The Second Session of the 107th Legislature adjourned sine die on Wednesday afternoon. With no vetoes being issued by Governor Ricketts on legislation passed last week, the final day of the session primarily consisted of pomp and circumstance. Governor Ricketts presented his end-of-session speech, in which he praised the Legislature for its accomplishments. Thirteen senators who will not be returning next session also provided parting words.

Passage of historic tax-relief, additional funding for rural workforce housing, allocation of over $1 billion in American Rescue Plan Act (ARPA) funding and maintenance of a cash reserve in excess of $1 billion were among the major accomplishments this session.

A hearty “Thank you” is extended to the following 13 senators who are departing the Legislature, either due to term limits or as a result of a decision to not seek re-election.

The Primary Election is just around the corner (May 10), with the General Election to follow on November 8. In addition to races for Congress and state constitutional offices, 24 seats are up for election in the Nebraska Legislature. With 11 incumbents running and 13 open seats, there will be many new faces when the Unicameral reconvenes in early January 2023.
 
A special election will also be held on June 28 to fill the 1st Congressional District seat vacated by the resignation of Congressman Jeff Fortenberry. State Senators Mike Flood (Norfolk) and Patty Pansing Brooks (Lincoln) will face off in the special election, with the winner filling out the remainder of the term through the end of the year.

Interim study resolutions form the basis for issues to be examined in-depth during the interim between legislative sessions. Some resolutions may involve formal public hearings, while others may result in informal meetings between interested parties or simply research of the issues.

Interim study resolutions of interest to the NBA include the following:

LR 330 - Interim study to determine what percentage should be used to forecast revenue when preparing fiscal notes and determine if state agencies or political subdivisions should use the same percentage
 
LR 333 - Interim study to examine modernization of Nebraska's tax system with the goal of facilitating economic growth
 
LR 371 - Interim study to review the requirements regarding occupational regulation as administered by the Department of Banking and Finance
 
LR 372 - Interim study to examine whether the Real Property Appraiser Act should be updated
 
LR 383 - Interim study to explore best practices for the implementation of a consumption tax in Nebraska
 
LR 393 - Interim study to examine the committee hearing procedures of the Legislature
 
LR 400 - Interim study to examine current farm economic conditions in Nebraska and how best to aid and support beginning farmers and livestock and dairy producers in the state
 
LR 401 - Interim study to review the administration of the Nebraska Broadband Bridge Act
 
LR 418 - Interim study to examine the sales tax system in Nebraska with respect to exemptions provided to various industries
 
LR 422 - Interim study to examine issues related to the Middle Income Workforce Housing Investment Act
 
LR 463 - Interim study to examine the structure and administration of and compliance with certain taxes

A complete review of actions taken by the Legislature on bills of interest to the banking industry will be contained in the NBA Legislative Update Wrap-Up edition, which will be finalized within the next few weeks. The NBA has begun preparation for the 2023 Legislative Session as the Government Relations Committee summer meeting will be conducted on June 6, at which time recommendations for legislation to be introduced during the 2023 session will be forwarded to the NBA Board of Directors for further consideration. Please feel free to contact the NBA if you have suggestions regarding the need for banking legislation on the state level. The NBA will be busy in the months to come participating in the interim studies set forth above.

After completing day 59 of the 2022 Legislative Session, the Legislature recessed for an extended five-day period to allow for the return on day 60 to override any vetoes that may be issued by Governor Ricketts. The Governor has five days from the date of passage to veto legislation; had the Legislature conducted the final day of the session without the extended recess, the Governor could have waited until the body adjourned Sine Die and issued "pocket vetoes" after the legislature had adjourned.

The final day for bills to advance from the Select File and still have a chance for passage featured a filibuster of Senator Tom Brewer's (Gordon) "constitutional carry" gun rights bill (LB 773), which would have allowed Nebraskans to carry concealed weapons without a permit or current required gun safety training.

