Ricketts: $1B property tax plan could take ‘every penny’ from NU or force ‘massive tax increases’
LINCOLN — While promising to push for “more of the same” in terms of economic growth initiatives, state budget reductions and tax relief during the 2018 legislative session, Gov. Pete Ricketts is raising a warning flag about the cost of a major property tax reduction proposal.
That plan comes with a $1 billion impact, the governor said, and “they have to talk about how they plan to pay for that.”
“You can fire me and people at every state agency and take the State Patrol off the highways and get halfway there,” Ricketts said during a telephone interview in advance of Wednesday’s opening day of the Legislature.
“You could take every penny we use for the University of Nebraska” and overall state support for higher education and “get the other half,” the governor said, or wipe out all state aid funding.
“That’s not likely to happen,” Ricketts said, so the alternative would be “massive tax increases” applied to sales and/or income.
Supporters of major property tax reduction are planning to introduce a bill during the upcoming legislative session while mounting a petition drive that would place an initiative proposal on the ballot in November if the Legislature does not act.
Their proposal would provide an estimated $1.1 billion in annual property tax relief by effectively reducing the local school property tax load by up to 50 percent, Sen. Steve Erdman of Bayard has said.
Erdman has suggested that state budget reductions could potentially be accompanied by elimination of some exemptions to the state sales tax as a dual means of supplying revenue needed to help fill the gap in tax support for the schools.
Under the emerging proposal, property taxpayers would access their tax reduction through a state tax refund or tax credit.
Ricketts said he will be focused foremost on closing “a $200 million hole” in the state budget opened by lagging tax revenue.
And, the governor said, he’ll be pushing for a revised version of the tax reduction package he supported during the 2017 legislative session that would combine corporate and personal income tax cuts with reductions in the valuation of ag land for local property tax purposes.
That bill was trapped by a legislative filibuster and is awaiting action on the floor.
Ricketts has been engaged in extensive negotiations with tax reduction proponents along with Sen. Jim Smith of Papillion, chairman of the Legislature’s Revenue Committee, and they are considering proposals that could alter — perhaps substantially — the terms of that legislation.
But the governor declined to reveal any details in advance.
“We’re looking at creative things we can do,” he said.
“There are a variety of different ideas and conversations with other folks.”
Those negotiations are taking into account “some lessons we learned” during the unsuccessful effort to move the 2017 tax proposal forward, the governor said.
Three years into his four-year term, Ricketts said the state has made “tremendous progress,” measured in terms of new investments by “a tremendous number of companies,” low unemployment, record population, streamlined, frugal and efficient state government, high national rankings for its business climate, and “better than average growth.”
“We are running government more like a business each and every year while delivering tax relief,” the governor said.
“For the first time, we count more than a million jobs,” he said.
Ricketts, who will be seeking a second term next November, said he will outline his plans for the coming year in more specific terms when he delivers his State of the State address to the Legislature on Jan. 10.
Asked whether he has any concerns about the cumulative impact of a continuing series of budget reductions for the University of Nebraska that have been prompted by declining revenue collections and projections, the governor said “we aren’t asking the university to do anything different than other organizations.”
Over the last 10 years, he said, “Nebraska was among a handful of states” that continually increased funding for higher education, positioning it as an established and ongoing commitment.
Ricketts dismissed the potential option of attempting to increase revenue without hiking tax rates, a pathway that could be opened by elimination of some sales tax exemptions or business tax incentives.
“We’re already a high-tax state,” the governor said.
“I don’t believe in adding to that burden. We need to create an environment that will cut red tape and create more job opportunities. We need to focus on how to control spending (and) set the state up for growth.”
Ricketts said the state will need to continue to make “significant investments in corrections” as it addresses overcrowding and programming challenges in the prison system.
“We’ve seen a lot of progress,” he said, “but we need to continue to move down that path.”