LINCOLN — Gov. Pete Ricketts unveiled a package of budget and tax plans Wednesday that he touted as setting up the state for future growth.
“That means cutting red tape, balancing the budget and delivering tax relief,” he told state lawmakers in his annual State of the State speech.
Ricketts delivered the address — the fourth and last of his current term in office — during a year when state tax revenues continue to lag and demands for property tax cuts are rising.
The governor, who is seeking re-election this year, spent much of the speech reviewing the accomplishments of his term.
“I’m happy to report that the state of the state is strong and growing,” he said, listing several economic development projects and international trade deals.
At the same time, Ricketts said cutting and reforming taxes is “key to growing Nebraska.”
He proposed a Property Tax Cuts and Opportunity Act that would make changes in both income and property taxes. The plan includes money for workforce development.
He said his plan emphasizes property taxes while making Nebraska more competitive with other states on income taxes.
But Ricketts acknowledged the state has challenges, including a $200 million shortfall in the two-year budget period ending June 30, 2019.
He said his budget plan would close the gap without raising taxes and while protecting state priorities, including K-12 education, developmental disability services, child welfare and corrections.
Under the plan, most state agencies would see across-the-board cuts. The cuts would be 2 percent for the last half of the current fiscal year and 4 percent for the fiscal year starting July 1.
However, he is recommending a $55 million increase in child welfare funding, offset by a $20 million decrease in public assistance.
He is not proposing additional money for the prison system but is seeking the authorization to hire more corrections officers and to build 100 new prison beds with funds left over from a previous prison construction project.
Despite the current budget difficulties, Ricketts said Nebraska needs to continue trying to bring down taxes.
His tax plan would lower the top individual and corporate tax rates to 6.69 percent over the next two years, a key goal of state business groups. Top current rates are 6.84 percent for individuals and 7.81 percent for corporate taxes.
The plan would address property taxes by changing how existing property tax credits are distributed. The result would boost credits for homeowners and Nebraska agricultural landowners.
His proposal would provide homeowners and ag land owners with refundable income tax credits worth about 10 percent of property taxes paid.
The homeowner credits would be capped at $230 and limited to a taxpayer’s main residence. The ag land credits would be limited to Nebraska residents.
Commercial property owners no longer would get property tax credits. Ricketts said business groups have told him they would prefer the lower income taxes.
To make the plan fit within the state’s budget constraints, it ends the existing property tax credit program and personal property tax exemptions.
The state now puts $224 million a year into the property tax credit program. The credits show up as a line on the annual property tax statements.
Ricketts said the amount allocated for the new property tax credit program could grow if state tax revenues grow. His plan includes a trigger mechanism.
Personal property tax exemptions, which total about $17 million per year, benefit business and agriculture.
