Ricketts called for property and income tax reformat his state of the state address in lincoln. The governor outlined his Budget Priorities for the state. This is 30 minutes. Thank you. President , speaker, member of the 105th legislature, tribal chairmen, distinguished guests, friends, fellow nebraskans, and of course our first lady my lovely wife, suzanne. Good morning. [ applause ] now, before we get started here today, i understand that we have somebody who has a birthday. Kitty, its your 70th birthday . Is that right . Woo woo give her a round of applause. [ applause ] i will spare you my rendition of happy birthday. Everybody is happy about that, too. Well, congratulations on the commencement of the 105th Nebraska Legislature. I want to thank each and every one of you for your willingness to serve our fellow citizens. I also want to highlight that you are beginning a historic year. The 150th of our statehood, which we will celebrate on march 1st. I am honored to be with you here in the peoples house. We all appreciate the unique nature of our nonpartisan role. Nebraska consistently pass as balanced budget on time. Not every state can say that. In our system, every bill gets a hearing. And every senator, a priority bill. Senators can have an impact with legislation regardless of part or seniority. And debate happens right here on the floor. Not behind some closed door conference committee. Our unicamera empowered citizens with increased access to the process, Greater Transparency and responsive representation. Now, why do we have such a system . Well, we have it because of a man by the name of George Norris who believed that government should be more open and responsive to the people. A man who traveled 5,000 miles, wore out two sets of tires, sent out 192,000 flyers all at his own expense to advocate for our unicamera. George norris was a man with vision. He had initiative. He persevered. He was tenacious. He had grit. Nebraska grit. And thats characteristic of our people. As a people, nebraskans have a heart for their neighbors, a firmness of character, and they demonstrate resilience and fortitude. Nebraska is what america is supposed to be. [ applause ] we are blessed with so many everyday heros in our communities, like the men and women that comprise nebraskas law enforcement. They work hard. And risk much to keep us safe. Were also grateful for our service men and women and the Nebraska National guard and their families. Another great example of true nebraska grit is don straton. He grew up in red cloud during the great depression. He was in the news just a few weeks ago during the 75th anniversary of pearl harbor. On that fateful sunday modern in 1941, a japanese dive bomber caused an explosion that engulfed the uss arizona. Straton and his battery mates were trapped in a Metal Compartment being scorched alive. Finally, a serviceman from a repair ship tied up to the arizona threw a rope to straton and his battery mates. With burns covering 65 of his body he peeled loose skin from his arms so he could climb hand over hand across 75 feet of rope. In excruciating pain, dodging japanese pilots fire, and suspended 45 feet above flaming oil. Straton made it. And it is with that same spirit and determination that we must approach the work before us. Our families, our families, and our neighbors are relying on us. Whats more, we have a chance to give a voice to the voiceless. To improve peoples lives. And to craft policies that build a Brighter Future for generations to come. I am excited to serve with each and every one of you to grow nebraska. Speaker, congratulations on your election. Thank you for your dedication. [ applause ] i appreciate all of your work for the citizens of nebraska. And that goes for all the new committee chairs. Thank you very much for your leadership. And for our new senators, congratulations. With farmers, Small Business people, veterans, and attorneys, a firefighter, and teacher, your diversity of experience will enrich the body and reflects our people. I look forward to what we will be able to accomplish working together. In this 105th Nebraska Legislature in the 150th year of our statehood, you are all a part of our unique nebraska history. Your first legislative session provides an opportunity for Decisive Action that will shape our state in years to come. I am halfway through my fouryear term in service as your governor. This morning, im going to highlight some of our accomplishments, discuss our legislative efforts to grow nebraska, address the budget adjustments, and detail my plan for the biennial. I will also share with you our plans to deliver muchneeded tax relief to hard working families. By identifying our mission to create opportunity through more effective, more efficient, and more customer focused government, we have made progress toward a vision of growing nebraska. We are making government work for the people. That think is contagious. The department of Environmental Quality has launched on line applications for storm water permits and new general air Quality Construction permits that reduced wait times. Health and Human Services once under special investigation is now accomplishing their mission of improving peoples lives. Access nebraska has reduced the average call wait time, improved snap application processing and in doing so safed the state 17 million. In our department of labor, we have launched a first ever Reemployment Program to help job seekers connect with good paying jobs faster and saving Nebraska Businesses 17. 