LINCOLN, Neb. (AP) - A debate over Nebraska’s $679 million cash reserve fund began in earnest on Tuesday, with three lawmakers arguing that the state should withdraw millions for temporary property tax relief.
The bills presented in a committee hearing set the stage for disputes over how to use excess money in the state’s rainy day fund. Some lawmakers argued that reducing the cash reserve by too much could leave the state vulnerable in another economic downturn.
Nebraska’s current cash reserve holds $679 million, and it’s projected to increase to $725 million by July 2015. Both numbers are above the minimum amounts recommended by the Government Finance Officers Association, a national group.
The property tax bills were introduced by state Sens. Beau McCoy and Pete Pirsch of Omaha, and Al Davis of Hyannis. Each would require a one- or two-time transfer to the state’s property-tax credit fund, a state account used to offset property tax bills.
McCoy’s bill would pull $85 million from the reserve and place it in the state’s property-tax credit fund. Pirsch’s legislation would move $230 million over two years. And Davis’ proposal would transfer $25 million.
McCoy said his bill would provide tax cuts for rural and urban property owners alike.
“I believe such a transfer would provide some needed relief for Nebraskans - not just for farmers, but for the young family that just bought a new house,” he said.
Several lawmakers on the budget-focused committee questioned the use of the state property-tax credit fund to reduce what owners pay. Sen. Danielle Conrad of Lincoln said increased state funding for local school districts, community colleges and counties could do more to reduce property taxes over the longer term.
Renee Fry, executive director of the OpenSky Policy Institute, testified that only Davis’ bill would leave the cash reserve above the recommended minimum level. The Government Finance Officers Association suggests that Nebraska should keep at least $643 million in its cash reserve in the current fiscal year and $702 million in the fiscal year that starts on July 1.
Fry said Nebraska relied on a combination of budget cuts, the cash reserve and federal stimulus funding during the global recession. She said it’s unlikely that the state will receive stimulus money again if the economy tanks, so lawmakers need to maintain a strong reserve.
For a house valued at $150,000, McCoy’s bill would reduce the annual property tax bill by about $73. Pirsch’s proposal would lower property taxes by nearly $99. Davis’ bill would reduce property taxes by about $21.50.
Davis acknowledged that the amount he proposed was relatively small, but he argued that it would still allow the state to pay its bills.
“It’s a modest step in the right direction,” he said. “I think it’s reasonable. I think it’s sustainable.”
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The bills are LB669, LB1086 and LB1094.
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