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November 2, 2009, 2:30 p.m. CT 


Jen Rae Hein, Gov’s Office
Ashley Cradduck, Gov’s Office


Gov. Heineman Calls for Spending
Reductions in Legislative Special Session

Strategic reductions will help Nebraska weather economic downturn

(Lincoln, Neb.) Gov. Dave Heineman today outlined his proposed budget adjustments for the upcoming special session to address an anticipated $334 million shortfall in state revenue during the 2009-2011 biennium. Gov. Heineman issued the official call today for the Nov. 4 special session.

Four components help make up for lower revenue: agency savings, general fund transfers, specific reductions, and across-the-board reductions.

“My proposal was developed with middle class Nebraska families in mind,” Gov. Heineman said. “When family income is down, families reduce spending. When business income is down, businesses reduce spending. When state revenues are down, state government should reduce its spending.”

Early in 2009, the Governor worked with legislators to implement a new policy referred to as ‘save it and keep it’ which allowed agencies to carry over excess funds from year to year. Agency savings total $65 million.

Gov. Heineman said, “State agency directors deserve recognition for their hard work to save these taxpayer funds in their agencies, without compromising services to Nebraskans.”

A total of $37 million would be transferred from numerous cash funds into the general fund. The proposal includes transfers from the Securities Cash Fund, the Insurance Cash Fund, the Tobacco Products Cash Fund, the Waste Reduction and Recycling Fund, the Job Training Cash Fund, the Enhanced Wireless E-911 Fund, and the Motor Vehicle Cash Fund.

The third component is adjustments totaling $154 million for specific expenditures including: state aid to education, provider rates, Medicaid, corrections and the State Patrol. State aid for the next fiscal year would be the same as the current fiscal year.

“We listened to the leaders of the education community,” Gov. Heineman said. “They preferred that any adjustments be in the second year of the biennium budget. I agree. By maintaining the current year funding level for this year and next, school districts have ample time to plan for the next school year. My hope is that school districts will find ways to reduce spending to limit the impact on classrooms.”

The fourth component is an across-the-board reduction of 2.5 percent in the current fiscal year to most state agencies and a 5 percent reduction in FY 2010-11. These reductions will apply to the Governor’s Office, the Nebraska Legislature and the Nebraska Supreme Court. Due to the requirements of the federal stimulus law, the across-the-board reductions for the University of Nebraska and higher education institutions will be 1.8 and 3.4 percent. Across-the-board reductions, including those for cash funded agencies, total $80 million.

Certain operations will be exempt from these adjustments, including: the state’s 24-hour care facilities, the protection and safety program at the Department of Health and Human Services, the Beatrice State Developmental Center (BSDC), and funding for services for individuals on the Developmental Disabilities waiting list. There is an adjustment of $6 million in savings realized when federal funding for BSDC remained in place until Sept. 23. The 2009-2011 budget anticipated the state needing to replace federal funds at the start of the FY 2009-2010.

Gov. Heineman said, “I want to emphasize that there are no proposed reductions in the operations of BSDC. There are no proposed budget reductions in the waiting list for developmentally disabled individuals. The $10 million added this year for the Developmental Disabilities waiting list has been maintained.”

The Governor’s budget also maintains tax relief programs enacted during the past four years and continues the property tax credit program begun two years ago. In FY 2010 and 2011, the program will provide $230 million in tax credits to property owners.

Gov. Heineman said, “Many Nebraska families are struggling in the current economy and failing to fund this program would be a property tax increase on Nebraska’s homeowners. In an economic downturn, increasing property taxes on middle class families, seniors living on fixed incomes, small businesses, and farmers and ranchers is unacceptable. I will oppose any attempt to increase taxes on Nebraska’s middle class families.”

The Governor also proposes maintaining a strong cash reserve fund to avoid future tax increases. Approximately $250 million in cash reserve funding is being used to balance the current budget. Additionally, the projected deficit for the 2011-13 biennium is $568 million, which could be revised in the coming months. The current proposal projects the cash reserve fund balance at the end of FY 2011 to be $325 million.

“The economic storm is unlikely to end this year and we must be prepared to continue addressing likely revenue shortfalls into the next budget cycle,” Gov. Heineman said. “Further use of the cash reserve now will only make any future financial challenges more difficult.

“Our hard work during the past few years has better positioned us to weather this fiscal storm, but state government must tighten its belt just as Nebraska families and businesses are doing. Implementing these budget recommendations will balance our state budget while allowing Nebraska to continue on the path of prosperity.”

 Further budget information is available at


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