Nebraska’s Growing Budget Problem

January 6, 2016|Posted in: Big Government, Budget Cuts, Constitution, Distrust of Parties, Social Security, Uncategorized

 

Nebraska’s 20 Year Spending Record

Nebraska’s Growing Budget Problem

It was great to see the Huskers turn back the clock 20 years in Santa Clara and feature an interesting football concept….the run.  The game spawned a question in my mind.

What if our ‘Husker’ government decided to create a spending plan similar to the ’95 legislature?  How would our government function? 

Two weeks ago, LIBA leadership (Lincon Independent Business Association) invited Nebraska’s Speaker of the Legislature Galen Hadley (Kearney-Buffalo County) to address our membership on this very topic.  The State budget was the primary conversation.  Full video coverage of his speech can be found on LIBA.org!

The ‘Mile High’ View – Accomplishments & Problems in the Budget

Over the last 20 years our state revenues have risen on average 4.4% a year ($1.8 billion to $4.3 billion).  That is a healthy clip.   Unfortunately, our State Legislature and Governors the past 20 years have presided over the same spending mistakes our national government began to make in greater significance in the 1930’s:  Increasing welfare to individuals.  This dangerous “Living” Constitutional view of Promote the General Welfare has taken root.  ‘Promote’ is yet another word that has been redefined by the Progressive movement.  ‘Promote’ now equals ‘Provide’.  What progress has been made in these areas with our citizens the last 20 years with substantial spending?  That is the question they do not want to answer.  We must transform our belief system.  We must internalize the fact that spending more money AND the institution of government will not be the primary solution to solve our social ills.

The Founders (who I feel wrote the best ‘Bible’ on the topic of civil legislation) knew the definition of “Provide”.  They chose to couple the word “Provide” with the purpose of “Defense” and not “General Welfare”.  This is a monumental difference that goes unnoticed by our elected leaders who have sworn to uphold the Constitution.

I will define the word “Defense” and “General” for the Republicans in a future blog.  (Hint: Think “Less Offense” and forget “Corporate” as the adjective to welfare).

If our government learned the definition of “Promote” vs. “Provide” we would improve this country’s financial situation.  Contrary to progressive beliefs, we would be improving many able bodied lives by freeing them from dependence on the state.  It is like exercise.  Short term pain for long term gain.

This subtle but massive change in our definition of “Promote” has created a staggering national liability that our nation will have trouble repaying.  The same “Provide” fact pattern is threatening our state if we don’t take action today.

Examining the “Husker” Budget

From strictly an accounting point of view, if spending rose less than 4.4% a year in any given category we would be growing our budget in a sustainable fashion.  If we spend less than our rate of revenue growth, we have the ability to do a tax cut.  If we spend less than our rate of revenue growth, we have the ability to fund priority areas in state government that present opportunity/risk to the state.  There are three major categories of state spending; Agency Operations, Aid to Local Governments, and Aid to Individuals.

Since 1995, expenditures in ‘Agency Operations’ have grown by 3.8% a year.  This is lower than the 4.4% growth in revenue.  This category stays in balance.  However, correctional services and the court system are showing cracks at the State level.

Nebraska could still increase spending in Agency Operations and be as efficient as revenue growth.  Less crime, speedier trials (especially out West with increased drug traffic), more state patrol, or cutting taxes are viable priorities in my mind.  I’ll let the citizens be the final judge.

Since 1995, expenditures in ‘State Aid to Local Governments’ have grown by 3.8% a year.  This is more efficient than the 4.4% growth of our treasury.  This category stays in balance.  Local education, homestead exemptions, and aid to local governments are in this area.

Unfunded mandates from state to local government are a large problem. Unfunded mandates from our national government to our state government are a large problem.  Addressing unfunded mandates could be a viable use of redirected funds at BOTH LEVELS!  However, it will probably take a partisan revolt to change this behavior as ‘passing’ the buck is as partisan as it gets.

