Proposed budget means more government spending, higher taxes in Omaha

Omaha Mayor Jim Suttle is poised today to present a tax and spending increase in his 2010 budget to the city council. This comes a week after a press conference during which the mayor stated that Omaha was at the “bottom of the barrel” for potential cuts.

The proposed budget calls for the city to increase its expenditures by roughly $4 million in 2010. Certainly, increasing health insurance costs will be cited as a large burden to the city. Yet, at the same time, no meaningful change is proposed to help reduce that expense. In fact, the proposed budget will call for increasing the size of labor in the city by a total of 28 civilian and sworn positions.

There is a proposed property tax increase in the 2010 budget which will produce an additional burden of $24 a year for $100,000 in assessed home value. A quick retort may very well center on how low Omaha’s property tax rate is in comparison to others. It is true that Omaha’s property tax rate is significantly lower than the much smaller communities around it. It is also true that Omaha’s property tax rate is significantly higher than Lincoln’s, which might be the truest apple-to-apple comparison. It’s doubtful that point will be mentioned. While it is true that there are many units of government which share the blame for an excessive property tax burden in Nebraska, it does not diminish the fact that Omaha is compounding the problem with an increase during recessionary times.

Omaha says it will generate more than $10 million a year from a proposed 2% entertainment tax in the city. Examples are likely to be given which show the new tax only amounts to a few quarters here and a couple dollars there. It’s doubtful any examples will be given which shows how people will make conscious decisions to be entertained outside of Omaha, which hurts city businesses and leads to layoffs, which only deepens the city’s economic tailspin.

At a time when Nebraska businesses are enacting layoffs at a level not seen in more than 20 years in order to survive, Omaha is proposing an increase in its labor force. While consumer spending has decreased over the past calendar year, Mayor Suttle proposes to increase spending. The proposed 2010 budget calls for increases in the spending for the Mayor’s office (1.9%), city council (1.7%), finance department (15.3%), planning department (10.8%), fire (4.0%) and police (5.3%) while calling for a decrease in the amount of money left in the pockets of taxpayers.

There are a few spending reductions in the proposed 2010 budget for Omaha which take a superficial approach to deep issues, but an increase in overall spending supersedes any minor attempts at controlling the growth of government and the overall tax burden of residents.

We find these issues troublesome. Nebraskans as a whole cannot continue to see government grow larger while their paychecks get smaller. The 2010 budget being proposed by Mayor Suttle does just that and fails to pass muster.

It’s Time to Relax Nebraska’s Firework Regulations to Missouri’s Standards

Berk Brown
Platte Institute Editor

From Chadron to Falls City and Imperial to Winside, firework stands will open for business today all across Nebraska. As the sounds of Independence Day remind us of our hard-fought freedom, keep in mind that Nebraska’s overzealous regulation of fireworks is antithetical to the liberty fireworks represent.

Why is it that Nebraska places much tighter restrictions on permissible fireworks than bordering-state Missouri? The answer always seems to come back to public safety. The government apparently wants to protect us from ourselves with these regulations. It’s high time, we believe, to put all the emotional media hype aside and have a dispassionate discussion about fireworks in Nebraska.

Myth Buster: Nebraska isn’t safer than Missouri when it comes to fireworks

Data from the U.S. Consumer Product Safety Commission shows that firework-related injuries are decreasing nationwide, yet information from the Nebraska State Fire Marshal says injuries are increasing in Nebraska. According to the U.S. CPSC report, injuries per 100,000 people stood at 4.3 in 1991 and dropped to 3.1 in 2006. Inexplicably, there were 61 firework-related injuries in Nebraska in 1991 while there were 147 injuries in 2006, an increase of more than 140 percent. Moreover, Missouri had one injury for every 14,609 residents in 2006 while Nebraska had one injury for every 11,564 residents. It’s counter intuitive, but statistics show that the Show Me State is safer than the Cornhusker State.

