Speaker Arch: Nebraska budget ‘without a doubt’ biggest issue of 2025 session

LINCOLN — Speaker John Arch of La Vista this week outlined the Nebraska Legislature’s biggest 2025 issue as lawmakers return to Lincoln: the state budget.

Arch, who is so far running unopposed to helm Nebraska’s legislative branch for two more years, said the budget would “without a doubt” be state lawmakers’ biggest issue in 2025 when they return for a 90-day session beginning Wednesday at 10 a.m. 

That priority comes as the state budget is forecasted to be running more than $432 million short in the next two fiscal years, which begin July 1 and end June 30, 2027. Legislative solutions will likely need to be massaged by the Legislature’s Appropriations and Revenue Committees.

If left unchecked, estimates show that the budget hole could grow to $1.13 billion by the middle of 2029, partly because of 2023 legislative decisions to decrease tax rates for top income and corporate earners.

Now, Arch said, lawmakers will see the reality and real numbers of those changes.

“We’ll have to have some time to digest,” Arch told the Nebraska Examiner on Monday. “We took some pretty big swings in the last couple of sessions.”

Revenue changes

This spring will be the final time that corporate taxpayers in Nebraska pay a tiered tax rate based on how much they earn. It’s part of a step-down approach to reducing top individual income tax rates and corporate tax rates to 3.99% beginning in 2027.

The start of the year also ushered in new income tax credits for grocery stores, restaurants and agricultural producers that donate to food banks, pantries or rescues; for family caregivers’ costs for eligible family members; for film and TV production companies’ qualifying expenditures to film in Nebraska; and for contributions to qualifying pregnancy help organizations.

Arch said crafting the 2025-27 budget will be “more normal” than past bienniums, as lawmakers continue to move beyond the COVID-19 pandemic era of being flush with “American Rescue Plan Act” federal relief dollars or a major budget surplus of state cash reserves.

Choosing legislative leadership

The first duty for state lawmakers will be selecting legislative leadership, including the chairs of the Legislature’s 14 standing committees that consider the vast majority of legislative proposals.

Of those committees, as well as three special or select committees, at least 13 will choose new leaders, most because of term limits, while two current chairs seek other positions.

At least five of the 14 standing committees are expected to have contested elections, based on announced candidates up to Tuesday morning, including the tax-focused Revenue Committee to succeed term-limited State Sen. Lou Ann Linehan of Omaha.

State Sen. Brad von Gillern of Omaha, the current Revenue Committee vice chair, and George Dungan of Lincoln have announced bids to succeed Linehan.

State Sen. Rob Clements of Elmwood is so far running unopposed for chair of the Appropriations Committee, which sets the budget. 

The Legislature will also vote on slates of senators to serve on the Committee on Committees, which doles out committee assignments to all 49 lawmakers, and the Executive Board, which monitors the hiring of legislative employees and the day-to-day operations of the legislative branch.

The 2025 legislative session will see 16 newly elected lawmakers and one former state senator from Grand Island returning.

Arch said he had the chance to meet with new senators at a legislative retreat in December and looks forward to working with them.

“I feel like we’ve got a good group of senators coming in ready to learn and ready to problem solve,” Arch said. “I think with that, we’re setting ourselves up for dealing with some of the difficult issues that we’re asked to deal with.”

Other key issues

Bill introductions will begin Thursday, on the second day of the session, and continue through the 10th day, scheduled for Jan. 22.

Among proposals on the docket is a quartet of priorities from Gov. Jim Pillen:

• Sex-based restrictions for K-12 bathrooms, locker rooms and sports teams, which could more broadly mirror a Pillen-enacted “Women’s Bill of Rights” and extend to higher education or other areas of state government. 
• Changing how the state allocates funding to K-12 schools to take pressure off of property taxes.
• Cracking down on sales of lab-grown meat and how it is labeled.
• Changing how the state awards its Electoral College votes. Lawmakers told the Examiner the proposal might come in one of two ways, either by a legislative bill or a constitutional amendment the public would vote on in 2026.