A farmer on a tractor sprays soybean crops. (Photo by Westend61/Getty Images)
State official says new statute changes allow transfer for water fund admin costs; Trust backers call it unconstitutional
BY: PAUL HAMMEL– JANUARY 5, 2026
Nebraska Examiner Press Release
LINCOLN — With state government facing a $471 million budget shortfall, one state agency again seeks to use state lottery funds, through the Nebraska Environmental Trust, to help finance its operations.
The proposal was described by trust supporters as a new and probably unconstitutional “raid” of trust funds — state lottery proceeds that are granted out to environmental projects.
A state official, meanwhile, described the transfer as necessary to continue soil and water conservation projects and said it complies with a recently amended state law that expanded the allowable uses of the money.
The Nebraska Department of Water, Energy and Environment (NDWEE), in a mid-budget funding request, seeks an $8 million transfer from the Trust, of which $6 million would be used for a soil and water conservation program and $2 million for salaries and administrative costs.
Amanda Woita, a department spokeswoman, said the transfer to the Water Resources Cash Fund complies with the goal of the Trust funds — to conserve, enhance and restore the state’s environment, and that the Trust currently holds more than $70 million, so it can “easily” afford an $8 million withdrawal. The Trust typically distributes about $20 million in lottery-funded grants each year.
“Using these funds to protect the vital groundwater and surface water resources is a clear constitutional and common-sense use of the funds allocated to the Environmental Trust,” Woita said in an email response to questions.
But Kristal Stoner, the head of Audubon Great Plains, and Sandy Scofield, a former state senator who heads the Friends of the Environmental Trust, questioned the legality of the proposed transfer.
Stoner said using one-time Trust funds to help solve a state budget problem would “erode” the Trust and its purpose, which is to provide competitive grants to local and regional organizations seeking to enhance the state’s environment.
“I am deeply concerned,” she said in an email. “Continued diversions of funds will mean the end of the Trust.”
“Nebraska should continue to fund our legal responsibilities and basics of our government with general funds,” Stoner said, and not lottery proceeds.
Tight budget times
The proposal comes when the state is wrestling with closing a gap in the state budget and as supporters of the Trust worry about raids on the grant funds.
Explaining the Nebraska Environmental Trust
The Nebraska Environmental Trust was established when Nebraskans approved a state lottery in 1992. It receives 44.5% of the lottery proceeds — about $20 million a year in recent years.
Its stated mission is “to conserve, enhance and restore the natural environments of Nebraska.”
Grants are provided on a competitive basis, after a review and scoring by a committee of Trust Board members and then voted on by the entire 14-member board. The governor appoints nine board members. Five others are state agency heads, four of which are appointed to those posts by the governor.
Recent grant recipients include the Statewide Arboretum, various cities and towns from Omaha to Mullen, the Crane Trust, Ducks Unlimited, the Nebraska Game and Parks Commission, as well as the Audubon Society.
A year ago, the Legislature allocated $15 million in Trust funds, over two years, to soil and water conservation programs overseen by the Department of Natural Resources, an agency that recently was merged into the NDWEE.
State lawmakers, though, rejected a proposal by Gov. Jim Pillen to expand the use of Trust funds to include “outdoor recreation” and “healthy infrastructure.”
The separate Water Resources Cash Fund primarily finances projects by local Natural Resources Districts to enhance stream flows and groundwater recharge in areas of concern about water resources.
When it was created, the water program was financed using state tax dollars. But since 2011, Trust funds have been transferred in some years to supplement the state water cash fund’s annual grants, which totaled $3.7 million in the most recent year, according to an October report to the Legislature.
The NDWEE, in its budget request, said the $8 million in Trust funds would allow continuation of water resources programs in areas where water has been fully or overappropriated.
In recent years, the Trust, in a departure from past practices, has built up an excess of funds by not awarding all the proceeds it gets from the Nebraska Lottery. In 2023, for instance, it granted out only $11 million of the $20 million available. In 2024, $15 million was granted out of $26 million available.
This year, grant awards of about $18 million out of the $25 million available have been recommended by a Trust subcommittee, according to Holly Adams, the Trust’s executive director. The full Nebraska Environmental Trust Board meets Jan. 8 to consider approving those awards.
According to the Legislative Fiscal Office, the Trust holds about $73 million in assets, about $27 million of which will remain unobligated, once the proposed new grants are considered. Some of the Trust’s grants are multi-year, so funds for them are already assigned to grant out in future years.
Scofield, who was chief of staff under then-Gov. Ben Nelson when the Environmental Trust was created, said lottery funds were never intended to finance the administrative expenses of state agencies. She said the current budget “mess” has been caused by the state failing to provide enough tax revenue to finance state operations.
Some have blamed cuts in state income taxes passed by the Legislature in 2023 as too deep. The cuts are projected to reduce state tax revenue by $470 million in the current fiscal year and $702 million in 2026-27. Pillen, meanwhile, has said he anticipated needing to cut state spending and says state government should be reduced. He has called for $500 million in agency cuts this year.
Legal questions continue
Supporters of the Trust, who maintain that the latest proposed transfer is illegal, point to a state statute that says that grants from the Trust “shall not provide direct assistance to regulatory programs.”
But Woita, of the NDWEE, said that is a misreading of state law, and that recent amendments for the use of the Water Resources Cash Fund clearly allow its use to cover the costs of salaries and water conservation projects.
In May, a former state official, Jon Oberg, threatened to file a lawsuit to block the proposed transfer of Trust funds to the water resources fund proposed in the 2025 legislative session.
Oberg and another former state official, W. Don Nelson, who served as chief of staff under then-Gov. Bob Kerrey, have previously successfully blocked a Trust funding decision that they maintained was unconstitutional. Their 2020 lawsuit resulted in the removal of a $1.8 million grant to install ethanol blender pumps at gas stations.
But Oberg told the Examiner on Thursday that he had no comment about the most recent proposal. The proposed $8 million transfer will be considered by the Legislature’s Appropriations Committee during the 2026 legislative session, which begins Wednesday.