Many critics argue that fireworks are fire hazards. The United States Fire Administration reported that there were 23,200 firework-related fires in 2002 which resulted in no deaths. The report also states that the total amount of damage done by a firework-related fire is, on average, $1,841. By comparison, the same administration reported that there were 11,600 Christmas tree-related fires in 2000 and there is an annual average of 40 fatalities because of them. The average amount of damage done by such a fire was measured at $8,063. So, while there are twice as many firework-related fires, Christmas tree-related fires do more than twice the damage. Despite the disparity, there’s no outcry for greater regulation of Christmas trees.

The impact of excessive regulation on the economy in Nebraska

Consumption of fireworks continues to grow in the United States. From 2000-2008, the amount of purchased fireworks grew from 152 million pounds to 213 million pounds– a 40 percent increase – according to the American Pyrotechnics Association. In Nebraska, however, availability of fireworks is steadily declining. The number of public firework displays has dropped from 441 in 2004 to 329 in 2009 – a decrease of more than 25 percent. The number of licensed firework stands also has dropped – from 785 in 2004 to 710 in 2009, a decrease of nearly 10 percent.

As we all know, residents of Nebraska drive to Missouri to get fireworks, so our state loses out from the sales tax generated from those purchases. At a time of declining sales tax revenues in our state, why does the State of Nebraska limit firework sales if there’s no compelling public safety issue.

Conclusion

Government certainly has a duty to provide public safety to its citizens, but there’s also an inferred obligation to only make laws which truly protects the public. We threw off the chains of tyranny on July 4th, 1776; mindless regulation of fireworks is contrary to the reason we celebrate the day. Judging by the steady racket of noise from most neighborhoods, our antiquated firework laws are widely flouted. We therefore advocate a thorough review of our firework regulations with the goal of enacting and enforcing laws that truly provide public safety without unnecessarily restricting our freedoms. Moving toward having the same permissible firework standards as Missouri would be a good step.

City of Omaha needs to look at spending cuts, not tax hikes

Berk Brown
Platte Institute Editor

There’s no question that the financial situation in Omaha is distressing. This is especially true for a city whose rating for general obligation bonds were lowered late last year to Aa1 by Moody’s Investors Service after more than 30 years of maintaining a AAA rating,1 which is the highest possible rating (Omaha has retained its AAA rating with Standard & Poor’s). Like many working-class families enduring the current recession, Omaha finds itself with the pressing need to make some hard decisions.

The City of Omaha Police and Fire Retirement System Pension Task Force, established by former Mayor Mike Fahey to examine ways for the city to replenish approximately $30 million annually to the pension fund, focused greatly on increasing revenues,2 an audacious proposition in a time of recession. The task force recommended a 50-50 solution in which the Police and Fire Unions and the City of Omaha meet in the middle to correct the issue.3 For the city’s portion, the task force recommended three methods to enhance revenues:4

A.) The City Council approve a six cent property tax increase in September 2009 as a safeguard in case the other funding sources (discussed below) do not materialize. If enacted in September 2009, the new property tax rate would become effective January 1, 2011,5 if no other revenue enhancements or spending reductions occur before then.

B.) The City ask the state legislature (the “Unicameral”) and Omaha citizens to permit the City to increase its sales tax rate. Specifically, the Task Force recommends that in January 2010, the City seek Unicameral approval for a 0.5% increase in the City’s sales tax rate.6

C.) That in January 2010 the City pursue Unicameral approval to authorize a municipal garbage collection fee. The City currently pays $15 million each year for garbage collection out of the General Fund. The City is the only municipality in the state that is not permitted to collect a garbage collection fee. The City Finance Director estimates that a $10 per customer per month garbage collection fee would generate $15 million annually.7

All three recommendations wallop Omaha taxpayers for fiscal decisions made over the last few years. With Nebraska citizens bearing a tax burden ranking in the top quartile in the country,8 asking our citizens to pay more tax should be the very last option newly-elected Mayor Jim Suttle and the Omaha City Council should propose. A much better alternative is to reduce spending.

If the City of Omaha were to reduce its spending, according to its 2009 adopted general fund budget,9 by six percent, it would have the $15 million it needs help replenish the fund. This is analogous to an individual having a net pay of $40,000 a year reducing personal spending by $200 a month.10 Cutting six percent may seem overly ambitious, but current spending was reduced by the Fahey administration by approximately this much from last year due to lagging sales tax revenue. Like a business or family facing a serious shortfall, expenditures considered to be necessary in good times become luxuries in hard times; Omaha needs to carefully review all budget items with greater vigor than past years. Other options could include, but should not be limited to:

* Reducing fire truck crews from four to three and flatten the bureaucracy by reducing the number of fire captains, or reducing the number of fire stations.

