Lawmakers override veto on social service payments

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April 2, 2012 - 7:00pm

The Legislature Tuesday overrode Gov. Dave Heineman's veto of payments to social service agencies who went unpaid during child welfare privatization. And lawmakers worked on assuring that no sales taxes would be paid on construction of a new Stratcom headquarters at Offutt Air Force Base.

The veto override concerned $2.5 million worth of claims from social service agencies across the state. The agencies provided services for children who were state wards. But they were subcontractors, and were not paid by the contractor Boys and Girl's Homes, one of the so-called "lead agencies" hired by the state to handle child welfare privatization.

Omaha Sen. Steve Lathrop argued that they should be paid, and used a personal analogy. "If I take my daughter into the hospital and I give them my insurance card and they take her appendix out and the bill comes, and at the same time the bill comes the insurance company calls me up and says I'm bankrupt. I don't have the means to pay it,' I'm a parent. I still owe the bill," Lathrop said. "And when we take in a ward we really are, statutorily and practically, in the position of a parent."

In his veto message, the governor said the proposed payments were unconstitutional. But Sen. John Harms of Scottsbluff supported the override, saying the agencies affected served parts of the state without other providers. "If we support the governor, then we've just destroyed many parts of rural Nebraska in providing services," Harms said.

Sen. John Nelson of Omaha supported the governor's veto. "I haven't heard anyone here say that the children were not cared for. They were. That was done by the subcontractors, whether voluntarily or involuntarily. We had a duty to pay the contractor -- Boys and Girls Homes. And I maintain that we did. That was our duty. We don't have a duty to pay twice, or to pay indefinitely, because someone lost some money," he declared.

Nelson predicted an override would result in a lawsuit that the state would lose. Nevertheless, senators voted 31-12 to override the veto.

On Stratcom, the Revenue Committee held a public hearing. Congress has approved a new half billion dollar headquarters for the command, located at Offutt Air Force Base, that deal with nuclear, space, and cyber warfare. But there is concern about possible effects on the project by Nebraska sales taxes.

Nebraska law exempts the federal government from paying sales tax. But it requires filing a form on behalf of private companies that might be buying materials for the project.

The federal government has declined to sign the form, citing concerns that it might therefore become liable for actions by those companies. In fact, witnesses said, the federal government has paid taxes on previous construction projects, like federal courthouses and office buildings.

U.S. Senator Ben Nelson testified at the hearing, urging that a way be found to give the tax exemption without risking federal liability. "In the past, the Army Corps of Engineers has just paid the sales tax on construction materials rather than try to resolve their concerns about liability. This has quietly raised the cost of projects to taxpayers, and it has boosted tax revenues to the state of Nebraska -- perhaps some that I had the benefit of when I was governor a few years ago," said Nelson. "But needless to say, I was surprised and disappointed to learn that taxes had been paid on projects funded by taxpayers that I think most of us absolutely thought were exempt from such taxes."

Col. David Press of Stratcom told Revenue Committee chairwoman Sen. Abbie Cornett that the estimated $12 to $15 million that could be spent on taxes would take away from the project itself. "Do you feel that those projects directly affect national defense?" asked Cornett. "Absolutely, I do. Those funds go back into the project," said Press. "It would definitely help us, with perhaps redundancies, additional redundancies, whether its power, additional backup power, or cooling. We get additional warfighting capability to keep this one of a kind facility running for the missions that we have."

Under questioning from Sen. Galen Hadley of Kearney, military officials admitted that they had included Nebraska sales tax in their calculations of how much the project should cost. But they said bids had come in higher than expected. Hadley pressed the point with Thomas Ingram, a lawyer for the Army Corps of Engineers. "Then it would be a fair statement if the contracts would come in at what you had expected the bids to be, then we wouldn't be here today. Is that a fair statement?" Hadley asked. "Probably so sir," Ingram replied.

Lawmakers said they would probably ensure that no sales taxes would have to be paid, either by changing a Department of Revenue form or the law to specify that the federal government would have no liability for private contractors.

 

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