LINCOLN — A memo Nebraska Gov. Jim Pillen issued last week calling for a minimum 5% spending cut across state agencies has raised questions about whether the governor has the power to impose such a cut without legislative approval.
The memo came three months after Pillen signed a pair of bills passed in the state Legislature that adjusted Nebraska’s current two-year budget, closing a projected budget deficit that at one point grew as high as $646 million. Before the legislative session ended, however, Nebraska was back in an expected deficit after state tax revenues fell below economic projections.
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That deficit is currently estimated at around $172 million, based on the last three months of state tax receipts. That number is likely to change, for better or worse, but as it stands Nebraska lawmakers are slated to start the 2027 session with two deficits to deal with — the current one, and a separate deficit in the state’s next biennial budget projected at $631 million.
This would be the third session in a row that the Legislature has had to fill at least one budget shortfall.
State Budget Director Neil Sullivan said the governor’s intent behind the memo is to give lawmakers essentially a head start on budget-balancing next year by creating savings in real time.
In the memo, Pillen asked state entities to “exercise fiscal restraint” by means such as restricting travel, delaying technology upgrades, and freezing new hires, effective July 1. Specifically, the memo orders that no position shall be created or refilled without prior approval from the State Budget Division, with an exception for new law enforcement or corrections officers.
Sullivan said the order is a step up on a directive Pillen previously implemented that eliminated open positions in state government after they remained vacant for at least 90 days.
Additionally, the memo directs Sullivan and the Budget Division to reduce monthly allotments to agencies by a minimum of 5%, pending budget adjustments lawmakers are expected to make in the 2027 session. It also says the governor expects all state agencies to submit monthly cash flow projections to the Budget Division that are consistent with this reduction.
Pillen told the Examiner that some other exceptions might be approved on a case-by-case basis, though he did not specify how. He described his memo as a “vision” and a “goal” but not an “edict.”
Sullivan said the process with state agencies is meant to be collaborative, and he’s excited to hear what ideas other divisions have for how to cut costs. But critics argue this is an example of Pillen overstepping his authority as governor, and making unilateral changes to a budget he already signed off on.
Governor’s authority
“(Pillen) can’t do with the memo what the Legislature is authorized to do by the Constitution,” said state Sen. Danielle Conrad of Lincoln.
Conrad has been a vocal critic of Pillen’s budget strategy, arguing that Nebraska is in a structural deficit due to the governor’s “fiscal recklessness.” She also has repeatedly defended the Legislature’s “power of the purse” outlined in the Nebraska Constitution.
Under the state Constitution, the governor is directed to submit a budget proposal to be presented in the Legislature, and lawmakers can make adjustments to it before sending the bills back to the governor’s desk to be signed into law. Budget bills are unique in that they are the only type of legislation in Nebraska where the governor is allowed to make line-item vetoes.
When the pair of budget-adjusting bills passed earlier this year, Pillen signed both without any line-item vetoes.
Conrad said there is no law she’s aware of that grants the governor power to change the budget after it’s been signed. She said she also found it strange that Pillen issued the directives in a memo that appeared to state his “policy preferences,” rather than an executive order.
When asked about the governor’s authority to impose a 5% spending cut without legislative approval, Pillen spokesperson Laura Strimple said: “No legislative approval is required for agencies to do the right thing by exercising fiscal restraint. Legislative approval is needed to remove the appropriation.”
The statement omits the fact that agency spending will be cut a minimum of 5%, regardless of whether the agency representatives are on board with the reduction.
“If you don’t have the money in your checkbook, pretty hard to spend it,” Pillen told the Examiner.
University cuts
The day after Pillen’s memo went out, University of Nebraska President Jeffrey Gold said NU representatives met with the governor’s office to discuss the parameters of the directive. Gold said it was made clear that their expectation was that at least 5% of spending would be cut for all state entities.
“It’s not that we’re being asked to cut it,” Gold said. “They are telling us they are cutting … What he’s saying is that if he were paying us $100 a month to do something, starting this July, he’s now only going to pay us $95.”
State Auditor Mike Foley said he wasn’t certain of this area of state law, but he believes the governor has a lot of leeway in governing code agencies, which report directly to him, but not as much with non-code agencies, which includes the university system.
While Pillen initially told the Examiner that the memo will not be applied to non-code agencies, Strimple later clarified that the governor “misspoke” and that the rule would be applied to all state agencies.
Foley said the Attorney General is the person who could answer the question about the governor’s authority to make spending cuts without legislative approval.
Attorney General Mike Hilgers’ office declined to comment.
A 5% spending cut would amount to roughly $36 million subtracted from NU’s roughly $1.19 billion operating budget — or about $3 million cut per month. Gold said the monthly cuts will likely be higher than $3 million, considering the time it will take to make the necessary changes retroactively.
Gold said NU officials are working fast to implement changes in response to the reduction, just a few weeks after the NU Board of Regents approved the university system’s budget.
“It seems just a couple weeks later, we’re having to reset the entire process,” Gold said. “Which we’re doing. I mean, we have no choice in the matter.”
The newly approved NU budget included a 4.25% tuition increase, and a roughly $8 million overall cut, which Gold said was in response to a state aid increase of less than 1% , which doesn’t keep pace with inflation.
Gold said NU officials are following the governor’s suggestions for how to cut costs, including reducing travel, consolidating positions and reviewing their contracts and research grants for excess funds.
Gold said he has not heard any discussions about NU possibly suing the state to challenge Pillen’s memo, and he’s not sure any conversations will be had on the subject. He said he recognizes that the state is in a tough financial position, though he is disappointed because he views NU as having a large return on investment for the state.
The need for belt-tightening
State Sen. Rob Dover of Norfolk, who sits on the Legislature’s Appropriations Committee, said he didn’t see anything concerning in the governor’s memo, and thought a 5% cut would be “doable,” as compared to steeper cuts Pillen has proposed in the past.
Dover did raise concerns about Pillen’s habitual strategy of making spending cuts to balance the budget, noting that has been his approach the last four years he’s been governor. Dover described the approach as “lean and mean,” but said there are some agencies that have already been cut to the bone, though he suspected there are others that still have hidden areas of savings.
“Some agencies are really good, and some agencies never change (their budgets), it’s the same thing year after year,” Dover said. “Sometimes you have to change … the process to wake people up.”
Dover said the only way he believes Nebraska can dig its way out of its budget struggles is through growth, primarily through creating new jobs and housing.
Why not call a special session?
Though he’s not sure of the legality, Foley said it is prudent for the governor to advise agencies to curtail spending. He said calling a special legislative session would have been a more appropriate way to enact a spending cut.
Conrad said she can’t speak for the governor, but she suspects Pillen being up for reelection this year may have been a reason why he didn’t call a special session. She said the optics would look bad, considering the session would focus on budget issues that have persisted through a majority of Pillen’s time in office.
On the possibility of a special session to address the budget, Strimple said this: “The governor’s actions will ensure state agencies have enough momentum on reducing spending when the Legislature convenes in January.”
Nebraska Examiner reporter Zach Wendling contributed to this report.
This story is provided by States Newsroom, a nonprofit state news network and Blox Digital content partner.