The Legislature has given final approval LB 707. The bill, introduced by Senator Matt Williams (Gothenburg), was designated as a Committee Priority bill and, as originally introduced, would authorize the Department of Banking to examine bank subsidiaries and recognize that bank subsidiaries may be formed as a limited liability company. The bill would also adopt the annual state-chartered bank and savings and loan “wildcard.”
 
As adopted, the bill contains the following provisions, all of which are supported by the NBA:​
​
LB 706 - REAL PROPERTY APPRAISER ACT: Introduced by Senator Williams, LB 706 will make “technical corrections” to the existing Real Property Appraiser Act to remain in compliance with the Appraiser Qualification Board’s Real Property Appraiser Qualification Criteria and to maintain compliance with Title XI of the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

LB 738 - LIBOR TRANSITION: Introduced by Senator Eliot Bostar (Lincoln), LB 738 addresses the legal effects of the discontinuance of LIBOR on contracts, securities or instruments and provides for the replacement, by operation of law, of the United States Dollar Libor as the benchmark index for any contract, security or instrument, with a recommended benchmark replacement that is based off a Secured Overnight Financing Rate (SOFR).

The bill specifies that the benchmark replacement applies with respect to a contract, security or instrument that either: 1) contains no fallback provisions setting forth a methodology or procedure for determining a benchmark replacement; or 2) contains fallback provisions that result in a benchmark replacement that: a) is not a recommended benchmark replacement; and b) is based in any way on any LIBOR value.

The measure provides that the selection or use of a recommended benchmark replacement as a benchmark replacement for a contract, security or instrument: 1) constitutes a reasonable replacement for and a commercially substantial equivalent LIBOR and 2) does not: a) impair or affect certain rights and performance obligations under; b) constitute a breach of; or c) void or nullify; the contract, security or instrument. The bill further provides that a person is not liable for damages and is not subject to any claim for equitable relief, in connection with: 1) the selection or use of a recommended benchmark replacement; or 2) the determination, implementation or performance of benchmark replacement performing changes; with respect to any contract, security or instrument.

LB 826 - PUBLIC FUNDS DEPOSIT SECURITY ACT: Senator Brett Lindstrom (Omaha) was the sponsor of LB 826, which will authorize the use of bonds or obligations of another state, or a political subdivision of another state, which are rated within the two highest classifications by at least one of the standard credit rating services to be used as collateral for public funds, with such classifications to include the underlying credit rating or enhanced credit rating, whichever is higher, with respect to bonds or obligations of a political subdivision of another state.
 
LB 846 - BANK DIRECTORS ANNUAL AUDIT: Introduced by Senator Julie Slama (Sterling), LB 846 will allow a bank’s board of directors to submit its annual audit to the Department of Banking within 120 days after the completion of the audit or, for a periodic audit, within 120 days after the end of the calendar year.

LB 993 - NEBRASKA FINANCIAL INNOVATION ACT: Senator Bostar was also the sponsor of legislation (LB 993) which will prohibit a digital asset depository from providing digital asset and cryptocurrency custody services unless the digital asset or cryptocurrency was 1) initially offered for public trade more than six months prior to the date of the custody services or 2) was created or issued by any bank, savings bank, savings and loan association, or building and loan association organized under the laws of this state or organized under the laws of the United States to do business in this State.
 
The bill also contains provisions clarifying the reserve requirements applicable to digital asset depositories which take custody of digital assets. The bill clarifies that the 100% reserve requirement for digital asset depositories only applies to the value of any outstanding stablecoin issued by the digital asset depository. Without this amendment, the 100% reserve requirement would apply to all digital assets in the custody of the digital asset depository.

The Legislature has given final approval to LB 1069, a bill introduced and prioritized by Senator Williams, on behalf of the NBA, which will: a) extend the definition of workforce housing to include owner-occupied housing units that cost not more than $325,000 (currently $275,000) and rental housing units that cost not more than $250,000 (currently $200,000); b) replace the $2 million cumulative grant limitation with provisions allowing for the Department, in its discretion, to determine the cumulative amount of grants for any single grantee; c) reduce the matching requirement for grants from 100% to 50%; and d) extend the sunset date for provisions of the Act from July 1, 2022, to July 1, 2027.

