providing beginning farmers a one-time income tax credit for the cost of the required financial management program; 4) increasing the tax credit mount from 5% to 10% of gross rental income for cash rents; 5) a tiered credit system that will provide a credit of 15% of the cash equivalent of share rent agreements; 6) definitions of shared rent agreements; and 7) increasing the net worth requirement to qualify as a beginning farmer from $100,000 to $200,000. Support

Education/Schools

LB 126 (Raikes) – Would mandate the “assimilation” of Class I schools (elementary-only schools) into K-12 school districts for the 2006-07 school year. The bill would eliminate Class I school districts, and would likely end many of the actual school buildings. There is prohibition of closing the school buildings through 2010 if the school building enrollment is at a certain level and if the school building is at least 10 miles from another elementary school or if the school building is the only school attendance center within the boundaries of an incorporated city or village. We view this as forced consolidation of rural schools and as potentially the first step in major forced consolidation of rural schools. The bill was advanced to General File on January 21 by the Education Committee with only Sen. McDonald voting not to advance. Oppose

LB 129 (Education Committee) – An overhaul of the formula for state aid to schools. In subsequent issues of the Legislative Update we will provide an analysis of this bill. The bill is schedule for hearing before the Education Committee on January 25.

Taxes

LB 133 (Connealy) – Would provide a renewable energy sales tax credit, and would provide any generator of electricity from a renewable resource a credit against any sales and use tax.

LB 309 (Connealy) – Would establish the Small Business Rural Microenterprise Tax Credit. The bill would provide for $2 million worth of tax credits annually for small business (with five or fewer employees or beginning farmers/ranchers) in areas with declining population or low incomes or federal enterprise zones. A taxpayer may receive up to a $10,000 credit per year. Support

LB 404 (Wehrbein) – Would create a tax credit for livestock modernization and expansion. The goal of the bill is to “attract and retain investment in Nebraska’s livestock industry.” The bill would provide a refundable credit equal to 10% of the $500,000 of investment and 5% of investment from $500,000 to $1 million. A taxpayer may receive a maximum aggregate of $75,000 in credits. Modernization and expansion investment is defined as the construction, improvement or acquisition of buildings, facilities or equipment for livestock housing, confinement, feeding, production and waste management. A hearing before the Agriculture Committee was held on January 21.

Business Tax Incentives

There are numerous bills relating to amending Nebraska’s business tax incentive laws, including LB 646 (Brashear) that would create the Advantage Nebraska Act, a new LB 775. In a subsequent issue of the Legislative Update we will analyze these bills.

Other

LB 189 (Preister) – Would mandate an electricity portfolio from renewable sources of 1% in 2007 and increasing 1% every year until it reaches 10% in 2017. This would apply to all electricity produced in the state. The bill also creates a mechanism for the buying and selling of credits to meet the portfolio standard.

LB 208 (Stuthman) – Provides for the appropriation of $1.75 million annually for the next two years to the state’s five federally qualified health clinics to provide services to the uninsured (the clinics are in Omaha, Lincoln and Scottsbluff). Support

LB 550 (Jensen) – Requires a plan to be submitted by December 1, 2005, for the financial support of community health centers and emergency medical services in the state.

LB 655 (Beutler) – Would create the Task Force on Small Employers Health Plans that would review data and policy ideas concerning health care plans for small employers and recommend policy steps for the state on this issue.

Center for Rural Affairs, 145 Main Street, Lyons, NE 68038. www.cfra.org

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