6 million in taxes. There are more efficiencies that we can bring to government. Earlier this week, chairman john morante and i announced a merger of our division of Veterans Home and our Nebraska Department of veterans affairs. We will eliminate red tape for our veterans and can provide streamlined services to them all under one roof. Thank you director john hilgert and your team for your diligent work to continually provide Better Services to our veterans. [ applause ] a chairman and i are also working on another merger, this time between the department of roads and the department of aeronautics. Well merge that into the department of transportation. Among other things, we will be able to find efficiencies that will allow us to put more money into runways and roads without sacrificing jobs. Thanks to director Ronnie Mitchell of arrow naught you can and director of roads for their work on this merger. [ applause ] i also want to recognize my entire cabinet, who is here with us today in the gallery. This dedicated bunch is working to transform the culture of State Government and deliver Better Services at a lower cost. Thank you for everything you do for our people of nebraska. [ applause ] i know that unnecessary hamper. This year we need to continue to get rid of unnecessary regulations to empower everyone from car salespeople barbers and cosmetologists to audioologists and massage therapists. We are going to help people who want to work in these professions get to work more quickly. Thank you to senators albright, craig head, geis, birdman, lowe lipped strom and reapy for all of your work to introduce these bills to cut red tape. [ applause ] with initiatives like these we have built a Strong Foundation in State Government. And the state of the state is strong. [ applause ] now, we also know that we have challenges. Farm income has gone from 7. 5 billion just a few years ago down to 4. 5 billion in 2015 and closer to 4 billion last year. As a result, we face reduced tax receipts. Our revenues were 95 million below forecast in our first fiscal year. And the forecasting board cut another 172 million out of the current fiscal year. The next biennial will require continued expense control. As nebraskans we dont spend money we dont have. We balance our budgets. And at the state level we have maintained a healthy cash reserve to set and set Spending Priorities like education, public safety, and infrastructure. This common sense approach has put us in a financial position where even a budget challenge such as this one can be managed nflt a year when we have to make difficult budget decisions we have to favor the taxpayer. Special interests can hire lobbyists to achieve their desired end. As elected officials, we have a duty to be advocates for the citizens and a voice of the people. This is an opportunity to put our nebraska grit to work, like don straton. Lets roll up our sleeves, and do what needs to be done to set a course for future prosperity. [ applause ] our first task is to adjust the current year budget to bring it back into balance. As i have said, it is easy to view a government budget as a collection of numbers in rows and columns next to agencies and programs. But behind the numbers are peoples lives. The dollars that fund our budgets are dollars that are earned by hard working nebraskans. Additionally our agencies and programs are designed to serve our citizens, and many of them are people in need. With that in mind, i worked with my agencies and my Budget Office to prepare budget reductions which i presented to you last week. My proposal provides more resources for child and family services, invests in education, protects reforms and corrections, and balances the budget without raising taxes. [ applause ] i will not support any effort to raise taxes on nebraskans. As Ronald Reagan said, simple fairness dictates that government must not raise taxes on families that are struggling to pay their bills. I urge you to take up the budget by the first week of february because there are less than six months left in this fiscal year. And the work we do is critical to finish this budget to set the foundation for the next budget. And i appreciate the work of chairman center and all the members of the Appropriations Committee on this. [ applause ] now, today, i present to you my recommendation force the upcoming by enyum. Four principles guide my budget recommendations. First, the revenue gap must be closed without increases taxes. Raiding the property tax credit relief fund, raising taxes, taxing food and groceries would be bad for citizens and would hurt our economy. Second the budget must be balanced. Third we must reduce government expenditures. And fourth, we target at keeping 500 million in the cash reserve so that we are in good position to address future uncertainty. Now, having said that, there are certain priorities that we must continue to fund. Thats why we propose increasing funding for the k12 education. I know that education is an investment in our children and in our future. When most areas of the state budget are essentially flat, i am proposing a 2. 7 increase, average increase for the next two years for k12 education. Thats a 5. 4 increase for the bienyum. I also recommend an additional 3 biennial increase in the special education funding. This is significantly more than the overallstate sbumt growing and is responsible within our resources. Now you all would be lobbying that this budget does not fully fund education. That is not true. That statement is based upon a flawed School Aid Formula that encourages spending. That allows schools to brow their budgets at 12 . What i have proposed is responsible. It respects the taxpayers and protects k12 education with a significant increase amounting to a historic high of over a billion dollars per year in general fund support. Another priority is our department of corrections. Together, we have made significant progress in an agency that has been neglected for years. In addition to providing basic the basic needs of more than 5300 inmates, corrections successfully launched an automated sentence calculation program, implemented the firstever Risk Assessment tool. They have reformed restrictive housing, completed a culture and staffing analysis, expanded Mental Health and cognitive Behavioral Health programming, created missionspecific housing, and have developed an Inmate Health care plan while addressing pay and quality of life issues for our deputy of our corrections officers. With this budget proposal, we will reduce protective Service Vacancy rates. We will upgrade technology and improve the lincoln correctional center. I want to thank director scott fraks and the members of his team who are with us here today. They thumb selves in harms way to keep us safe, and they have worked together to transform the culture of this agency. Please join me in thanking them. [ applause ] we began work on this budget last june to right size appropriations with actual spending. Our recommendations are thoughtful and reflect the input of my agencies. These are reductions that can be made without affecting operations. In the end, our first fiscal year increase is 1. 