Saturday, May 21, 2005

When Big Business Writes the Budget...

by Kyle Michaelis
A very insightful and surprisingly candid article ran earlier this week by the APs statehouse reporter, Scott Bauer. Under the title "What Business Lobby Wants, It Gets" , the article made it quite plain whose really pulling the strings at the state capitol and the Governor's mansion:
If there ever was any doubt about the power of business interests in Nebraska, take a look at what has happened this week in the Legislature. Business lobbyists — primarily the Omaha, Lincoln and state chambers of commerce working in conjunction with the Department of Economic Development and others — got lawmakers to agree to three key economic development initiatives. And they won't come cheap.

The main proposal, an expansion of the LB775 program passed in 1987, is estimated to cost $430 million over 10 years. That's on top of the $140 million already awarded each year in sales and income tax breaks to qualifying companies such as Union Pacific and ConAgra.

Along with that, lawmakers approved an immediate injection of $15 million for job training — a carrot of upfront cash to lure in companies. A third piece, thrown together to satisfy rural senators, would spend a comparatively paltry amount — $7.5 million over two years — to fund incentives for new ethanol plants and grant programs to help entrepreneurs and small businesses in Nebraska's towns and villages.

All this comes as the Legislature continues to dig out after four years of budget cuts that resulted in reductions in spending across the board in state government. But guess what program also escaped those cuts unscathed? That's right, LB775.

Even when then-Gov. Mike Johanns, a vocal LB775 supporter, proposed in 2002 a $25 million surcharge on companies receiving the benefits, it was rejected. The tax was to be repaid to the businesses over time, and they would have lost no money. However, the Legislature that same year raised income and sales taxes and cut funding for the University of Nebraska and most other state agencies, including aid for the poor and K-12 schools. Many of those cuts have yet to be fully restored....

"This is big business and the governor's office going off on a spending spree with the state's credit cards," said Tim Rinne, statewide coordinator for Nebraskans for Peace.

The push for more incentives has been aided by an improved economy, which has led to more money in the state budget...All of this goes to show that when the business lobby speaks, senators listen. And spend.
Maybe this is the true impact of term limits in the Unicameral. Senators who have no long-term interest in serving their constituents are that much more likely to sell-out while they have the chance to secure favor and fortune with the business community.

This isn't to say that all business tax incentives are inherently flawed, but the priority they receive over every other interest of the state should rightfully raise a lot of questions. While some important and common sense disclosure rules are finally being imposed, it remains incredibly distressing that the legislature has proven otherwise unwilling to mandate expectations of quality job-creation from these business subsidies. The Lincoln Journal-Star reports on the new incentive proposal:
While LB312 does offer a richer package of tax breaks than LB775, it does contain some concessions critics of LB775 have long wanted, such as disclosure of how much companies receive and increasing investment thresholds that trigger tax breaks in accordance with a price index. Thresholds in LB775 have remained unchanged since the bill was passed.

It also calls for businesses that receive tax breaks to pay at least 60 percent of the average state wage, or about $19,500 annually, and increases tax credits for those that pay more; there are no wage levels in LB775.

Sen. Chris Beutler had wanted more incentives for businesses to pay higher wages. But like another measure that was designed to motivate businesses to provide adequate health insurance, it suffered Tuesday from lawmakers' unwillingness to take a firm stand.

Omaha Sen. John Synowiecki said of his proposal to increase tax credits for companies that provide health insurance: "Without a health insurance plan a family's assets are wiped out with one trip to the emergency room."

It failed on a 20-2 vote, with 22 senators not voting. Twenty-five votes are needed for passage. Beutler, who introduced another amendment that would have encouraged companies receiving tax breaks to provide health insurance, said not doing so would further burden the state by forcing people onto Medicaid. That could exacerbate what he described as the "fiscal crisis" that could be created by the tax-break plan.
There's the problem with selling off the state's fiscal security to the highest bidder. There are long-term problems in the state budget that the legislature has simply turned a blind eye to. Of the total budget and the on-coming financial catastrophe it portends, the AP reports:
State spending would increase more than 7 percent over the next two years, but there would be no sales or income tax increases to pay for it, under the budget lawmakers sent to Gov. Dave Heineman on Wednesday.

The governor must decide by midnight Tuesday whether to accept all of the $6.1 billion in spending, or veto specific spending and force senators to override. The governor will take until Tuesday to announce any vetoes, said Heineman's spokesman, Aaron Sanderford. "He's going to carefully examine the entire package," Sanderford said.

For the first time in four years, the budget does not include major cuts or tax increases....The main budget bill passed on a 34-10 vote.

Even though the current two-year budget is balanced, there are problems on the horizon. Based on the impact of various bills expected to pass this year, the state's budget will be $236 million short in four years.
Oh goodie! We've put in more untouchable incentives for businesses so the next crisis will be even more destructive to the state's education and health programs. Who are we to expect the Governor or the legislature to protect the long-term responsibilities of the state?

Goodbye Medicaid and hello tuition hikes! With these short-sighted bozos in charge, it's only a matter of time.


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