Nebraskanomics: Senator John Stinner on Balanced Budgets and Leadership
The chair of the Unicameral’s budget-writing Appropriations Committee joins Jim to discuss the financial picture for Nebraska and the qualities that he’d suggest his colleagues look for in a successor for leading the committee. A transcript of the discussion is available below.
Jim Vokal: No matter what’s going on in Washington, states have limited budgets that have to be balanced. Even the most generous helpings of federal spending for states will reach their limit at some point. My guest today is chairman of the Nebraska Legislature’s budget writing Appropriations Committee, and he’s been watching all these factors play out in real-time through the pandemic and its numerous emergency spending policies, and now he and his colleagues will have to set the priorities to take Nebraska into the next phase of growth in 2022.
State Sen. John Stinner—welcome to Nebraskanomics.
Sen. John Stinner: Thank you. Thank you for having me.
Jim Vokal: And if you want more conversations like this YouTube viewers can like and subscribe to our channel or subscribe to the podcast on your favorite listening platform to get notified of our latest episodes. So let’s get started now, Senator, we’ve got a session coming up in January, and the state is going to be making decisions about allocating the first portion of funding from the American Rescue Plan Act. Now, anytime people hear that we have a significant amount of money coming into the state, whether it’s because of revenues or federal spending, naturally as you can imagine, people are going to start wondering if there’s something transformational we can do on the statewide level with those funds. Is there anything Nebraskans need to know about how state revenues and federal spending work so they can properly manage their expectations and their aspirations?
Sen. John Stinner: Yeah, actually, I need to correct you on one thing. We have received half of the money, $520 million and that will be allocated first of all by a recommendation by the governor as to what he sees is important for the state, and come to the Speaker, and then the Speaker will make that a bill. There will be a second tranche too, even though we haven’t received the funds, we will make application and probably receive those funds in May. We’ll be out of session by that time, but my conversations with the governor is—let’s allocate the full $1.1 billion, 40 million dollars, because time is of the essence. So, if those dollars can go out to help where it’s needed to be impactful that’s what we need to do. As far as the allocation of those dollars, they’re one-time spends. It’s one-time federal money that comes in. We’re trying to decide as a legislature what’s the best use of those funds, what’s the most impactful way of spending those funds that’ll have, you know, a long-term, certainly long-term implications for the state of Nebraska.
But we do have some issues. Certainly, workforce issues come up on a frequent basis, mental health for an example, is an issue across the state that needs to be addressed. Is there something we can do with these one-time funds to address some of those types of themes? So that’s kind of what we’re going to look at. I am expecting anywhere from 40 to 60 bills, individual bills, to come to our committee. We will have a hearing on each one of those bills and decide what we will try to put into that package, and right now, I have about $4 billion of requests. so we need to fit those in first of all they have to be compliant with our secondarily we’d like to have that test of one-time money for a one-time spend, so that will be kind of the criteria that we’re going to be looking at.
Jim Vokal: That’s a great overview, I appreciate that. And as you know, given your position, our economy was not as heavily impacted because of the shutdown during the pandemic, not just because of government policy of course, but also the industries that make up our economy here in Nebraska. So, with the federal assistance that we’ve received, it’s almost like Nebraska’s economy got a booster before anyone was even talking about a COVID booster, but now we’re seeing some side effects about significant inflation. How does that spike in inflation either impact the strength or flexibility of the state finances over the next couple years?
Sen. John Stinner: Yeah, inflation has two things. A good part of it is inflation generally helps sales tax and sales tax revenue, and many times because of salary increases, it also helps the income tax revenue side of things. The bad side of that is—and that’s something that we tried to address a little bit in the interim—with the governor renegotiating contracts with NAPE, which is the state employee union, and then also with the Corrections folks, the fraternal order of police that oversees or the union as head of the Corrections side of things. I think that number is about $70 million to $75 million. I don’t have a final number on that yet, so that is impactful, but when you take a look at that, that was put in place because we were having a hard time at the state level retaining and attracting employees. Well, we also have things like nursing homes that we have to address. What’s the reimbursement rate, what is the right rate for the nursing home so that they can attract—and we’ve already seen seven nursing homes and assisted living homes close because of COVID, because of workforce, because of the lack of revenue to support what they were trying to do. Developmental disabilities on the provider rate side, certainly they’re having the same problem, and I’m also hearing from child welfare. So we’ll probably be looking at some deficit requests, not only from the agencies, but then we’ll also have some bills to consider as it relates to provider rates and trying to make sure that we’re providing the services that we are basically, you know, mandated by the federal government to have those services out there.