Other bills supported by the NBA and adopted by the Legislature during the past week include the following:
 
LB 902 - NEBRASKA CAREER SCHOLARSHIP ACT: LB 902, introduced by Senator Ray Aguilar (Grand Island) and designated as a Speaker Priority bill, will authorize the Board of Trustees of the Nebraska State Colleges to award a Nebraska Career Scholarship not exceeding a maximum of $15,000 per year to any eligible state college student who achieved a composite score on a standard college admission test equivalent to a score of at least 18 out of a maximum score of 36 and who is enrolled in an eligible program of study (rangeland management, industrial technology, criminal justice, business administration, education, communication, or computer information systems). Under the measure each scholarship recipient will be required to register to obtain a Nebraska-based internship, apprenticeship, clinical position or employment in a major-related field prior to completion of the student’s eligible program of study. The bill also provides similar scholarship and internship opportunities for University of Nebraska eligible students.

LB 1024 - ARPA FUNDING-NORTH OMAHA RECOVERY ACT: Introduced by Senator Justin Wayne (Omaha), LB 1024 will promote recovery effort in North and South Omaha and other underserved areas of Nebraska. The legislation will allocate $335 million in federal funds under the American Rescue Plan Act of 2021 (ARPA) to support affordable housing, infrastructure improvements, crime prevention projects and other recovery initiatives.

Filibusters were the order of the week, as the Legislature spent four hours on Select File debate on Tuesday before advancing the tax relief package (LB 873) and spent eight hours on General File debate on both LB 920 (prison reform/overcrowding) and LB 933 (Nebraska Human Life Protection Act), with both measures falling short of the 33 votes required to invoke cloture and cease debate. In addition, an effort to override Governor Ricketts’ veto of a federal rental assistance funding bill (LB 1073) fell one vote short of the 30 votes needed to override the veto.

As of the end of this week, only four days remain in the 2022 Legislative Session. Friday marked the final day for bills to be considered on General File and still have a chance for passage. Bills on Select File must advance to Final Reading next Monday in order to reach the finish line. Lawmakers will take a five-day recess following adjournment next Wednesday and will return for the final day of the session on April 20 to consider overriding any Gubernatorial vetoes and take action on any bills remaining on Final Reading.

The Legislature has given second-round approval to LB 1069, a bill introduced and prioritized by Senator Matt Williams (Gothenburg), on behalf of the NBA, which would: a) extend the definition of workforce housing to include owner-occupied housing units that cost not more than $325,000 (currently $275,000) and rental housing units that cost not more than $250,000 (currently $200,000); b) replace the $2 million cumulative grant limitation with provisions allowing for the Department, in its discretion, to determine the cumulative amount of grants for any single grantee; c) reduce the matching requirement for grants from 100% to 50%; and d) extend the sunset date for provisions of the Act from July 1, 2022, to July 1, 2027.

​Lawmakers gave final approval on Thursday to a nearly $900 million tax relief package (LB 873), after rejecting efforts earlier in the week to include income tax cuts for middle-income taxpayers. As adopted, LB 873 will:

• Reduce individual and corporate income maximum rates to 5.84% over the next five years
• Provide additional property tax relief for the portion of real estate taxes paid for community colleges, with initial funding for property tax credits in the amount of $50 million in 2022, increasing to $195 million by 2026, with the credit percentage to be adjusted going forward on the basis of credits allowed in the prior year increased by the allowable growth percentage of no more than 5%
• Increase the amount of credits available under the Property Tax Incentive Act to $548 million in 2022, $567 million in 2023, and eliminate the existing cap of $375 million, otherwise applicable in 2022
• Completely phases out income taxes on social security income.

Earlier this week, Governor Ricketts sharpened his veto pen by cutting more than $170 million out of the $9.8 billion biennium state budget. The Governor line-item vetoed payments for providers caring for vulnerable Nebraskans, affordable urban housing development, and vocational and life skills programs to assist inmates to succeed outside of prison.