* Assign non-licensed city employees for non-enforcement traffic control and most police clerical functions.

* Through wage negotiations with fire and police employees, reduce benefit programs or increase co-pays for health insurance claims.

* Reduce or eliminate all voluntary contributions the City makes to non-profit groups in Omaha while reexamining alternative uses of revenue from Keno, including the possibility of asking the Unicameral for more control when it comes to utilizing those revenues.

* Privatize or subcontract city services like park maintenance, road repair and snow plowing to reduce expense. Also, the benefit of selling or leasing golf courses currently maintained by the City of Omaha could be examined.

* Continue to examine redundancy in operations between City of Omaha and Douglas County to find more economically efficient practices.

An immediate effort to reduce spending would be the best course of action for our City at this time. But if raising taxes is deemed essential, an effort by the Unicameral to reduce the amount of lost revenue from sales tax exemptions by 10 percent will infuse all cities with extra revenue and will provide the City of Omaha with an estimated $30 million annually.11 Such a move will not only provide the City of Omaha sufficient revenue to cover the $15 million per year required to fund the pension shortfall, but it could help reduce city property taxes. From the standpoint of transparency and accountability, reducing sales tax exemptions or giving Omaha the authority to increase sales taxes is preferable to increasing property taxes.

From our reading of the legislative tea leaves, there is scant chance that the Unicameral will allow Omaha to levy a higher city sales tax or levy a garbage collection fee. Levying an occupational tax or being given authority to increase the local option sales tax in Omaha might be made more palatable if the Unicameral agrees to decrease the state’s high marginal income tax rates concurrently. Elimination or reduction of the state income tax would enhance Nebraska’s tax competitiveness and reduce the incentive for high income residents to change their place of domicile to states without an income tax, like Wyoming or South Dakota.

The City of Omaha faces significant challenges with its finances. We have full confidence that our elected City representatives will distinguish themselves and make Omaha citizens proud by making the appropriate decisions for the long-term benefit of the City rather than making expedient smoke and mirror decisions which occurs all too frequently at many levels of government these days.
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2 http://tinyurl.com/myevh5
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Higher Education Personnel Spending Possibly in Need of Reduction

Kelly Dunlap
Platte Institute Intern

In conversations aimed at reducing Nebraska’s spending, higher education is frequently cited as being in need of improvement. Dr. Ernie Goss’s policy study, “Nebraska’s Spending Habits,” reports that Nebraska outspends its neighbors, such as Iowa and Wyoming, as well as the U.S. state average in higher education costs. Solutions to this issue, such as increasing tuition and reducing redundant programs, have been suggested. Also important to consider are personnel costs, which speak for over half of the state’s higher education spending. Statistics show that this area might have room for improvement.

The annual salaries of Nebraska’s public professors fare well in comparison to those of surrounding states, possibly even lagging behind them. Statistics reveal that the average salary of a full-time professor at a Nebraska public 4-year institution receives a salary similar to that received by professors at comparable institutions in neighboring states. The average annual salary is $63,588 for Nebraskans, a bit lower than Iowa, Wyoming, Kansas and Colorado, but a bit higher than Missouri and South Dakota.[1]

Within our borders, however, the average professor’s salary at a state institution is greater than that at private institutions. Professors at public 4-year institutions with an estimated fall enrollment of 1,000 or more receive an annual salary of approximately $63,588. Surprisingly, professors at private 4-year institutions with similar enrollment receive $56,147— a difference of $7,441 annually. Furthermore, 2-year institutions show the same inconsistency. Professors at public 2-year institutions benefit from an average of $2,159 more each year in their paycheck.[2]

While most would agree that educators are deserving of greater compensation than what is usually offered, perhaps personnel costs may be considered alongside other solutions, such as tuition rates, in addressing Nebraska’s spending dilemma.

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[1] http://nces.ed.gov/ipeds/datacenter/Default.aspx
[2] Ibid.

