CHICAGO — The last time Nebraska issued bonds to finance highway projects was the summer of 1969. But five years of falling road revenues have prompted lawmakers to give borrowing a fresh look.
Lawmakers on the state transportation committee said at a conference in Omaha Thursday that the state needs to consider borrowing as its highway construction budget continues to shrink.
The proposal comes as double-A-plus rated Nebraska — which does not issue general obligation debt — faces an unprecedented $750 million general fund shortfall in its upcoming two-year budget period.
The Legislature will reconvene in January to craft the 2011-2012 budget. Legislative committees, meanwhile, will meet throughout the fall to identify 10% in cuts for all state agencies they represent.
“Nebraska is one of the few states that doesn’t bond for highways, and like most other states, we’re having trouble finding money for roads and that’s an issue our lawmakers are interested in pursuing now,” said Dusty Vaughan, legal counsel for the transportation and telecommunications committee.
The highway budget has fallen to $316 million in fiscal 2011 from $390 million in 2006.
The Nebraska State Highway Commission is currently authorized to borrow up to $50 million to finance highway projects. But the state last tapped that money 40 years ago, and $50 million now is “chump change when it comes to highway projects,” Vaughan said.
Sen. Deb Fischer, chair of the transportation and telecommunications committee, said she would unveil a transportation funding plan this fall that includes new bonding authority.
Fischer has not released details of her bonding proposal, but it is expected to be tied to a new revenue source, Vaughan said.
The state also faces a challenge on its pension front.
Its three pension plans account for around 1% of the total state budget but make up nearly 15% of the current $750 million general fund shortfall, according to officials.
Like other states, Nebraska’s pension plans — which covers police, judges, and teachers — have seen big investment losses since 2008, said Kate Allen, legal counsel for the retirement committee.
Traditionally funded at roughly 95%, the three pension plans are now facing a combined shortfall of $100 million.
An actuarial report due in November will determine the exact size of the unfunded pension liability.
But Nebraska’s history of strong funding levels is expected to lessen the blow, lawmakers said.
The teachers’ plan is the state’s largest plan and makes up the biggest chunk of the $100 million shortfall, Allen said.
“We’ve had such a bad couple years on investment returns,” she said. “But the state has always done a really good job of funding each year, and so we have been above the 90% category for some time.”
“There’s a $700 million deficit issue, and the pensions are just one piece of it,” she added.
The state raised its contribution rates last year but the committee has not started to craft recommendations for the pension shortfall.
“There are discussions, but these are contractual obligations,” Allen said. “Even if changes are adopted next year, it can only apply to new employees. That’s the challenge with public pension plans.”