The Appropriations Committee recommended that all of the vetoes issued by Governor Ricketts be overridden, with the exception of the $14 million, to be left in the Governor's emergency fund, rather than being transferred into the state's Cash Reserve Fund. The Legislature took up the veto overrides on Thursday and accepted the Appropriation Committee's recommendations by overriding the Governor's vetoes, restoring more than $172 in expenditures.

LB 1014, which would distribute just over $1 billion in ARPA funds for approximately 40 projects or focus areas, was given final approval by the Legislature on Thursday. The legislation contains $10 million for rural workforce housing “infrastructure” (laying drinking water transmission lines, rehabilitation, renovation, demolition or destruction of vacant or abandoned buildings in disproportionately impacted communities and removal and remediation of environmental contaminants or hazards from vacant or abandoned properties in disproportionately impacted communities).
 
Under LB 1014, ARPA funding would be provided to address the following project areas:
 
Public Health:
$60 million for a rural health complex at the University of Nebraska-Kearney; $20 million to help rural communities replace aging ambulances
 
Economic Revival:
$60 million to Nebraska’s six community colleges to strengthen and grow a post-pandemic skilled workforce; $20 million for grants to Nebraska food banks and to groups with innovative food supply chain projects
 
Premium Pay:
Nearly $37 million to provide pay increases for front-line public health and public safety workers in 24-hour facilities; $55 million for rate increases for certain providers of developmental disabilities services
 
Infrastructure:
$23 million to repair irrigation tunnels that collapsed in the Fort Laramie–Gering Irrigation District; $20 million to the Nebraska State Fair for wastewater and sewage systems
 
LB 1014 has been sent to the Governor, who has line-item veto authority to cut specific expenditures of ARPA funds. The Legislature will likely consider overrides of any potential vetoes.

LR 264 CA, a proposed Constitutional Amendment to eliminate the state income tax, state sales tax, local property taxes and the inheritance tax and replace these taxes with a new “consumption” tax to fund state and local government, fell short of the 25 votes required to move the measure to Select File. The vote on the consumption tax proposal was as follows:
 
Ayes: Sens. Albrecht, Bostelman, Brewer, Briese, Cavanaugh, M., Clements, Geist, Gragert, Halloran, Hansen, B., Hilgers, Hilkemann, Hunt, Lathrop, Lowe, McDonnell, Moser, Murman, and Wayne.
 
Nays: Sens. Aguilar, Blood, Bostar, DeBoer, Dorn, Flood, Friesen, Kolterman, Linehan, McCollister, Pansing Brooks, Slama, Vargas, and Williams.
 
Present-Not Voting: Sens. Arch, Brandt, Cavanaugh, J., Erdman, Hansen, M., Hughes, Jacobson, McKinney, Morfeld, Sanders, Stinner, Walz, and Wishart.

The following bill was debated and advanced to Select File this week:

LB 729 - QUICK ACTION CLOSING FUND ACT: Introduced by Senator Brett Lindstrom (Omaha), LB 729 would establish the Quick Action Closing Fund to authorize expenditures by the Governor for the purposes of economic development and related infrastructure development if expenditures of such funds would likely be a determining factor in locating a high-impact business project or facility in the state or in retaining such project or facility within the state. (NBA Position: Support)

During the past week, the Legislature adopted adjustments to its biennium budget, moved to the cusp of giving final approval to the ARPA funding proposal, moved forward on “transformative” tax relief and engaged in extensive debate on prison reform and overcrowding measures. In its spare time, the Legislature methodically moved through a series of priority of bills at the General File and Select File stages of debate but has yet to address almost 30 individual Senator, Committee and Speaker priority bills. In order for a bill to be passed this session, it must advance from General File to Select File no later than Friday, April 8.