What Brings People to Nebraska?

Jimmy Conway
Platte Institute Intern

What makes people want to come to Nebraska? We may not attract any avid skiers or mountain climbers and there is not a five star amusement park in the state, but tourism is Nebraska’s third largest industry. It’s also the third largest revenue source following agriculture and manufacturing.

Nebraska’s tourism is bringing in over $3.3 billion annually. Each dollar spent by tourists in Nebraska is re-spent in the state to produce an additional $1.70 in business and income, creating an overall economic impact of $2.70 (NebGuide: Tourism’s Financial Impact).

In 2007, Nebraskans and visitors to the state made 19.4 million trips in the state to destinations 100 miles or more away from home. Kansas sent the most visitors to Nebraska, followed in order by Iowa, Colorado, Missouri, South Dakota, Illinois and Minnesota.
Where are all of these visitors spending their time? Research by Dr. Ernie Goss of Creighton University finds that Ogallala is the top visiting spot with the annual College World Series, currently taking place in Omaha, a surprisingly 13th most visited location.

Nebraska’s Top Tourist Attractions for 2007 (According to the Nebraska Department of Economic Development)

Rank City Event or Attraction Summer Attendance % from Outside NE
1 Ogallala Front Street and Cowboy Museum 738,000 70.0%
2 Omaha Henry Doorly Zoo 666,147 46.0%
3 Prague Czechland Lake 650,000 n.a
4 Omaha Heartland of America Park and Fountain 605,971 n.a
5 Ashland Eugene T. Mahoney State Park 535,600 n.a
6 Ponca Cook Blacksmith Shop 476,000 40.0%
7 Louisville Art Chicks, A Girlfriends Gallery 470,000 n.a
8 Burwell Calamus Reservior State Recreation Area 399,500 10.0%
9 Louisville Louisville Lakes State Recreation Area 399,500 10%
10 Louisville Platte River State Park 392,919 5.0%
11 Ponca Ponca State Park 369,330 40%
12 Alma Harlan County Lake 303,330 n.a
13 Omaha College World Series 300,702 48.5%
14 Omaha The Rose Theater 300,000 n.a
15 Crawford Fort Robinson State park 298,350 50.0%
16 Omaha Standing Bear Lake 250,000 n.a
17 Omaha Cunningham Lake 237,090 n.a
18 Lincoln Pawnee State Recreation Area 230,000 n.a
19 Omaha Zorinksy Lake 226,111 n.a
20 Crofton Lewis and Clark Lake State Recreation Area 209,494 50.0%
21 Lincoln Great Plains Art Museum 199,000 n.a
22 Papillion Papio Fun Park 175,000 n.a
23 Blair DeSoto National Wildlife Refuge 158,929 n.a
24 Omaha Florence Mill 150,000 n.a
25 Omaha Boys Town 140,748 n.a

Over the years, there has been a yearly attendance of approximately 1,150,600 visitors to Mahoney State Park; 1,335,170 to the Henry Doorly Zoo; 881,600 go to Lake McConaughy State Recreation Area and 124,129 check out the Strategic Air and Space Museum. (Nebraska’s Department of Economic Development)

What does Nebraska’s tourism population look like?

Of the non–Nebraskan CWS visitors, 64 percent planned to attend another Omaha attraction while in town while roughly 47 percent of non-Nebraska CWS visitors planned to visit Omaha’s Old Market and another 34 percent of non-Nebraska CWS visitors planned to visit the Henry Doorly Zoo while in town (According the research complied by Dr. Goss).

With the tradition of the College World Series every year what kind of impact does it have on Nebraska’s economy? Long-term contracts have been debated and signed to keep the championship here until 2035 – the championship that pumps nearly $40 million annually into the economy. The College World Series contributes to the attractiveness of the state, encouraging immigration and discouraging out-migration.