Since 1995, expenditures in ‘State Aid to Individuals’ have grown by 6.1% a year!  Excessive and perpetual acceleration of individual aid spending is of grave concern.  You can make a difference in this area at home by becoming LOCALLY engaged and taking action.  Please redirect some of your attention focused on the Presidential race (of which your vote will have little consequence) to our state!  Call your Senator.  I know firsthand many are frustrated by the apathy of citizens with state government.  They would welcome your voice and involvement!

Further Analysis of the Macro Budget

‘Agency Operation’ share of the budget has shrunk by 11.2% the last 20 years.  ‘State Aid to Local Government’ share of the budget has shrunk by 10.8% the last 20 years.  However, ‘State Aid to Individuals’ share of the budget has accelerated at 39.2% the last 20 years!  Let that fact sink in. 

Does this spending behavior appear to be a balanced and responsible approach by our state government?  Is this the trend in service we want to see from a state government?

No!

A 20 year perspective will help you understand where our government is trending. Slippery slopes happen each passing year with little fanfare.  The kettle on the range is turned up another degree each passing year to create more government dependence.

Understanding  the primary role of government as framed by our Constitution (both National and State) would help frame a direction for government.  Mercy should be primarily addressed by outside institutions who are exponentially more effective in dealing with societal problems.  George Washington served on a Vestry Board and worked on the Constitution.  He was smart not to combine both efforts in one institution.

If Nebraska continues down this path another 20 years with the same growth rates in revenues and category spending, State Aid to Individuals will be 41.9% of our budgeted expenditures.  Compare this to 22.7% of our expenditures in 1995!

Furthermore, these growth rates do not balance!  Despite our balanced growth in Agency Operations and Aid to Local Governments, we will be running an additional $342 million annual deficit due to accelerated growth in Individual Aid spending if this trend continues!  If we were to control State Aid to Individual spending at a 3.8% growth rate and maintain a 4.4% growth of revenue we would have a surplus of $1.1 billion in 20 years.  That is a $1.44 billion budget difference by controlling spending in aid to individuals at a 3.8% growth rate (compared to the 20 year 6.1% growth rate).  We could address infrastructure, cut taxes, invest in schools, empower local governments, or improve the state Patrol with this money.  However, what do I know?  I’m just an Independent with an unequal vote and voice at the primary ballot box.  I’m way behind in my line of thinking.

We need to set a responsible example to our children and our national government by being a beacon of light with responsible government spending.  Progressive politicians on both sides of the aisle need to wake up and exercise some fiscal constraint and responsibility.  They should not be afraid at challenging the endless empathetic arguments around state aid.  They should be more fearful in the lack of progress in the general welfare of our people due to this misguided approach to government spending.  They let short term cries around “Security” tump action that would provide that same individual long term prosperity.

Nebraska has time on our side to solve spending problems if we act now.  We should not kick the can down the road by talking tough and doing nothing like our national politicians do (seen a plan yet to tackle those unfunded liabilities as promised?)

I’m proud to be the only member to have run with a detailed plan to solve our social security problem with details.  I have solutions in this blog for our state as well.

Speaker Hadley and His Budget Speech

Unfortunately, I didn’t hear the conviction from Speaker Hadley to solve our budget problem during his speech. Below are some of Speaker Hadley’s quotes.  I have referenced the approximate time in the LIBA video for your reference.

Speaker Hadley Video (Will expire soon)

Opening Minute: “Nebraska is a high tax state.”  I agree.  What are your plans for change Speaker? Less rhetoric and substantive plans are needed from all levels of leadership to solve problems and start a conversation in constructive legislation.  Less talk and more walk please.

(5:30) “As a Senator those are hard things to deal with….Anytime you are working with aid to individuals”

A proper perspective in growth of spending and Constitutional intent should make this an easy area to bring to the table.  In my opinion, we need new legislators if cutting spending “Is too hard to deal with”.   He has his PHD in Accounting.  He should know where 6.1% growth trends in spending will take us.  

(11:20) “It is difficult to cut spending…it really is!  You get a lot of special interest groups, rightly so, telling you why their area is important to fund.”

