Former state officials sue Pillen admin over alleged misuse of Nebraska Environmental Trust funds

LINCOLN — Two former state officials sued the Pillen administration and the state treasurer, alleging they unlawfully used Nebraska Lottery proceeds intended for environmental purposes to resolve a state budget shortfall.

The lawsuit, filed Thursday, cites a $13.5 million transfer this year from the Nebraska Environmental Trust — which is funded by lottery proceeds — and a $15 million transfer in 2015 used to help balance the state budget and provide property tax relief.

The Trust was created when voters approved the lottery in 1992. It is intended to “complement” governmental and private programs via competitive grants, that “conserve, enhance, and restore the state’s natural environments,” the lawsuit says.

It argues the funds cannot be used “as a piggy bank to cover other state expenses.”

“The sorry truth is that the state is playing a shell game to cover self-created budget gaps at the expense of the Trust’s constitutionally-mandated conservation efforts,” said Jon Oberg, a former director of the Nebraska Department of Administrative Services. Oberg filed the lawsuit along with W. Don Nelson, a former chief of staff under then-Gov. Bob Kerrey.

“Budget integrity requires both honesty and playing by the rules,” said Oberg in a press release. “The Trust is not a tool to solve our state’s budget problems.”

The American Civil Liberties Union of Nebraska and the Gutman Law Group represent the pair.

The filing cites a 2004 constitutional amendment approved by voters which, the plaintiffs allege, “guarantees” a certain percentage of State Lottery funds be used by the Environmental Trust, via competitive grants, for environmental purposes.

The lawsuit cites a Nebraska Examiner story in January in which State Budget Director Neil Sullivan stated that fund transfers from the Environmental Trust were being used for “a balanced budget and additional property tax relief.” That, the lawsuit said, was an admission that the dollars were being used to purposes unrelated to conservation.

Filed Thursday in Lancaster County District Court, the lawsuit names Pillen’s budget director and DAS director, as well as State Treasurer Joey Spellerberg and the heads of the Nebraska Department of Water, Energy and Environment, plus the director of the Nebraska Game and Parks Commission.

Some of the fund transfers were directed to the Game Commission as part of a marina expansion project at Lewis & Clark Lake and to the Department of Water, Energy and Environment for water conservation projects. The funds were used to replace state general funds and to enhance property tax relief efforts, which the lawsuit claims are outside of the legal use of Trust funds.

An attorney with the ACLU, Carter Mack, said the lawsuit was a “voters’ rights issue” for the civil rights organization.

Nelson, in a press release, said the Trust will be one “in name only” if state government is allowed to continue to “drain money out of it” every time there is a budget crisis.

This year, the governor and Legislature wrestled with closing a nearly $500 million gap in state funding via a combination of state budget cuts and transfers of reserve and cash funds.

Oberg and Nelson are not new to legal action related to the Trust. In 2020, their lawsuit against the Trust forced the dropping of a proposal to defund $1.8 million in conservation projects and instead award that money to install ethanol blender pumps at some Nebraska gas stations.