LINCOLN, Neb. (AP) — Lawmakers will start their new session Wednesday with Nebraska in better financial shape than two years ago, but now they're bracing for a fight over how to spend the state's extra money.
Pressure to cut costs has eased now that the state faces a projected $195 million shortfall in its next two-year spending plan — far less than the nearly $1 billion budget hole that lawmakers had to plug in 2011.
The smaller shortfall gives lawmakers more wiggle room as they set the anticipated $8 billion, two-year budget. But it also sets up a tug-of-war over funding for government programs and tax-cut proposals.
State senators are expected to debate bills this year that would expand services for children in foster care, the poor and the uninsured. Republican Gov. Dave Heineman hasn't released his plans but has signaled in speeches and interviews that he wants to continue cutting taxes. Earlier this year, advocates for children, teachers, and rural Nebraskans urged lawmakers to replenish the state's cash reserve while investing in schools and health care.
"It very well could be that we see a more contentious debate on the budget this year than what we've seen in the past two," said York Sen. Greg Adams, who is running unopposed to become the Legislature's next speaker. In previous years, "everybody knew going in that we were going to have to cut. And when everyone knows it's coming, it's more a question of whether everyone's taking a fair cut."
Lawmakers will debate a proposal that would extend Medicaid coverage to thousands of residents, an optional piece of the federal health care law. Heineman has repeatedly voiced opposition to the proposal, calling it unaffordable, but lawmakers who helped override his veto last year on a prenatal care bill are planning to press the issue.
Adams said it's too early to know whether the Medicaid proposal has the backing it needs to clear the Legislature. Supporters plan to argue that expanding the coverage is a moral imperative that will reduce health care costs. They also plan to argue that it will relieve pressure on Nebraska to cover certain populations, such as prison inmates and behavioral health patients, who are in state custody.
Under the Medicaid expansion, the federal government would pick up the entire cost of covering the newly eligible beneficiaries for the first year, and would then ratchet down its contribution to 90 percent. Supporters argue it's a great deal compared to current Medicaid rates, for which Washington pays as little as half and forces states to cover the rest.
"I think it's a public policy issue that certainly deserves a hearing and a discussion," said Lincoln Sen. Kathy Campbell, chairwoman of the Legislature's Health and Human Services Committee. "We pay for this segment of the population in a lot of different ways in Nebraska. We shouldn't fool ourselves to think that if we don't take this expansion money, that it won't cost us anything. There's a cost if we say we are going to cover this population, and there's a cost if we say we won't."
Campbell said she said she also expects a push to expand services for children's mental health, and a measure that would let youths stay in foster care until they turn 21. The current age cutoff is 19. She said lawmakers and Heineman worked together during the recession to preserve state programs that help Nebraska's most vulnerable populations, and they managed to avoid the larger cuts to services seen in other states.
"I think the senators have been very cognizant in understanding that there are just some foundational services for the elderly, for the disabled, for children, that need to be in place," Campbell said. "I certainly expect that philosophy will prevail. But whether we can enhance and build upon those services — I think that's the question we'll be addressing."
Omaha Sen. Heath Mello, who is running for chairman of the Legislature's Appropriations Committee, said lawmakers should proceed cautiously with the new budget and first meet their obligations to schools, health care providers, and the state's colleges and universities.
"Are things going to be a little easier? Perhaps," Mello said. "But at the end of the day, we still have an economy that's recovering. We still are not seeing the revenue growth that we saw prior to the recession."
Adams said lawmakers will also likely need to put money back into the state's cash reserve. Lawmakers have used the fund in recent years to help balance their budget.
"Even though we're in a better place, it doesn't mean happy days are here," Adams said. "If you look at our revenue, it's positive. That's good. But in my opinion, I don't think we're going to see the kind of revenue when I first came into the Legislature" six years ago.