The Legislature has given first-round approval to LB 1069, a bill introduced and prioritized by Senator Matt Williams (Gothenburg), on behalf of the NBA, which would: a) extend the definition of workforce housing to include owner-occupied housing units that cost not more than $325,000 (currently $275,000) and rental housing units that cost not more than $250,000 (currently $200,000); b) replace the $2 million cumulative grant limitation with provisions allowing for the Department, in its discretion, to determine the cumulative amount of grants for any single grantee; c) reduce the matching requirement for grants from 100% to 50%; and d) extend the sunset date for provisions of the Act from July 1, 2022, to July 1, 2027.

LB 1069 is back on the agenda for Select File debate next Tuesday.

The Legislature has advanced LB 707 to the final stage of debate. The bill, introduced by Senator Williams, has been designated as a Committee Priority bill and, as originally introduced, would authorize the Department of Banking to examine bank subsidiaries and recognize that bank subsidiaries may be formed as a limited liability company. The bill would also adopt the annual state-chartered bank and savings and loan “wildcard.”

As advanced to Final Reading, the bill contains the following provisions, all of which are supported by the NBA:

LB 706 - REAL PROPERTY APPRAISER ACT: Introduced by Senator Williams, LB 706 would make "technical corrections" to the existing Real Property Appraiser Act to remain in compliance with the Appraiser Qualification Board's Real Property Appraiser Qualification Criteria and to maintain compliance with Title XI of the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

LB 738 - LIBOR TRANSITION: Introduced by Senator Eliot Bostar (Lincoln), LB 738 addresses the legal effects of the discontinuance of LIBOR on contracts, securities or instruments and provides for the replacement, by operation of law, of the United States Dollar Libor as the benchmark index for any contract, security or instrument, with a recommended benchmark replacement that is based off a Secured Overnight Financing Rate (SOFR).

The bill specifies that the benchmark replacement applies with respect to a contract, security or instrument that either: 1) contains no fallback provisions setting forth a methodology or procedure for determining a benchmark replacement; or 2) contains fallback provisions that result in a benchmark replacement that: a) is not a recommended benchmark replacement; and b) is based in any way on any LIBOR value.

The measure provides that the selection or use of a recommended benchmark replacement as a benchmark replacement for a contract, security or instrument: 1) constitutes a reasonable replacement for and a commercially substantial equivalent LIBOR and 2) does not: a) impair or affect certain rights and performance obligations under; b) constitute a breach of; or c) void or nullify; the contract, security or instrument. The bill further provides that a person is not liable for damages and is not subject to any claim for equitable relief, in connection with: 1) the selection or use of a recommended benchmark replacement; or 2) the determination, implementation or performance of benchmark replacement performing changes; with respect to any contract, security or instrument.

LB 826 - PUBLIC FUNDS DEPOSIT SECURITY ACT: Senator Brett Lindstrom (Omaha) is the sponsor of LB 826, which would authorize the use of bonds or obligations of another state, or a political subdivision of another state, which are rated within the two highest classifications by at least one of the standard credit rating services to be used as collateral for public funds, with such classifications to include the underlying credit rating or enhanced credit rating, whichever is higher, with respect to bonds or obligations of a political subdivision of another state.

LB 846 - BANK DIRECTORS ANNUAL AUDIT: Introduced by Senator Julie Slama (Sterling), LB 846 would allow a bank’s board of directors to submit its annual audit to the Department of Banking within 120 days after the completion of the audit or, for a periodic audit, within 120 days after the end of the calendar year.

LB 993 - NEBRASKA FINANCIAL INNOVATION ACT: Senator Bostar is also the sponsor of legislation (LB 993) which would prohibit a digital asset depository from providing digital asset and cryptocurrency custody services unless the digital asset or cryptocurrency was 1) initially offered for public trade more than six months prior to the date of the custody services or 2) was created or issued by any bank, savings bank, savings and loan association, or building and loan association organized under the laws of this state or organized under the laws of the United States to do business in this State.

Prior to advancing, Senator Mike Flood (Norfolk) proposed an amendment to LB 707 to clarify the reserve requirements applicable to digital asset depositories which take custody of digital assets. The amendment clarifies that the 100% reserve requirement for digital asset depositories only applies to the value of any outstanding stablecoin issued by the digital asset depository. Without this amendment, the 100% reserve requirement would apply to all digital assets in the custody of the digital asset depository.

