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The Associated Press May 11, 2011, 8:27PM ET

Nebraska lawmakers approve state budget bills

Lawmakers approved a two-year spending plan Wednesday that cuts state agency budgets but leaves nearly $300 million in Nebraska's cash reserve without raising taxes.

The budget bills cleared their third and final reading and advanced to Gov. Dave Heineman. The package would set general fund spending at roughly $7 billion over the two-year budget period that begins July 1.

The package closes a budget gap that, earlier in the session, had been projected at nearly $1 billion. Changes to the state's school aid funding formula accounted for $410 million in savings spread over the next two fiscal years.

The proposal would pull $105 million from the state's cash reserve to balance the budget, but leave $299 million. Elk Creek Sen. Lavon Heidemann, chair of the Appropriations Committee, said the required cuts weren't as severe as lawmakers had initially feared.

"It's been a difficult process, but we were very fortunate," he said.

The budget is one of two constitutional mandates the Legislature must tackle this year. Lawmakers still have to approve redistricting bills to redraw the state's legislative and congressional boundaries, among others.

The board that forecasts Nebraska's tax collections offered a sunnier outlook last month for state revenue. The Nebraska Economic Forecasting Advisory Board estimated that the state would collect roughly $150 million in tax revenue beyond earlier projections in the next two fiscal years that start July 1.

The projections are based on new construction, inflation, commodity and gas prices and other economic indicators throughout the state. Board members use the information to predict how much money the state will collect from sales taxes, individual and corporate income taxes, and miscellaneous taxes.

The budget outlook assumes no new changes in law that would affect revenue. One intensely debated bill this session, LB 84, would divert one-quarter of a cent out of Nebraska's 5.5-cent sales tax to local and state road projects -- an estimated $70 million a year. Critics say the bill relies on the risky assumption that the state economy will recover.

Lawmakers approved the measure 33-10 Wednesday, sending it to the governor. Heineman has hinted at a possible veto and questions the measure's timing.

The budget package also included a $25 million investment in the University of Nebraska-Lincoln's Innovation Campus, a research park designed to attract new industry and jobs.

The Innovation Campus will include a life sciences research center specializing in food, fuel and water, as well as a public-private office and lab building, a renovated 4-H building and a U.S. Department of Agriculture Research facility.

University officials say the Innovation Campus will attract high-tech companies that will capitalize on the work of the school's researchers, and feature biotechnology and life-science research that could help Nebraska agriculture.

In a statement Wednesday, University of Nebraska President James Milliken said the budget represents a timely investment in the state's economic future. Appropriations will help the university continue its momentum with enrollment growth and research, he said, although funding will remain flat for the fourth and fifth years straight.

The financing was part of a broader state budget bill for new and ongoing construction projects recommended by Heineman. The governor has identified the Innovation Campus as a key part of his proposed two-year budget and said the need for the $25 million was immediate.

The research park will occupy the former home of the Nebraska State Fair, which moved last year to Grand Island after more than a century in Lincoln. Construction begins later this year, with a target completion date of 2012.

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