State budget administrator defends governor's mid‑biennium package, cites $471M gap and cash‑fund transfers

Neil Sullivan, Nebraska’s state budget administrator, told the Appropriations Committee on Feb. 2 that the governor’s mid‑biennium budget package (LB1071 and LB1072) balances an identified $471,000,000 shortfall largely by using transfers from cash funds and targeted reductions in appropriations.

"The $471,000,000 budget gap is a spending issue," Sullivan said, adding that the administration has reviewed more than 900 funds and recommends $278 million in transfers and $80 million in fund‑mix adjustments. He said the recommendation preserves a $1.3 billion reserve and aims to limit general‑fund spending growth.

Sullivan told senators the package includes reductions that are often achieved by not filling vacant positions and closing select offices, and he called certain changes "conservative fiscal decisions" that would allow continued investments in education, property tax relief and workforce development.

Committee members repeatedly pressed Sullivan for specifics. Sen. Makayla Kavanaugh asked which line items represent true spending cuts versus savings from not filling vacant FTEs. Sullivan answered that Health and Human Services contains roughly $220 million in gross reductions across aid programs and that some changes alter provider rate‑setting to reduce outlier payments.

Senators also questioned the use of the budget bill to effect statutory policy changes, with Kavanaugh asking why program language sometimes is removed via the budget rather than by committee bills. Sullivan said statutory changes included in the budget are tied to appropriation reductions and that centralizing those changes in one package was necessary to address the gap.

Sullivan defended the administration’s approach to cash funds, saying that in many cases excess balances have accumulated for specific purposes and the administration is seeking eligible ways to deploy those balances rather than leaving them idle. He cited the Nebraska Environmental Trust as an example, saying it has grown to roughly $70 million and that recommended uses would be within constitutional authorization.

The Appropriations Committee followed the presentation with extended questioning and scheduled agency hearings to review specific impacts. Sullivan said members of the governor’s cabinet will provide additional information at those hearings and that the administration is available to work with the legislature as it considers the mid‑biennium adjustments.

The committee did not take a vote at the hearing; additional testimony from agencies and stakeholders is expected in follow‑up hearings.