Herein lies the biggest problem with partisan politicians today.  Democrats in general believe in more welfare spending.  Gadley is typical for the GOP…they can’t stand up to lobbyists.  They often take the campaign money and pass the spending bills for special interest.  It is time for change.  

I’ve attached a memorable PSA for advice if you have a hard time acknowledgin an Independent political figure.  It was produced by a moderate Republican.  This PSA will help Republicans and any sensible Democrats in learning how to actually cut spending and deal with those “TOUGH” special interest groups when they offer you a new spending bill.

Just Say No!

(14:00 and 16:25) Credit Speaker Hadley.  He is a very funny guy.  I like him.  This letter is about principled governmental differences and is not personal. He is hilarious!  I’d have lunch with the guy anytime.

Balancing the Budget

In summary, Speaker Hadley’s mile high view to balance the budget doesn’t add up. He wants lower taxes while simultaneously saying it is very hard to make a spending cut. Those positions do not go together to create a balanced budget.  Unfortunately, they garner votes from the simpleton citizen who can’t solve 1 minus 2 and like what they hear.  Independent conservatives like me prefer to do the math.  Like most Republicans, he is preaching more employment and growth in the economy to “Grow” out of this situation.

Friends, have you looked at recent financial statements from the farm?  They are not strong.  I’m very familiar with our farm in Wayne County.  It is not a banner year. Cattle Markets are struggling as well.  Income tax (a big driver of state revenues) from Ag will be down.

Hadley expresses the unemployment RATE is a key stat he watches for income tax growth.  Friends, the unemployment RATE will not get much stronger than present levels. However, net positive migration for jobs and wage growth should aid income tax revenues.

At the end of the day, if you add it all up, you see a headwind coming in revenue. Revenue challenges and lower taxes will not bode well for a balanced budget when it is “Too Hard” to make cuts in spending.  We already have a $100+ million shortfall on our hands.  It is time for action!

In summary, growth is not a be-all end-all answer.  We do need to grow.  However, we must also cut spending!  We must demand a plan by our representatives to make wise decisions for the benefit of both sides of the ledger.  One sided ledger arguments appear to be the primary challenge with both Republicans and Democrats. Both hasten the goal of a balanced budget.  We must balance considerations to create inflow (not raising rates) and stop wasteful outflow.

“What About the Poor Todd? Don’t you care!”

I’m very passionate about ending oppression of the poor.  I’m very passionate about ending endless welfare for the able bodied non working poor. They coexist nicely.  Addressing the Federal Reserve, taking on the financial institution lobby, and reducing endless welfare for the able bodied would be my goals.

The Fed. Our financial system needs to be based on money earned in hard work.  Our financial instruments need to be backed by equity created by labor…not a printing press.  Investment equity needs to primarily come from people, not Wall Street. Change percentage of bank debt to private bonds and watch our economy grow for all.  This will shrink inequality and allow Americans to thrive (albeit at different levels) together by reducing the monetary float from the printing press that works against labor.

Abraham Lincoln knew labor was the superior to capital.  Both parties are slaves to the banking system and will not make necessary changes.  Article I, Section 8, Clause 5.  Learn it.  Understand why we no longer follow the original Constitution.  Income Inequality is a problem.  Structurally designed inequality can be addressed when we tackle the banking system.  Controlling money for the people will enable the poor to get a leg up on purchasing power and savings/investment options.

It doesn’t stop there.  I want even tougher limits placed on the financial institutions.  We should wipe out usury interest from our books.  Payday loans, 18% interest, etc. just prey on our poor.  Rates should not exceed a percentage over prime.  Those businesses usually extend problems for the poor.  They do not solve the problem.  Short term pain for long term gain.  Remember?

Our current financial system is set up to prey on the poor and inflate producing assets to a value that make them unattainable to those offering hard work to produce livelihood out of capital.  Ask yourself how new young farmers who took a mortgage out for land at record prices (no interest printed money inflates prices) are doing?  Do young farmers even exist or have viable options to start a farm?

