Federal Relief Aid Totals More Than 100% of Nebraska State Budget

We don’t know exactly how much money has been sent to Nebraska from the federal government for relief efforts related to the pandemic (how many people got the $1,200 payment?, how many children got the $500 payment?, where did all the PPP money go?, etc.).  What we DO know is that the federal government has sent Nebraska more than 100% of its FY2020 General Fund budget.

From what we can tally, the federal government has sent Nebraska $4.645 billion (and this is not including all the payments included in the CARES Act because data is not available yet).

Let’s put that into perspective.  In the current fiscal year:

• Nebraska spends around $1.6 billion on agency operations;
• Around $1.44 billion on aid to individuals through programs like Medicaid, public assistance, aging programs, public health, etc.; and
• Around $1.5 billion in aid to local governments which includes the TEEOSA school funding formula, aid to community colleges, homestead exemption, property tax relief, and much more.

Even if you don’t count all of the other programs that the CARES Act funded and only focus on the $1.25 billion sent for state and local aid, this accounts for more than a quarter of our state General Fund expenditures in FY2020.

Now, let’s look at the HEROES Act that was released yesterday by House Democrats.  This bill sends even more money to states and local governments, $1 trillion more to be exact, but is it really needed?

Here’s a reference point – According to the US Census State Government Tax Collections data, the entire country (that’s all 50 states plus Washington, D.C.) collected $1,090,242,189,000 in tax revenue for 2019.  Now, add the $1 trillion from the HEROES Act plus the $150 billion from the CARES Act and that is more than what all the states collected in tax revenue for the entire year. I’m the first to admit state revenue is going to be affected negatively by the pandemic, but not more than 100%.

According to preliminary estimates, if enacted in its current form, the HEROES Act would send

• $2,883,992,267 to the state of Nebraska, and
• $2,427,302,968 to local governments

That’s $5.3 billion in additional aid which calculates to $2,746 per person.  This doesn’t even account for what the state would receive from the calculation of relief from positive cases and unemployment next year under this plan.

Again, for perspective, the FY2020 state budget spent $2,424 per person.  Why in the world does the state need this much more money?! Simple answer, it doesn’t.

That is why flexibility with the first $150 billion in the CARES Act is needed.  Nebraska is expecting between 10-15% revenue losses from this crisis. Nebraska will have increased costs in Medicaid and unemployment.  But, the $1.25 billion is more than enough to fill those gaps.  Nebraska went into this crisis with a healthy cash reserve fund, being able to replenish that and offset lost revenues will keep NE’s fiscal house sound.

And just in case you are thinking maybe the state needs that money if we have a second wave of the virus that causes shutdowns again – just remember one word, inflation.  This money is not free and interest rates will eventually have to go up to keep inflation in check.  That means bonds and any debt that is issued will be more expensive and put more pressure on tax revenues.  So, the less the federal government spends now will help in the future.  But, that’s another discussion for another day.