Jim Vokal: OK, that’s very helpful. Let’s shift a little bit to property taxes. No matter how bad people think the property tax situation in Nebraska is at this point, we’ve now allocated nearly a billion dollars in tax relief programs, and that doesn’t even include state aid to education. A lot of taxpayers didn’t end up claiming the latest LB1107 tax credit, and the overall local property tax rate is still rising in Nebraska. So for all that the Nebraska Legislature is offering to spend, do you think Nebraskans are getting their money’s worth with this approach, or do you have other ideas as it relates to what property tax reform should look like?
Sen. John Stinner: Well, yeah, that’s a good question, and I can’t answer the one about the individuals who haven’t applied for the tax credit. I’ve seen some numbers on that. We need to kind of dig down deep into that to find out why, but the second thing is, people haven’t felt the impact of the next level. So, we went from $125 million which is about 6% of the [school district property tax] bill to now we’re going to go to $548 million dollars, which will be 25[%]. So, the real true impact of what we’ve done in the Legislature won’t be felt till this time around. Now we do have a line item—I did check it out on my own tax return—that should alert the accountants and people who are preparing the tax to incorporate that, so we’ll see how this all works.
I don’t know about pass-throughs or corporations or any anything like that, so we really need to dig down into the numbers to find out why people aren’t really utilizing it. Of course, we also increased 275 to 313 [million] the credit fund, which is a direct credit. It’s biased more toward agriculture because there’s a 20% increase in their assessed valuations in there, so it’s a little bit more biased toward ag. I think with that combination, should keep everybody up to date as far as the credit’s concerned, plus a larger and larger credit.
Is this the correct way of doing it? It’s in the eyes and beholder. Obviously, Blueprint talks about expanding the sales tax base and doing something not only with property tax but also with income tax. That’s a thought that has been taken off the table with this government, so what we’ve been trying to do is to tamp down and hold down government spending, and using that incremental change to make these changes as it relates to property tax. That’s the only way we’ve been able to do it, so that’s about where we’re at today. Is there a better way? You know, we’ll just have to see what the next Legislature does.
Jim Vokal: That’s fair enough, and you mentioned Blueprint Nebraska. During that Blueprint Nebraska process, reducing or eliminating taxes was identified as one of the top three concerns for the state’s economic vitality. You’ve always been a straight shooter. You just showed that in your previous explanation, and you don’t overpromise one way or another. What do you think can be realistically accomplished to remedy some of the concerns people think stand in the state’s way of reducing further taxes in Nebraska?
Sen. John Stinner: Well, I think first of all, nobody likes paying taxes, period. I don’t either. But when I look at the budget, you know, we’ve got three real main themes in this budget. One of them’s education, and education is about 45 to 47 percent of this budget. That’s our future, and I think past Legislatures have looked at that. Obviously, it’s one of those situations where it provides that workforce and actually provides the future for the state of Nebraska. The second one is really the have-tos, and that’s about 35 percent going on 37 of the budget, and that’s aid to individuals that’s dictated to us by federal law and federal mandate. And, of course, then you’ve got a good portion of it, 12% left over for Corrections, and that’s obviously for safety purposes. That’s State Patrol, that’s the prison situation, and the judges. There isn’t a whole lot of room in that budget as far as where you can actually cut down. Now, can you look at programs that are effective or not effective? I don’t think anybody in the state would say “hey we need to lower the amount of money that we’re providing for education,” I don’t hear anybody saying that we need to lower the cost associated with the safety side, and we can’t do anything with individuals. So that’s the box that you have to work with from the expenditure and service side. Now, how do you do that from a revenue side to support that? Is there some other formula? Is it all sales tax-oriented? There may be some other ideas out there that that actually provide the resources for the state to continue to provide the services that are required.
Jim Vokal: You mentioned the governor’s opposition previously, where do you think the Legislature stands on expanding the sales tax base overall in principle?
Sen. John Stinner: I think overall in principle, I think people…Myself, I would be somewhat against it. I’d have to really take a hard look at what we’re trying to do, because it becomes a regressive tax, and if we could eliminate some of that regressiveness on that on that side, you know I’d probably take a more favorable look to it. I don’t like increasing taxes, but that one might be prudent if you can bring it down and make it fair for everybody.
Jim Vokal: Yeah, in fairness, I should have said in conjunction with lower income and property tax rates, not just for the basis of expanding the sales tax base.
Sen. John Stinner: Right, and from that aspect, I have been a proponent of that. But that doesn’t work with this administration.
Jim Vokal: So, let’s look ahead in your final year in 2022. The session’s starting in January. Where do you think the Legislature’s focus should be, and where would you say Nebraska’s status is with its overall financial health?
