Text of Gov. Johanns' Remarks Announcing His Decision to Veto Mainline Budget Bill, Tax Increase Bill and School Property Tax Increase Bill, May 26
For more than four months I have made the case to Nebraskans that the budget I introduced in January is the best approach to funding our state's priorities during this historically difficult time for state revenues. For four months I have said publicly and privately that this budget must be balanced on the spending side and that sales and income tax increases must be the last alternative.
My budget recommendation protected public safety from deep spending cuts. It protected programs that contribute to the health and safety of our children from deep spending cuts - including child care, children's health care, early childhood education, and child protection and safety workers. And my budget recommendation protected seniors and other vulnerable citizens from deep budget cuts - including state veterans homes, the mental health regional centers, the home for the developmentally disabled, and nursing home costs and prescription drugs for seniors.
Once public safety, children's health care, and senior health care was protected from deep cuts, I allocated the remaining projected state revenues to education and state agency operations. Both areas required significant reductions in state general fund expenditures in order to protect the state's other priorities. These were very difficult decisions but in the end, they were decisions that reflected our state's and our nation's difficult economy and the resulting decline in state tax receipts.
State agency operating funds took a significant reduction in my budget recommendation which represented the fourth time state agencies, especially those under my direct control, have faced the full brunt of spending reductions.
Through three rounds of previous budget cuts, higher education was treated more generously than other areas of state government and both the Legislature and I sought to protect, and almost totally did protect, funding for K-12 education.
Preventing cuts to these important investments in our state's future could not be avoided in putting this biennial budget together. Consider that the Legislature's own budget ultimately cut higher education spending about three percent over the next two years and cut K-12 state aid to schools three-and-a-half percent over that same period.
Having said all of this, I strongly believe the budget plan I recommended and have asked for over and over again, is the right plan for Nebraska's future. I was very serious about my budget - a budget filled with tough yet responsible decisions at a historically difficult time for our citizens. Nebraska families and small businesses have felt the impact of the national economic slowdown with less income, smaller paychecks, and job losses. Higher sales and income taxes will only serve to delay economic recovery and, most unfortunately, will extract more tax dollars from Nebraskans at a time when they can least afford it.
That is the deeply personal and philosophical position from which I approached my analysis of, and final decision on, Legislative Bills 407, 759, and 540.
After reviewing the mainline budget bill, LB 407, I have concluded that it fails to achieve the objectives I set forth in my State of the State Address.
First, the Legislature's budget plan reflects a level of spending that cannot be afforded by the taxpayers of this state. This budget simply fails to control the growth in government spending to the extent necessary at this time in our state's history. While my budget recommendation proposed a real cut in overall spending by three percent the first year and a flat level of spending over two years, the Legislature did not reduce overall state spending.
The Legislature's budget grows spending at a time when we cannot afford to grow government any bigger than it already is. And that is not because we have a shortage of needy and worthy programs on which to spend. Rather, we must reduce spending to avert the need for our citizens to pay higher taxes.
Second, the state's core responsibility of public safety is not adequately addressed. Most problematic is the decision to close the Lincoln Correctional Center and thereby eliminate funding necessary to house 500 convicted felons. This very substantial decision was arrived at during evening floor discussion with minimal debate and was never addressed through the bill introduction and public hearing process.
With our state's prison system already at 134% of it's capacity and the Legislature having committed to the construction and staffing of a new prison facility shortly before I took office at a price tag thus far, including construction, of $92 million dollars, this decision represents a dramatic, eleventh hour shift in corrections policy.
This decision creates a risk that drug dealers, sex offenders and felons with ten, twenty and more contacts with the law will be released into our communities and neighborhoods sooner than their sentences prescribe. This most unfortunate spending decision sets up the very likely possibility that Parole Board decisions will be driven less by the diligent release review standards that are now in place, but instead will be influenced by the need to address the substantial reduction of prison beds brought on by the closure of a major correctional facility.
Third, additional funding is not allocated for the state's cash reserve as I have strongly and repeatedly suggested. I have made the case that a larger cash reserve fund is needed to address the very real possibility of paying a $150 million plus judgment in the Boyd County - Low Level case. Prudent planning for this serious judgement is warranted despite our earnest effort to win the case on appeal.
The federal money that we will receive due to enactment of the President's Jobs and Growth Package, which will be place in the state's Cash Reserve Fund as dictated in legislation I am signing today, will not satisfy our potential legal liability in the Boyd County - Low Level case.
Fourth, I believe the budget proposal presented to me relies on overly optimistic projections of revenue growth. Likewise, I take issue with the Legislature's decision not to use more realistic deficit planning numbers. For example, the Legislature has approved a $22 million dollar deficit bill this year but continues to allocate only $5 million for deficits in each year of the upcoming budget.
Fifth, I remain concerned about Cash Flow issues. The Legislature's budget and tax increases are front-loaded on the spending side and back-loaded on the tax increase side. In other words, despite the Legislature's reliance on tax increases to achieve a balanced budget I am not convinced that spending has been reduced enough to enable the state to pay it's bills in a timely manner without borrowing against the cash reserve and, possibly, the Universal Service Fund. I hope I am wrong about this.
For these very significant reasons, I have concluded that this budget fails to address the need for the State of Nebraska to cut government spending, to protect our most basic need of public safety, that it requires tax increases beyond that which our citizens can afford, and that it fails to account for improved future budget planning.
I have decided to veto the mainline budget bill, returning it to the Legislature without my signature and with my objections.
I have also decided to veto Legislative Bill 759, the Legislature's dramatic tax hike plan.
The Legislature went too far in its reliance on tax increases to fund continued growth in state spending. This bill places too high a tax burden on Nebraskans at a time of shrinking paychecks and shrinking payrolls.
If you consider the increase in tax burden for the next two years, the number is a staggering $345 million. Over the next four years, these tax increases reflect a $857 million dollar drain on the pocket books of Nebraskans.
These tax increases represent an additional $800 in tax increases for a family of four over the next two years and more than $2000 from a family of four over the next four years - a $500 tax increase for every woman, man and child in the State of Nebraska of the next four years.
These tax increase simply run afoul of my strong belief that state spending reductions must be the focus of the budget solution, not tax hikes.
Finally, I have decided to veto Legislative Bill 540, which allows local school boards and community college boards to increase property taxes by as much as $63 million dollars in the first year of the budget alone - without a vote of the people.
I believe that all levels of government, including public education, should and must strive to be more efficient and effective when it comes to spending tax dollars, especially during these difficult economic times. I also believe that our current law allowing school districts to exceed the maximum one dollar school levy with a vote of the people is sufficient and appropriate to address the needs of local districts. The formal election process allows local taxpayers to decide this important issue within the context of a discussion and debate about the needs of a school district.
Furthermore, the property tax increase authorized in LB 540 coupled with tax increases in LB 759 represent nearly one billion dollars in higher taxes over the next four years.
I fundamentally disagree with this level of tax increase.
During my twenty years of public service I have demonstrated time and again both a willingness and a desire to work with people to solve problems and address challenges. I have not given up hope that this can happen here. Nebraskans believe our best days are ahead, not behind us - I share that belief. However, nearly a billion dollars in tax increases will make recovery that much tougher for our citizens.
I ask with the strongest conviction that the Legislature sustain my vetoes.