Each year, the College World Series attracts other sports-related activities. As an example, the United States Specialty Sports Association baseball championship series attracted 133 teams with each team staying three nights in the city. This series was organized to coincide with the CWS. Also held in conjunction with the College World Series is one of the largest youth baseball tournaments- the SlumpBuster- sponsored by Triple Crown Sports in Fort Collins, Colorado. The 2007 SlumpBuster drew 325 teams and nearly 10,000 players, coaches and fans, according to Keri King of Triple Crown Sports. The participants came from 40 states including Hawaii. The 2007 tournament began June 18 and ended June 27 with many teams coming in to the city on June 15 to catch the opening of the College World Series. In 2007, Triple Crown Sports purchased 10,000 general admission tickets which were used by the players, coaches attending the tournament. 2008 marked the sixth year of the Omaha SlumpBuster tournament.

Other than the College World Series, where is this money coming from? The average non-resident traveling party visiting Nebraska by highway during the summer is 2.5 people who stay two nights and spend $439. (Over a third of the non-residents go to attractions or events, such as the College World Series). For each attraction or event visited, they average a half-day longer in Nebraska, spending an additional $101. Visitors that stayed overnight in lodging establishments accounted for one-half of all visitor spending in 2008 (Nebraska Department of Economic Development, 2008 Fiscal year Annual Report). Visitors that stayed overnight in unpaid accommodations (primarily private homes of friends or relatives) accounted for 24 percent. Day travelers accounted for about 22 percent.

The Importance of Hospitality and Tourism to Nebraska

Nebraska’s hospitality and tourism industries are integral to the economy. The restaurant, lodging, outdoor activity and tourism industries provide a large percentage of tax revenues, as well as employment. (NebGuide: Nebraska’s Hospitality and Tourism Industries)

 Direct travel spending in Nebraska generated 36,000 jobs with earnings of $556 million in 2008. Four out of five of these jobs were in leisure and hospitality.

 More than 288 industries and countless companies in Omaha experienced increases in revenues because of the CWS.

 Expected increase in employment for the Hospitality industry. For example, employment for recreation workers is projected to increase by 13 percent between 2006 and 2016.

Despite their integral role, these industries often are overlooked when determining the important economic factors providing sustainability to Nebraska.

NEBRASKANS PAY FOR “UGLY BETTY” LICENSE PLATES

Nebraska residents will soon discover what their new license plates for motor vehicles will look like. There has been plenty of public comment – mostly unfavorable – about the amateurish designs being considered. Regardless if you love or hate the new design, you’re getting new license plates in 2011.

Only a government would operate in this fashion. Not many businesses would long survive long if, when customers walked into their store, they handed you an unattractive product and then told you to like it or lump it. Clearly governments don’t exactly play by the “free market rules.”

Until recently Nebraskans received new license plates every three years; it was changed to every six years for budget reasons. The cost of the new license plates came from the state’s general funds but changed when the legislature established a fee to cover the cost of new license plate production. Those fees are collected when you register your vehicles and receive your new license plates.

The Platte Institute did a report last summer on the outlandishly high motor vehicle tax in Nebraska. According to that report, to register a 2007 Honda Odyssey Minivan in Nebraska and the surrounding states would cost the following:

Missouri – $55
South Dakota – $61
Iowa – $360
Colorado – $456
Nebraska – $563
Wyoming – $616

According to the Nebraska Legislative website, motor vehicle taxes and fees in its current form began in 1998. Sadly for Nebraska citizens, the taxes and fees have grown at a much faster rate than both inflation and the Nebraska economy. Click on the link below to see the graphic which shows this very alarming trend:

http://www.platteinstitute.org/docLib/20090518_Motor_Vehicle_Fee.pdf

It’s clear to see that that we are overly burdened with the motor vehicle taxes and fees in the Cornhusker state. To add insult to injury, we are now presented with four ordinary looking designs and are told that the fee for the new license plates in 2011 has yet to be determined. The current fee is set at $3.25 per plate, so if there is no increase in the fee, you will be paying an additional $6.50 for those new plates (two plates per car).

According to the Nebraska Department of Motor Vehicles, there are more than 2.1 million vehicles registered in Nebraska. Nebraskans therefore will be spending more than $13.5 million on these new license plates. These new license plates, objects of scorn as they are, were selected in an environment which limited design options and “free market rules.”

Why new license plates every six years? The next time you are driving home from work or around town running errands, take a moment to behold your bug-splattered, battle tested, long held object of affection. Removing your old plate will be like losing an old friend. And the forced break up is made even more painful knowing you and your fellow Nebraskans are paying $14 million for “ugly Betty” license plates.