Sen. John Stinner: Overall financial health should be very, very strong. If you saw the report the last time, we’re almost a billion dollars in the rainy-day fund. Let’s compare and contrast that to pulling it down into the 3-400 [million] range during the financial crisis. So from that side, the fiscal posture of the state looks to be very, very strong. We do have right now about $400 million in excess over the a mandatory three percent reserve for cash, and that’s your working capital side. That will probably be getting be eaten up with some of the salary increases, provider rate increases, we’ll see how that all goes through this session. As far as focus, you know, we still have the prison situation and we set the stage with the governor last time in allocating dollars, half of it, $115 million. Some of it was set aside for reforms, some of it was actually appropriated to look at site and plans and, you know, the development of the blueprints so that we can get a firm grasp on just what we’re building and what the cost associated with that is. How far along, there was other pieces that corrections got in that process. I can’t tell you. what kind of reforms that we need to have because the trajectory of 100 to 150 to 200 more people every year coming into the system doesn’t really work, because you’re going to build something that’s going to be 20 years out, and so you have to have an accurate projection on just what you need to build. Is it a maximum security prison, is a minimum or medium? You know, depending on that blend, that affects cost. The second thing is how big, and if you don’t lower that trajectory, which may be reforms, it may be some other ideas that are out there that hopefully CJI will provide us.
You know, we’ll take a look at all of those things, but that needs to be addressed. We will probably still allocate that second portion of that, so that the state has at least sequestered those dollars, and then try to collect all the information to make a prudent decision.
Jim Vokal: Anything else the Legislature should focus on besides prison-related things in 2022?
Sen. John Stinner: Yeah, I think the thing that I’m going to try to impress upon the Legislature is inflation is impacting us. I think if you did a look back over the last decade, for an example, that salary increases were averaged about 2%. As you look at decades, 60 years, and I did take a look back—normally salary increases range from three, three and a half percent, so as you look forward and start to take a look at where the state’s going to be, that 2.5% to 2% budget that we brought to the floor probably will be more like a 3-3.5% budget impacted predominantly by inflation and making sure that we have attracted a quality workforce and have been able to retain that quality workforce, so that’s something that I think’s a heads up as you move forward. I think it’s something that you actually can project out at least over the next two to three years to take a look at making sure that when you pass things like tax legislation or that you pass something that’s going to increase cost you can really kind of simulate that out into the future.
Jim Vokal: One final question going into 2022. There is some excess revenues as you had indicated, is it important for tax reform that we have the pay-fors going forward so we avoid situations like Kansas, as an example?
Sen. John Stinner: I think prudent management practices would dictate that. I think, you know, we have to be careful in what we do that affects revenue, but we also have to be careful what we do on the expenditure side as well. And I’m not an advocate for new programs at all. I think we’ve got enough new programs, or enough programs. If there’s something new that comes along—I’m only one vote—so if it can get that 33 votes, that’s fine. On the tax side, I think we should always look at taxes, and what we could do on a productive nature. Now we just went through a session where, I think it should be called a Tax Reform Session. You know, we address Social Security, we address military pay, we address corporate income tax, we address property tax. And those dollars if you start to add up what those dollars were, they are very, very significant dollars. We held down expenses right now to 1.8%. I’m not going to guarantee that that’s what it’s going to look like after we make the budgetary adjustments that that I’m seeing right now, just in deficit requests that I have in front of me.
Jim Vokal: Now, nobody gets to stay in the Legislature for more than eight years, and I’ve certainly enjoyed working with you over the last seven and a half. And you’re entering your last session. You’ve been a great Appropriations chair, but soon in 2023, lawmakers will have to select your successor as Appropriations Committee chair and follow in your footsteps. What characteristics should future members of the Unicameral look for in a person seeking to lead your committee and what advice would you have for that person that is selected as your successor?
Sen. John Stinner: Well, the one thing that I look at, I got six members that I’m leaving behind. Three of us are now termed out. Those six members are all accustomed to looking at and working through the budget side, so I think all of them have a level of competence and qualifications. So, you look at who has the most understanding of the budget and the budget process. Who’s the best balanced, because you hear a whole lot of things from a lot of different sources, so you have to keep your balance in that, and who’s intellectually curious. You know, you’ve got to be able to dig into the numbers, but you also have to understand what that agency is about from a statutorily standpoint, from a mission standpoint, and how those appropriations dollars are being spent. And a lot of times that takes digging into. And then you have to be a good listener, you can’t you can’t be somebody that’s going to tell everybody something, you have to be able to listen to what they have to say—completely listen—from almost an empathetic side of things, so those would be qualities I would look for.
Jim Vokal: Senator Stinner, thank you for your leadership in the Unicameral, and thank you for joining me today on Nebraskanomics.
Sen. John Stinner: Thank you.