The Rural Impact of the Nebraska State Budget Proposals

The Appropriations Committee’s proposed 2003-2005 biennial budget will have an impact of $66 million on rural Nebraska through cuts to programs benefiting rural people and rural communities and cuts in state aid to rural political subdivisions. The Appropriations Committee’s proposed budget will have nearly a $28.9 million impact on rural Nebraska in fiscal year 2003-2004 (beginning July 1, 2003) and a $37.6 million impact in fiscal year 2004-2005 (beginning July 1, 2004).

Both budget plans base their proposed spending cuts on items directly related to aid to political subdivisions – schools, counties, municipalities, community colleges, and natural resource districts. In the Governor’s budget, about 77 percent of proposed rural spending reductions in both years are aid programs to political subdivisions; in the Appropriations Committee’s budget, 51 percent of proposed rural spending reductions in the first year and 65 percent in the second year are aid programs to political subdivisions.

Tables A and B detail portions of the proposed budgets as they pertain to rural Nebraska. The total consequences are likely underestimated because budget lines such as the University of Nebraska system are made in a lump-sum, and specific budget actions that will affect rural Nebraska are unknown at this time.

The recommendations in both budget plans will have direct consequences for rural people and rural communities in service reductions or elimination. But they also highlight another, significant policy issue – the potential for a dramatic shift from state to local responsibility, and the potential for increased local taxes.

In two years over $96 million in the Governor’s budget and $38 million in the Appropriations Committee’s budget of identified rural impacts are in areas that aid property tax-supported institutions or programs. If local political subdivisions and institutions attempt to replace these state funds with local funds, equivalent amounts may be taken from rural taxpayers and the rural economy. The alternative available to local officials is to adjust their budgets without increased revenue, with the potential for decreased services and local job losses.

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Table A

Rural Impacts of Proposed Budget Cuts in Governor’s Proposed Biennial Budget

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Table B

Rural Impacts of Proposed Budget Cuts in
Appropriations Committee Proposed Biennial Budget

* Based on LB 540 model
** Assumes position would be based in or perform work primarily for rural Nebraska
*** $7,531,307 in each year is an annualization of LBs 8 and 9 adopted in 2002 Special Session

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Data and Sources
Note: Unless specifically noted, the amounts listed represent the entire amount of the budget actions concerning an agency or program. Also unless noted, the entire amounts of the budget actions listed pertain to rural communities and rural people. Many of the budget actions also have an urban component, e.g., personnel actions that will impact state employees based in Lincoln. However, even if a particular position or office is located in an urban location, it is also assumed the work done and the programs operated by the offices and positions listed below will affect the lives of rural people and their communities.

K-12 State Aid, Special Education and Aid to ESUs
The rural share of these proposed budget cuts is 54.6 percent. The rural share was determined by subtracting from the total proposed cut the K-12 state aid reductions to school systems in Douglas, Lancaster and Sarpy counties. This estimate is based on General Funds only and differences between certified state aid for 2002-03 and budget proposals (Governor’s or LB 540 model used by Appropriations Committee).

The same percentage is used for proposed reductions in special education spending and aid to Educational Service Units (ESUs).

Medicaid
The rural share of proposed spending reductions is 55.9 percent. Data Source: Nebraska Service Utilization Data, 2000: Medicaid Expenditures by County (1998 data); data show that total Medicaid expenditures in the 90 Nebraska counties excluding Douglas, Lancaster and Sarpy counties equals 55.9 percent of statewide Medicaid expenditures.

Game and Parks Commission
The rural share of this proposed spending reduction is 51.7 percent. This represents the share of the state’s population that lives outside of Douglas, Lancaster and Sarpy counties. It is assumed all people in the state benefit from the activities of the Game and Parks Commission.

Department of Natural Resources
The rural share of these proposed spending reductions varies by program mission and program uses. The rural share of the Small Watershed Flood Control program and the Soil and Water Conservation Fund is 100 percent because of the program missions of those programs. The rural share of the Natural Resources Development Fund is 84.8 percent (Source: Nebraska Resources Development Fund Biennial Report, August 2000; an analysis of all approved projects funded by this program shows 84.8 percent are in rural areas).

State Colleges
All state colleges are in rural communities.

Department of Economic Development
The Lied Main Street program operates solely in selected rural communities, and the Community and Rural Development division of DED is responsible for economic development in rural communities throughout the state.

Library Commission
The rural share of all proposed spending reductions for the Library Commission is 80.6 percent (Source: 80.6 percent of 2001 Library Commission grants and aid to libraries and related purposes other than college libraries, Lincoln and Omaha Public Libraries and statewide training and education; Library Commission website)

State Treasurer – Aid to Counties, Municipalities and Natural Resource Districts
Aid to Natural Resource Districts (NRDs): The rural share of the proposed spending reduction is 51.7 percent. This represents the share of the state’s population that lives outside of Douglas, Lancaster and Sarpy counties in predominately rural NRDs. The same percentage is used for the Natural Resource District Fund.

Aid to Counties: The rural share of the proposed spending reductions is 77.1 percent. An analysis of State Treasurer data shows that 77.1 percent of aid to counties goes to the 90 counties excluding Douglas, Lancaster and Sarpy.

Aid to Municipalities: The rural share of the proposed spending reduction is 55.1 percent. An analysis of State Treasurer data shows that 55.1 percent of aid to municipalities goes to municipalities outside of Douglas, Lancaster and Sarpy counties; this figure likely understates the rural share because there are rural municipalities in those three counties.

Department of Agriculture
By definition and statutory authority, the Department of Agriculture’s programs and operations apply predominately to farmers and ranchers.

Community Colleges
The rural share of the proposed spending reduction for aid to community colleges is 51.7 percent. This represents the share of the state’s population that lives outside of Douglas, Lancaster, and Sarpy counties (i.e., those areas served by urban community colleges).

County Property Tax Relief Program
The rural share of this program is 100 percent. A review of data from the Department of Revenue shows that 100 percent of funds distributed by this program went to rural counties.

Behavioral Health, Developmentally Disabled and Vocational Rehabilitation Aid
The rural share of the proposed spending reductions related to behavioral health, developmentally disabled and vocational rehabilitation aid programs is 51.7 percent. This represents the share of the state’s population that lives outside of Douglas, Lancaster and Sarpy counties. Without other data, it is assumed that these services are provided in the same proportion as the state’s population.

County Jail Reimbursement
The rural share of the proposed spending reduction for this program is 48.5 percent. This figure represents the share of inmates referred to the Nebraska Department of Corrections from counties other than Douglas, Lancaster and Sarpy counties. (Source: Nebraska Department of Corrections 2001 Annual Report).

Educational Lands and Funds
The rural share of this proposed spending reduction is 100 percent.

The Center's Issue Briefs are produced by Jon Bailey, jonb@cfra.org and Kim Preston, kimp@cfra.org from our Rural Research and Analysis Program. Contact either of them for more information.

posted 5-14-03