Heineman outlines agenda in speech and reaches out to senators

BYLINE: By NATE JENKINS, Associated Press Writer

DATELINE: LINCOLN Neb.

Gov. Dave Heineman steeled state senators for mounting water and education policy problems facing the state Thursday, and called on them to approve tax cuts and reduce state spending.

"We need to confront these challenges and those that await us over the next four years head-on," Heineman said in his inaugural address after being sworn in as governor Thursday.

Heineman reached out to the Legislature, which has been overhauled by term limits there are 22 new senators. Some political observers and lawmakers have said the inexperience may make the Legislature bend more easily to the governor's wishes.

Heineman is making no secret of his primary wish, which he told lawmakers represents a crossroads for the state.

"As every Nebraskan can attest, over the past two decades, Nebraska has become a high-tax state," Heineman said. "We can act now and grow our state to meet the demands of the future, or we can do nothing, change nothing, and watch the slow decline of a great state."

He recently unveiled a tax-cut package that would lower income-tax rates, condense the number of income brackets from four to three, and eliminate both the estate tax and so-called marriage penalty. A family of four earning $50,000 annually would receive a tax cut of about $227 under the plan, Heineman has said.

Heineman has said the plan is targeted at the middle class and would provide more than $1 billion of tax relief over the next four years, Heineman said.

Senators are expected to debate in coming weeks whether the state can afford it.

"At first look, it looks like an aggressive plan," said Sen. Chris Langemeier of Schuyler. "I think we'd all certainly like to see tax cuts. We'll have to evaluate the plan and see if it's sound and fiscally possible."

How Heineman plans to pay for the proposal that would cost $200 million to $250 million a year is not yet clear. But he has suggested it will depend partially on less state spending.

He said Thursday he would present a tightfisted budget that limits state spending "to a far more reasonable budget than we have historically achieved." The days when state government provided funding for every project, he said, are gone.

Heineman's tax-cut plan has been criticized for not doing more to reduce property taxes, which a recent state report showed increased about 7 percent from 2005 to 2006.

"I also know that there is a need to have an open, honest discussion about property taxes," Heineman said.

Following last year's passage of a large tax-break packages for businesses, Heineman appears convinced that reducing taxes is the next step toward creating more jobs, but also stressed the need to focus on education.

He has previously suggested he will call for fully funding a formula that sends state dollars to local schools, a move he believes would ease property taxes. But overall, he called state attempts to address local property taxes a "tax shift, not a tax cut."

"I think what he's attempting to do makes a lot of sense," said Sen. Mike Friend of Omaha. "When you reduce the tax burden like he's proposing, you build a tax climate conducive to business and entrepreneurs.

"I'm not one who jumps on governors' bandwagons, but I understand where he's going with this."

In reaching out to the new Legislature, Heineman said called the opportunity to make changes for the good of the state unprecedented.