After a number of unsuccessful attempts to forge a compromise on a package of tax relief measures, the Legislature, following four hours of debate, on a vote of 44-0 gave first-round approval on Wednesday to LB 873.

LB 873 contains the following provisions:

• Reduces individual and corporate income maximum rates to 5.84% over the next five years
• Provides additional property tax relief for the portion of real estate taxes paid for community colleges, with initial funding for property tax credits in the amount of $50 million in 2022, increasing to $195 million by 2026, with the credit percentage to be adjusted going forward on the basis of credits allowed in the prior year increased by the allowable growth percentage of no more than 5%
• Increases the amount of credits available under the Property Tax Incentive Act to $548 million in 2022, $567 million in 2023, and eliminates the existing cap of $375 million, otherwise applicable in 2022
• Completely phases out income taxes on social security income

LB 873 has resurfaced on the agenda for Select File debate next Tuesday.

LB 902 - NEBRASKA CAREER SCHOLARSHIP ACT: LB 902, introduced by Senator Ray Aguilar (Grand Island) and designated as a Speaker Priority bill, has been advanced to Select File. LB 902 would authorize the board of trustees of the Nebraska State Colleges to award a Nebraska Career Scholarship not exceeding a maximum of $15,000 per year to any eligible state college student who achieved a composite score on a standard college admission test equivalent to a score of at least 18 out of a maximum score of 36 and who is enrolled in an eligible program of study (rangeland management, industrial technology, criminal justice, business administration, education, communication, or computer information systems). Under the measure each scholarship recipient would be required to register to obtain a Nebraska-based internship, apprenticeship, clinical position or employment in a major-related field prior to completion of the student’s eligible program of study. The bill also provides similar scholarship and internship opportunities for University of Nebraska eligible students. (NBA Position: Support)

LR 264CA-NEBRASKA CONSUMPTION TAX ACT: The Legislature is scheduled to conduct General File debate next Tuesday on LR 264CA, a proposed constitutional amendment, introduced and prioritized by Senator Steve Erdman (Bayard). The measure, on and after January 1, 2024, would prohibit the imposition of any taxes other than retail consumption taxes and excise taxes upon the people of Nebraska. If passed by the Legislature and approved by the voters, the state income tax, state sales tax, property tax and the inheritance tax would be repealed. (NBA Position-Oppose)

A package of budget adjustment bills (LB 1011, LB 1012 and LBA 1013) received final-round approval on Tuesday and have been sent to Governor Ricketts for his signature. The $9.8 billion biennium state budget contains $30 million for rural workforce housing (LB 1071) and $20 million for middle-income workforce housing (LB 1262), both of which are supported by the NBA.

LB 1014, which would distribute just over $1 billion in ARPA funds for approximately 40 projects or focus areas, has been re-advanced to Final Reading. The legislation contains $10 million for rural workforce housing "infrastructure" (laying drinking water transmission lines, rehabilitation, renovation, demolition or destruction of vacant or abandoned buildings in disproportionately impacted communities and removal and remediation of environmental contaminants for hazards from vacant or abandoned properties in disproportionately impacted communities).

Under LB 1014, ARPA funding would be provided to address the following project areas:

Public Health:
$60 million for a rural health complex at the University of Nebraska-Kearney; $20 million to help rural communities replace aging ambulances

Economic Revival:
$60 million to Nebraska’s six community colleges to strengthen and grow a post-pandemic skilled workforce;
$20 million for grants to Nebraska food banks and to groups with innovative food supply chain projects

Premium Pay:
Nearly $37 million to provide pay increases for front-line public health and public safety workers in 24-hour facilities; $55 million for rate increases for certain providers of developmental disabilities services

Infrastructure:
​$23 million to repair irrigation tunnels that collapsed in the Fort Laramie–Gering Irrigation District; $20 million to the Nebraska State Fair for wastewater and sewage systems