5 , followed by a 1. 9 increase in the next fiscal year. For a twoyear average of 1. 7 increase in spending. This is in line with my current year recommendation. As i have traveled the state, i hear almost universally from nebraskans that they are taxed to much. So i am proposing both property and income tax reform. Property taxes are too high. Especially in our agricultural producers. Between 2003 and 2013, property taxes paid by farmers and ranchers have risen 137 . As cattle and crop prices decline, its important that assessments drop as well. Taxes should correlate with income. We have to think bold. We have to think long term. Bold. And long term. This year, we have a chance to achieve lasting, fair, and structural property tax reform by changing the way that we value ag land. The agricultural valuation fairness act sponsored by ag Committee Chairwoman lydia brash changes the methodology for assessing Property Value from a market based system to an income potential assessment. Income potential is much more fair and will slow the growth of ag land valuations. If this system were in place in 2017, it would have reduced ag land valuations by about 2. 2 billion. Income potential based property tax assessment for ag land is used in north dakota, south dakota, kansas, iowa, wisconsin, illinois, indiana, and ohio. This method is much more fair and standard across ag states, which is why a number of nebraska ag producers have suggested it to me. We would implement this change beginning in 2019 to give local taxing entities and county assessors plenty of time to prepare. Now in the past, nebraska has attempted to get Property Tax Relief by putting more money into the School Aid Formula. That has proved to be a failed policy. Historically, additional spending, additional aid without spending restraint has only resulted in additional spending and higher property taxes. Finally, i want to talk about reducing income tax rates. When i traveled the state, nebraskans make it very clear that they are taxed too much. And that they are tired of government taking their money. When it comes to income tax they get a reminder of this every 1st and 15th of the month when they get their paychecks. Its not just lincoln reaching into their pockets. Its washington, d. C. Now, we cant control what goes on in washington, d. C. , but we can here in lincoln. Let me tell you, our people get frustrated when they hear us talk about finding revenues or new resources or rebalancing because they know that these are code words for raising their taxes. The way to grow revenues is to grow the number of people who live in our state and to create more and better paying jobs. To do that, we have to be more competitive. Only one of our bordering states has a higher tax rate than we do. And thats iowa. South dakota and wyoming have no income tax. Colorado, kansas, missouri, all have lower tax rates. Our high tax rate hampers our ability to grow our economy over the long term. It discourages investment and chases away great people. If we want to outpace other midwestern states, we have to be more competitive. Do you know its been 20 years since middle class nebraskans have seen a cut in their income tax rate . The hard working people of nebraska deserve better than for their elected officials to treat cutting income tax rates as a once in a generation event. Partnering with senator jim smith, chair of the revenue committee, we propose to take that top income tax rate down roughly. 1 per year as long as our Revenue Growth is 3. 5 or higher. In effect, we will have a trigger. When we hit 3. 5 growth, to take that income tax rate from 6. 84 down a little each year until we get it under 6 . If our revenue doesnt grow fast enough, the tax rate doesnt come down. Its that simple. Now, i want to take a minute to address the top income tax bracket. In world of hyper political rhetoric, people are quick to say that a reduction of the top income tax bracket is a tax break for the rich. Any single individual making 29,831 is caught in this highest tax bracket. Folks, 29,831 is not rich. It is middle class. And for married couples making 59,661, they are also caught in this top tax bracket. And thats more than half of them. Nebraskans look at us and wonder why it is so hard for us to let them keep more of their money. The only way to have Sustainable Tax relief is controlling spending. Any opportunity for tax relief is fundamentally the difference between spending restraint and Revenue Growth. Controlling spending must come first. The tractors of this tax plan will point to other states that have reduced taxes before reducing spending and then struggle to catch up. Thats not what we do here. We are controlling spending first. That is responsible budgeting. And that is responsible tax relief. That is the nebraska way. Join me in helping middle class working families. Lets spur Economic Growth and make nebraska more attractive to businesses and families looking to relocate. Lets do it the nebraska way. The reductions we make to the budget to balance it and continued attention to spending control will allow us to cut taxes and grow nebraska. [ applause ] this isnt easy. It will require nebraska grit. Speaking of nebraska grit, one other thing i didnt tell you about don straton after several months of surgeries and rehabilitation at naval hospitals he was sent home to his parents in red cloud. And after several more months of recuperation, don straten reenlisted. Thats right. He reenlisted. Now, he had to convince the draft board in omaha to take him back into service. And they put him through boot camp all over again to make sure he was physically up to it. But he made it. He went back to the pacific theater. He was assigned to a destroyer where he protected u. S. Marines in the invasion of okinawa. After 82 days of brutal combat, u. S. Forces took okinawa. Don straton, nearly fatally injured in the First American battle of word war two, played an Important Role in one of the last battles of that war. Don straton finished the war. Now, it is our job to finish the work in front of us. With determination, we can dress our challenges and position our state for future long term growth. We can balance the budget, set Spending Priorities, deliver essential services, all without raisinges