Second, we need to fight for our poorest workers first before we can fight for these clauses with a straight face.  Count me in with Trump on fighting for work at home.  We need our manufacturing jobs here. It is time the establishment of both parties learn business.  Stop getting schooled in trade.  We need to control our borders from Democrats allowing additional unskilled workers to come into our country.  We need to control our borders from Republicans letting good jobs leave this nation with poor economic policy.  Control the borders should work for business and people.  Adjust national policy accordingly.

Finally, Nebraska (and America) needs to stop “Providing” the General Welfare. People need to be Independent again.  Providing is not the Constitutional perscription and it doesn’t create vibrant citizens that contribute. It is time to relearn the ENTIRE pre 1913 Constitution for the benefit of all citizens.

My Solutions to the Nebraska Budget

As a blogger that offers solutions and not just criticism…here is what I would do differently.

  1.  Stand up to lobbyists. Lobbyists should not be bullying around a Speaker.  Just say NO Speaker Hadley.  Do what needs to be done for the people.
  2. We need to move spending allocations back to historical levels.  Capping all spending at 3.1% growth is not strong enough.  Let’s put a 10/20 year plan in motion to move total percentages in the “Big 3” categories back to 1995 allocation levels.  Aid to Individuals should be reduced as a percentage of budget by .5% a year until the category reaches 22.7% (1995 level).  A return to the Constitution would be a better option.  However, I’m offering a pragmatic approach that is more likely to pass with Democrats and Republicans who find it “Hard” to cut spending and operate in a “What is everyone else doing” progressive environment.
  3. Invest in our young people.  Want growth in income tax?  Train them for good jobs. Leave them less debt to create a business or run a healthier life at home. In-state tuition should drop by offsets in state spending.  Funding of Universities and State Colleges should move up .25% of the total budget for the next 20 years as long as our schools invest in principled education and not elaborate buildings/social engineering/or more overhead administrative jobs.  Hank Bounds/Regents – Are you listening?  Higher Educational Achievement = Higher pay = Higher tax base. Furthermore, make sure our community colleges get their fair share.  We have unfilled high paying jobs that would generate income tax.  We need to help our community colleges “Get the word out” on the opportunities they can create for Nebraskans TOMMOROW.  I’ve spent hours at community colleges from Metro, Milford, Hastings, etc.  We are missing HUGE opportunities for our people!
  4. Address Unfunded Mandates.  At a minimum, unfunded mandates must be capped (Preferably eliminated).  Passing the buck maybe American.  It shouldn’t be Nebraskan.  Don’t cramp our localities ability to make needed local decisions/investments.  Local decisions make a bigger difference.

Nebraska is unfortunately trending the progressive way of National government.  Even Republicans are adopting liberal initiatives at home (See recent votes on Death Penalty, Higher Taxes, More gambling measures that hurt our poor, etc).  Proud conservatives in this state should recognize they have let the welfare state (as a percentage of the total budget) grow by 39% the last 20 years while our spending in our 2 main areas have declined 10%. Is that conservative legislation from a conservative state?

Our state legislature has made a poor statement about our future by dropping our total spend on our University/College system from 19% to 14% of our budget!  This would not be my message to the next generation and Nebraska to grow a brighter future.  My suggestion would be to gradually return to 1995 levels in education in the form of tuition reduction.  Our University system is a governmental charge to address in our charter.

Unfortunately, our state budget is a reflection of the growing belief in progressive philosophy within both parties.  It is time for common sense and fiscal discipline!

We have the brainpower to get this done.  We just need to witness more courage from our delegation.  Leadership starts at the top!

I hope you benefited from my “State” blog for the week.  I will return to National issues soon. I wanted to make a contribution to the dialogue at the state level for the New Year.  I’m grateful for the service of our Nebraska State Representatives for their hard work and little pay to make Nebraska a better place.  I’m happy to say that many of you have become trusted peers the past two years!  I value your relationship.  Thanks for what you do.  I believe in and am counting on you to make this right for my four kids and many other Nebraskans this year.  Let’s ensure the Good Life for the next 20 years!

God Bless! Have a Great 2016 Session! …And Believe in the Run!

Todd

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