OMAHA, Neb. (AP) — Nebraska lawmakers gave initial approval Thursday to a $9.7 billion state budget that includes more money for property tax credits and college scholarships while setting aside $115 million for a possible state prison to ease overcrowding.

Lawmakers advanced the measure, 42-0, through the first of three required votes.

The package would cover state expenses for the next two fiscal years, starting on July 1. It came as some lawmakers warned about a possible economic downturn that hit state revenues, which are currently higher than expected despite the coronavirus pandemic.

The budget includes a $351 million boost to the state’s cash reserve, bringing it to a total of $763 million for emergencies and one-time expenses — a savings cushion equal to a little less than two months of state tax collections.

“Having a healthy cash reserve will help us in a lot of different ways,” said Sen. John Stinner, of Gering, chairman of the budget-writing Appropriations Committee.

Sen. Curt Friesen, of Henderson, said lawmakers should be cautious because the state's healthy tax collections could drop sharply with a downturn in the farm economy. Friesen said he was also concerned federal coronavirus aid won't be sustainable if the pandemic continues.

“We need to make sure we're prepared,” he said.

Under the budget, state spending would increase by an average of 1.7% over the two-year budget cycle. Providers of child welfare services, mental health services and other services would get a 2% increase in how much the state reimburses them, for an extra $83.5 million.

The package would also pump an extra $63 million into a tax credit to cover a part of local property tax bills paid by land, home and business owners. Nebraska's state-funded career scholarship program, a priority of Gov. Pete Ricketts that's designed to steer students toward high-demand careers, would get $17 million.

Lawmakers are also proposing to set aside $115 million to for half of a new state prison, although they're expected to study whether there's a need before approving the $230 million, multi-year project.

Nebraska's prisons have struggled with chronic overcrowding, and Ricketts has argued that the state needs to replace the 152-year-old Nebraska State Penitentiary in Lincoln.

Lawmakers gave the main budget bill initial approval Thursday evening after a prolonged debate that shifted away from discussion about the main spending measure.

Sen. Machaela Cavanaugh, of Omaha, railed against senators Thursday after they declined to add her as a member of a special committee that she pushed to create. The committee was set up to investigate major problems with St. Francis Ministries, a Kansas-based child welfare contractor that serves the Omaha area.

Cavanaugh, who has asked tough, probing questions of state administrators, said she was excluded from the committee by senators who personally dislike her and view her as too critical of the state's contract.

Cavanaugh is a Democrat in the officially nonpartisan Legislature, and the board that chose the investigative committee's members is led by Republicans. The agency that signed the contract, the Nebraska Department of Health and Human Services, operates under Ricketts, also a Republican.

“Anytime I think you can’t go any lower, you prove me wrong," Cavanaugh said.


Follow Grant Schulte on Twitter: