OpenSky Policy Institute - Funding Our Priorities 8.28.14

Clear thinking for

a stronger Nebraska

About OpenSky Policy

Institute

We are a non-partisan think tank

focused on fiscal policy in Nebraska.

Our mission is to improve opportunities

for every Nebraskan by providing

impartial and precise research,

analysis, education, and leadership.

Importance of the State Budget

• Nearly 300,000 students are educated by 22,000 teachers in over 1,000

public schools each year

• More than 107,000 students attend the University of Nebraska, state

colleges, and community colleges each year

• Almost 10,000 miles of highway and over 3,500 bridges are maintained

(enough road to reach nearly halfway around the earth)

• More than 137,000 children receive health care through Medicaid each

month

• More than 7,000 Nebraskans are cared for in state nursing facilities

each month

• More than 4,500 inmates are housed each month in the state

correctional system

• 175,000 professional licenses are overseen, including for more than

7,500 physicians, 35,000 nurses, 3,500 pharmacists, 7,000 mental

health professionals, 1,500 dentists, and 1,000 veterinarians.

Education, Health Care Top SpendingGeneral Fund Expenditures, FY 11-12

Total: $3.45 billion

Sources: OpenSky analysis of

data from Legislative Fiscal

Office and Department of

Administrative Services

Accounting Division

Note: Percentages do not sum

to 100 due to rounding

K-12 Education, $1,024,084,084 ,

30%

Higher Education,

$627,403,585 , 18%

Health and Human Services (Non-Medicaid), $663,934,522 ,

19%

Medicaid & CHIP,

$576,385,969 , 17%

Public Safety and Law Enforcement

$317,672,714 9%

General Government$156,629,137

5%

Agriculture, Environment &

Natural Resources$38,273,197

1%

Humanities$17,939,902

<1%

Transportation and Infrastructure$16,908,088

<1%

Labor and Economic

Development$6,476,974

<1%

State Spending in Nebraska Has FallenGeneral Fund Appropriations per $1,000 of NE Personal Income,

FY 98-99 to FY 14-15

Sources: Department of Administrative Services Accounting Division and Budget Division, Legislative

Fiscal Office, Nebraska Economic Forecasting Board, Congressional Budget Office, and US Bureau of

Economic Analysis data.

$41

$42

$43

$44

$45

$46

$47

$48

$49

$50

$51

FY 99-00 FY 01-02 FY 03-04 FY 05-06 FY 07-08 FY 09-10 FY 11-12 FY 13-14

Spending Trends in Major Budget AreasGeneral Fund Appropriations per $1,000 of Nebraska

Personal Income

Sources: NE Legislative Fiscal Office, US Bureau of Economic Analysis

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

FY99-00

FY01-02

FY03-04

FY05-06

FY07-08

FY09-10

FY11-12

FY13-14

K-12 Education

Medicaid + CHIP

Health and HumanServices (Non-Medicaid)

Higher Education

Public Safety andLaw Enforcement

Transportation and Infrastructure Spending has

DeclinedGeneral and Cash Fund Expenditures

per $1,000 of Nebraska Personal Income

Sources: OpenSky analysis of Department of Administrative Services Accounting Division, Legislative

Fiscal Office, and US Bureau of Economic Analysis data.

$10

$11

$12

$13

$14

$15

$16

FY 99-00 FY 01-02 FY 03-04 FY 05-06 FY 07-08 FY 09-10 FY 11-12

Aid to Local Governments Has DeclinedState aid to local governments, adjusted for economic growth,

FY 00-01 to FY 13-14

Sources: OpenSky analysis of State Auditor of Public Accounts local budgets, Legislative Fiscal Office, Department

of Revenue, and US Bureau of Economic Analysis Personal Income data.

