Zach Wendling
LINCOLN — Two Lincoln state senators clashed Friday at a hearing over a governor-backed priority to reconsider what to do with Nebraska retirement plans once they are fully funded, starting with schools.
The proposal in question, Legislative Bill 645 by State Sen. Beau Ballard of Lincoln, seeks to lower annual contribution rates to the statewide school retirement plan for eligible teachers and school employees, excluding those in the Omaha Public Schools, who have a separate retirement plan.
The initial bill, introduced at Gov. Jim Pillen’s request, had received broad condemnation from the Nebraska State Education Association and teachers statewide, prior to a latest amendment that shifted the NSEA to neutral because it would lower the payroll deductions for employees, increasing take-home pay.
State Sen. Danielle Conrad of Lincoln, the current Legislature’s longest-serving lawmaker in her 11th year, repeatedly asked Ballard if lawmakers should pause given “great risk and significant economic volatility.”
She also pinned Ballard over whether he would have proceeded differently knowing the “heartache” that teachers had over the version of LB 645 that he introduced on the last day of bill introductions without much heads up.
Part of that opposition came because NSEA leaders described the bill as a “raid” on the retirement fund, which Ballard and the governor’s staff adamantly denied and said was never an option.
“If you had to do it over again would you proceed forward in such a haphazard and careless manner, or would you have clearer communication and more stakeholder buy-in?” Conrad asked.
“I disagree with your framing,” Ballard, chair of the Retirement Committee, responded. “I was confident in my ability to bring stakeholders to the table and talk about a reduction for teachers, and I think that this is going to be a huge win.”
The Lincoln senators faced the closest committee chair election on the first day of the 2025 legislative session for the Retirement Committee. After a 24-24 vote, Ballard prevailed over Conrad by one vote, 25-24.
Current status of the plan
This is Ballard’s first year on the committee, while it is Conrad’s fifth. During Conrad’s first stint in the Legislature, 2007 to 2015, she was part of a major 2013 compromise partly led by three key school organizations to keep the retirement plan afloat after rough economic downturns.
Those compromises have since brought the school retirement plan from around 77.1% actuarially funded to 99.9% as of last summer, which led to LB 645. The retirement plan for judges is also fully funded, which Ballard told Conrad he is open to modifying.
The school retirement plan is annually funded via contributions from:
- Teachers and other employees: 9.78% of payroll.
- Employers (school districts): 9.88% of employees’ payroll.
- State of Nebraska: 2% of statewide school employee payroll.
Statewide school employee payroll for this fiscal year was estimated to be about $2.5 billion.
When the plan requires more funding than legally required, the obligation falls on the state, which was the case in 2013. The compromise that year was championed in part by the NSEA, Nebraska Association of School Boards and Nebraska Council of School Administrators to provide long-term stability to the plan and lower the shortfall that the state needed to cover.
The NSEA shifted its stance on LB 645 after a Feb. 13 amendment from Ballard was introduced to streamline stepped-down contributions for the state and employees to three tiers, based on whether the plan is less than 96% actuarially funded, 96% to less than 100% actuarially funded or fully funded.
At 96% funding, the contributions drop to 0.7% of statewide school employee payroll for the state and 7.28% of payroll for employees. Once the plan is fully funded, the state would fully pull out of annual contributions, while teachers would remain at the 7.28% level.
If the plan is less than 96% funded, contribution levels would return to the current levels.
School districts are currently set at 101% of what employees contribute, equating to 9.88% of employee payroll. Ballard’s amendment would lock that 9.88% contribution into law, foregoing a benefit to the school districts funded by property taxes or state tax dollars.
‘Three boats all rising’
Jeremy Knajdl, business manager for Minden Public Schools in central Nebraska, said employers would effectively pay the same portion of payroll taxes if LB 645 is adopted. However, he said employers would end up paying about 136% of what employees contribute under lowered contribution rates.
The state would receive its modified contribution rate after the start of each fiscal year on July 1, but employees would get a new contribution rate after Jan. 1 of each year.
Knajdl, representing the Nebraska Council of School Administrators, told the committee that this timing could be hard for some employees who go into winter break with one paycheck and then come back facing a 2.5% increase in required contributions, lowering their take-home pay.
Colby Coash, a former Lincoln state senator representing the Nebraska Association of School Boards, said leaving the plan alone makes sense.
