February 6, 2013

Revenue Committee
Nebraska Legislature
State Capitol
Lincoln, NE 68509
RE: Opposition to LB 405

Senator Hadley and members of the Revenue Committee,

I am writing on behalf of the Nebraska Association of Public Employees/AFSCME Local 61, the recognized collective bargaining agent for over 10,000 employees, to express our opposition to LB 405.

LB 405 fundamentally will do three things - LB 405 shifts the tax burden onto working Nebraskans, increasing their taxes; LB 405 will place significant pressure on state budgets, jeopardizing core services that working Nebraskans desperately need; and LB 405 will be devastating for public employees, as cuts to services translate into lost jobs.

LB 405 is a tax shift and will increase taxes for everyday Nebraskans. Lower and middle class Nebraskans pay a higher percentage of their income in sales taxes relative to wealthy Nebraskans. Eliminating the personal and corporate income tax while replacing this revenue through sales taxes will increase taxes on the middle class. According to one tax analysis, under LB 405, middle class Nebraskans would pay over $1,000 more in taxes per year while wealthy Nebraskans would receive a tax cut of nearly $5,000.
LB 405 will place significant pressure on state budgets.

We need to look no further than Kansas to see how this has worked recently. Kansas recently passed a similar tax measure, and is now facing a projected $4.2 billion budget deficit over the next five years. This required Kansas to dramatically cut funding for public education and other critical state services. Nebraska cannot afford to make this same mistake. Nebraska already is facing shortfalls in key areas. For example, LB 405 could jeopardize as much as 30% of the Department of Correctional Services’ budget – roughly the cost of incarcerating more than 9,300 inmates. The Department is already at over 95 percent of inmate capacity but just 70 percent of staffing capacity and a funding shortfall already exist of at least $31 million. Income tax revenue also account for over one in three dollars appropriated to the Department of Public Safety. As scarcity for money looms larger in the event LB 405 were passed, cuts for children’s services, like child welfare and Medicaid, or public school funding, or many other key health related services would be inevitable.
LB 405 will result in lost jobs.

Since Governor Heineman took office, we have seen a steady decline of state employees, a reduction in staff of over 1,800. If LB 405 were to pass, this trend would only escalate. The cuts to services mentioned above, along with others, would force state employees to do more with less, and ultimately require that state employees be laid off and lose their jobs.

Nebraska cannot afford the risky venture that LB 405 clearly is. When we shift taxes onto working Nebraska families at the expense of the wealthy, we force Nebraska families to unfairly do more with less. When we reduce our investments in what creates jobs and builds a strong economy—like public education, public services, and infrastructure—we hamper Nebraskans ability to prepare for and succeed in the future. We always must be diligent about how we examine state revenues and spending to ensure we are using tax dollars efficiently and strategically. This will help us promote a prosperous Nebraska now and in the future. LB 405 does not do this. LB 405 will not work. LB 405 is bad policy.

Thank you,
Cassy Fogale
Contract Administrator/Lead Negotiator
NAPE/AFSCME Local 61