NEBRASKA’S LICENSING REQUIREMENTS HIGHEST AMONG ALL ITS NEIGHBORS

We’ve all heard the phrase, “bureaucratic red tape” used to describe a cumbersome process. A report by the Reason Foundation entitled, “Occupational Licensing: Ranking the States and Exploring Alternatives” finds that Nebraska has more licensing requirements than any of its neighbors and ranks the Cornhusker State as the 19th highest in the country when it comes to the most bureaucratic red tape in this form.

Here are how the rankings look when looking at Nebraska and the states it shares a border with. The number of occupations requiring a license is in parentheses.

Nebraska (96)
South Dakota (90)
Iowa (85)
Wyoming (74)
Colorado (68)
Kansas (56)
Missouri (41)

The study shows the Nebraska requires licenses in 15 occupations which none of its bordering states require. And in three of those occupations, Nebraska is the only state in the entire country to require a license for those occupations – including amusement and recreation attendants.

In the study, it is stated, “…we should seek to encourage employment opportunity and entrepreneurship, not deter them. Governments should, therefore, look to remove economic barriers, not erect or maintain them through licensing laws.

“Occupational licensing laws tend to hurt the very people that the government purports to be ‘protecting’ with its regulations. Such regulations disproportionately harm the poor and minorities, who generally have less work experience and fewer employment opportunities than the rest of the population. Laws that make it more difficult for them to obtain certain jobs or start their own business only make it that much harder for them to work their way up the economic ladder.”

We couldn’t agree more.

Video Platte Chat

A Case for Abolishing Nebraska’s Commission of Industrial Relations

“… That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

While the above language from Thomas Jefferson’s famous preamble to the Declaration of Independence was written more than 230 years ago, the call to end destructive practices within government – and begin new and just practices – is just as powerful today as it was then.

The Platte Institute’s latest policy commentary, authored by John Heieck II, states that the time has come for Nebraska to abolish it’s Commission of Industrial Relations.

Download: A Case for Abolishing Nebraska’s Commission of Industrial Relations

Report Shows Nebraska’s Economic Outlook Slowly Moving in Right Direction

 The 2009 ALEC-Laffer State Economic Competitiveness Index for 2009 is out, and while it shows Nebraska’s economic outlook is improving, it also shows the Cornhusker State has a long way to go.In the Rich States, Poor States report, Nebraska ranks 29th nationally in economic outlook, which is an improvement over last year’s ranking of 34th. However, when comparing Nebraska to all its geographical neighbors, Nebraska ranks next-to-last:

• Colorado 2nd
• South Dakota 5th
• Wyoming 6th
• Missouri 23rd
• Kansas 24th
• Nebraska 29th
• Iowa 35th

The economic forecast for a state is based on each state’s standing (equally weighted average) in 15 important state policy variables. Among the biggest factors contributing to Nebraska’s bottom-half ranking according to the report:

• Personal income tax progressivity (the change in tax liability per $1,000 of income) in which Nebraska ranks 45th in the country.
• Property tax burden has Nebraskans paying $38.02 per $1,000 of personal income, which ranks Nebraska 37th in the nation.
• Sales tax burden, which shows Nebraskans paying $29.40 per $1,000 of personal income, which is the 41st highest amount in the country.
• The fact that Nebraska has an estate/inheritance tax levied earned it low grades as did Nebraska’s public-employee-per-10,000-of-population ratio of 640.3 – which is the 44th highest in the nation.

As was stated at the beginning, there are some signs of Nebraska moving in the right direction. According to the report, recently legislated tax changes (2007 and 2008) have decreased Nebraska’s tax burden by $2.11 per $1,000 of personal income – which is the fifth best in the country.

Nebraska’s debt service as a share of tax revenue (5.9%) ranked eighth best in the nation while the Cornhusker State also received good marks for being a right-to-work state, having the same minimum wage as the federal floor and for its state liability system.

While it is nice to say Nebraska is moving up, it’s also important to note that gravitating toward mediocrity should not be the goal. Gravitating toward the top 10 should be.