“It’s always when things are good, pull money out, it changes, and then you’re not able to be responsive to that,” Coash said.
However, Coash said, if state and employee contributions are lowered, employers should receive an adjustment, too, which he noted would help lower property taxes. His legislative tenure between 2009 and 2017 crossed paths with Conrad and included the 2013 retirement compromise that both supported.
“The proposal that got us to where we are was three boats all rising,” Coash said. “Now we’re in a situation where that’s a little off balance.”
Ballard said employers were left out “to maintain a certain level of funding.”
“I believe that this is a recruitment and retention piece for employers,” Ballard testified.
Impact to budget negotiations
State Sen. Rob Clements of Elmwood, chair of the Legislature’s Appropriations Committee, asked whether the 2% state contribution increase passed in 2013 was meant to be for “forever,” or “until we fix the problem.”
Coash responded that it was intended “to get us out of the hole.”
Clements’ committee is leading efforts to fill a $457 million projected budget shortfall over the next two years. The committee preliminarily identified about $171 million in cuts and could use another $100 million in more revenue than initially anticipated in the next few months.
State Sen. Margo Juarez of Omaha, a former paraeducator and former school board member for OPS, suggested cutting back on sending the Nebraska National Guard to the southern border could save money.
She asked why 100% funded should be the threshold and not a “greater cushion,” such as when the plan is 105% or 110% actuarially funded.
“Just because we’re at 100%, to me, I just don’t think that that should be the reason why we’re doing this,” Juarez said.
While the lower state contributions could be used toward the projected budget shortfall, Kenny Zoeller, director of the governor’s Policy Research Office, reiterated the governor’s stance that the freed-up dollars should remain separate and be used for state investments in education.
Zoeller said the governor identified the dedicated education investments as a “North Star” for the committee’s continued work. Zoeller said it is an opportunity to be forward-thinking.
Two other “North Stars” for the governor, Zoeller said, are ensuring the financial longevity, growth and health of the school retirement plan while finding a proper balance in increasing teacher take-home pay and providing tax relief in state dollars.
“This bill is truly an exciting opportunity for the state to deliver wins for teachers and the taxpayer,” Zoeller said.
‘I have nothing to hide’
Another contentious moment Friday came when Conrad pressed Ballard on whether the bill was “retribution” for the efforts of the teachers union and other advocates the past few years to stop state “voucher schemes.” About 57% of Nebraskans in November rejected using state dollars to help offset the cost of attending private K-12 schools.
Ballard said “that was never a consideration,” and Zoeller shook his head “no” during the questioning.
Conrad, an attorney, pushed further and asked if public records would confirm Ballard’s position. He said any records involving his office would.
Ballard said he, like other committee members, had received feedback from thousands of teachers statewide and interacted with more in person and over the phone.
Conrad asked Ballard if he would personally publish his communications with the governor’s office online. Ballard declined, describing them as “private” communications.
“I have nothing to hide in this,” he added.
Lawmakers’ communications are shielded from records requests, but the executive branch does not have that same privilege.
Ensuring proposal’s viability
Tim Royers, president of the NSEA representing 26,000 public K-12 school teachers statewide, repeated that the LB 645 amendment was a “step in the right direction,” but expressed openness to bringing employers to the table.
Royers cautioned that the committee needs more information before acting and shouldn’t “rush.”
“My fear is in your quest to reduce an appropriation, I fear you’re setting yourself up for a much larger gap in the future,” Royers said.
Such changes to state retirement plans require an actuarial study before they can be enacted, to ensure the proposals are feasible. One such study was completed one week ago, but Royers said Friday it was a “coin flip” to whether the state could afford the increased risk and volatility or if employees or the state could be harmed in the long run.
“I would love to live in a world where we could do a two-and-a-half percent increase in pay to our teachers, but I can’t in good conscience advocate for that if the data tells me that 10, 15, 20 years from now we’re going to actually see us go in the opposite direction,” Royers said.
He continued: “Absent additional information that tells us for sure this is a viable plan, no, we can’t be comfortable moving forward with this.”
Ballard committed to working with districts, administrators, the governor’s team, teachers and his committee members to figure out how to move forward. On Friday, he identified LB 645 as a 2025 committee priority bill, increasing the chances it could be debated on the floor this year.
The committee took no immediate action on the legislation.