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

FY 01-02 FY 03-04 FY 05-06 FY 07-08 FY 09-10 FY 11-12 FY 13-14

Mil

lio

ns

Total

Aid to K-12Schools

Aid toMunicipalities

Aid toCounties

$15

$20

$25

$30

$35

$40

$45

$50

$55

FY 79-80 FY 84-85 FY 89-90 FY 94-95 FY 99-00 FY 04-05 FY 09-10

State Aid Total Local Taxes

State Aid and Local Taxes Have Mirrored Each OtherAid and Taxes per $1,000 of Nebraska Personal Income

Sources: US Census Bureau, Survey of State & Local Governments; US Bureau of Economic Analysis

Most Revenue for State Budget Comes from

Sales and Individual Income TaxesGeneral Fund Tax Revenues, FY 12

Total: $3.61 billion

Sources: Department of

Administrative Services Accounting

Division, Annual Budgetary Report

(December 2012).

* Other taxes are primarily Business

and Franchise Taxes and special

income taxes on fiduciary income

and financial institutions.

Individual Income

$1,808,244,570 50%Sales and Use

$1,436,909,372 40%

Corporate Income

$234,266,238 7%

Excise$73,477,570

2%

Other*$53,431,064

1%

Nebraska’s Three-Legged StoolState and Local Taxes by Type, FY 10-11

Source: US Census Bureau, State and Local Finances data

Personal Income

22%

Corporate Income

2%

Property Tax37%

General Sales22%

Selective Sales

9%

Other8%

Nebraska’s Tax System is RegressiveState & Local Taxes in 2010

Shares of family income for non-elderly taxpayers

Source: Institute for Taxation and Economic Policy

–3%

–2%

–1%

—

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

Lowest 20% Second 20% Middle 20% Fourth 20% Next 15% Next 4% TOP 1%

Total Sales & Excise Taxes Property Taxes

Income Taxes Federal Deduction Offset

Effect of Cutting Personal Income Tax Rates to 2.25%,

4.75% and 5.5%Average Annual Tax Change by Income Group, 2013 Income Levels

Total Annual Cost to State: $353 Million

Sources: Institute for Taxation and Economic Policy

$122 $230 $346$766

$1,768

$8,509

Lowest 20%(<$21k)

Second 20%($21k-$36k)

Middle 20%($36k-$58k)

Fourth 20%($58k-$88k)

Next 15%($88k-$161k)

Next 4%($161k-$371k)

Top 1%(>$371k)

The Real Taxpayers of Nebraska

The Real Taxpayers of Nebraska

Cutting Income

Taxes Doesn’t Spur

Economic Growth

Nebraska Economic Growth Higher than

Neighbors with Lower Top Income Tax RateGrowth in Real GDP Per Capita, 2003-2012

Source: OpenSky Analysis of US Bureau of Economic Analysis Data

-0.8%

2.1%

6.7%

8.6%

8.8%

11.5%

12.8%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

Missouri(10 brackets, 6% top rate)

Colorado(flat 4.63% rate)

Wyoming(no state income tax)

South Dakota(no state income tax)

Kansas(2 brackets, 4.9% top rate)

Nebraska(4 brackets, 6.84% top rate)

Iowa(9 brackets, 8.98% top rate)

Economic Growth in States with High

Income Taxes and No Income TaxesGrowth in Real GDP Per Capita, 2003-2012

Source: OpenSky Analysis of US Bureau of Economic Analysis Data

-3.8%

-3.1%

-0.6%

2.1%

2.2%

3.3%

4.7%

6.6%

6.9%

7.6%

8.5%

9.2%

9.3%

9.8%

11.2%

11.3%

12.0%

13.8%

32.0%

-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Nevada

Florida

Ohio

New Jersey

Maine

Tennessee

California

Wyoming

New Hampshire

Hawaii

South Dakota

Vermont

Alaska

Washington

Nebraska

Maryland

Texas

New York

Oregon

Example: Income Tax Cuts in Kansas

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information

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(402) 438-0384 or (402) 250-4518

rfry@openskypolicy.org