Leaders ponder record cash reserve

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By NANCY HICKS / Lincoln Journal Star

State leaders are sitting on the largest cash reserve in history as they head into an uncertain future.

“This is definitely a good problem to have,” said Sen. Lavon Heidemann, chairman of the Legislature’s Appropriations Committee, about the expected $574 million reserve, fattened by higher than predicted tax revenues over the past few years.

“Things are rolling along in Nebraska better than what we had anticipated,” said Heidemann of Elk Creek.  

Despite historic tax rate cuts passed in 2007, the cash reserve will be $574 million this summer as the state begins a new fiscal year, more than double the 2006 level.   

That’s about 16.4 percent of the $3.5 billion budget for this year.

Senators fall in three general camps on what to do about this largess: save it for the predicted slowdown; send it back to the people; or spend some of it on worthy projects.

Senators like Heidemann see the high reserve as a saving grace to help the state government ease through a predicted recession without tax rate increases or cuts in state services.

“I praise the Legislature to no end for leaving the cash reserve alone. It is prudent. We will have that money to see us through the tough times,” he said.

Gov. Dave Heineman falls into the send-it-back camp.

The governor’s spokeswoman, Jen Rae Hein, provided a one-sentence comment from the governor on the new reserve number.

“This is additional evidence that tax relief should be a top priority in the next legislative session.”  

Veteran Lincoln Sen. DiAnna Schimek says senators next year should take a new look at the reserve and at state needs.   

If the economic downturn doesn’t materialize, the pot of money gives senators options: investing in one-time projects that really need to be done and returning money in the form of tax cuts to citizens, she said.

State government ended the 2008 fiscal year, June 30, with about $100 million more in tax collections than predicted by the official forecast a year ago.

That $100 million will be automatically moved into the state’s cash reserve, pushing it to about $574 million, according to early estimates provided by Gerry Oligmueller, the governor’s budget officer.

“Right now we are in a pretty decent position,” said Mike Calvert, veteran fiscal analyst for the Legislature.

Every economic cycle  is different, so senators will have to watch carefully over the next year to 18 months to see how this predicted downturn affects Nebraska, Calvert said.  

Nebraska state government is better off going into this recession than it was in the early 2000s, Calvert said.

The cash reserve was created in 1983 to provide money for two purposes: cash flow needs during years when tax revenue is down, and a rainy day fund or savings account for economic downturns.

Sen. Pat Engel, a veteran member of the Appropriations Committee, remembers the last recession in the early 2000s and the difficult decisions.

“We had to — I’m going to use that nasty word: raise the taxes,” Engel said. “We also cut some things (state programs) right down to the bone.”

“The way the gloom-and-doom people are talking, it is a good idea to hang onto that money,” he said of the predicted downturn.

If the predictions prove false, then “they can figure out a way to give back the money,” said Engel, who is serving his last year in the Unicameral.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.