Twenty Years Ago: How the Tobacco Lobby Nearly Smoked the Environmental Trust


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By Randall Moody

This is a story of treachery, deception, luck, timing, courage and power politics. In other words: how a law is made. It is a recounting of the process and behind-the-scenes maneuvering that resulted in the creation of the Nebraska Environmental Trust during the 1992 session of the Nebraska Legislature. This essay is gleaned from a written “after-action” report I prepared then for my lobbying client, the Nebraska Chapter of The Nature Conservancy, legislative records and from my own, admittedly faulty, memory. Some names are left out to protect the guilty.

By most accounts, the Environmental Trust, funded by the Nebraska Lottery has been a great success. According to the trust, “Over [the past 19 years] $189 million in grants has been given to more than 1,300 projects that have improved Nebraskans’ lives in the name of conservation.”

It was created “to conserve, enhance, and restore the natural physical and biological environmental environment in Nebraska, including the air, land, ground water and surface water, flora and fauna, prairies and forests, wildlife and wildlife habitat, and natural areas of aesthetic or scenic values,” according to the authorizing legislation.

Political Beginnings

One of the primary reasons, some say, Ben Nelson defeated incumbent Gov. Kay Orr in the 1990 Nebraska gubernatorial election was because of her opposition to a state lottery. Many surrounding states—including Iowa—for a number of years had been draining gaming money from Nebraska because of their popular lotteries. This was an “economic development” issue.

So, one of Gov. Nelson’s top priorities in the 1991 session of the Legislature was to make sure legislation authorizing a Nebraska lottery was considered and signed into law. That happened, and the law designated 49.5 percent of the proceeds of the lottery not paid back to players was to be used for an “Education Innovation Fund,” and 49.5 percent of the money was to go to a “Legislative Assistance Fund” described in the law “to be distributed as directed by the Legislature” Ironically, a “Gamblers Assistance Fund” was also created and would receive 1 percent of the gambled dollars.

The legislation also required that approval of a statewide lottery be submitted to the voters of Nebraska in the form of a constitutional amendment. That Legislative Resolution was approved, and an amendment to the state constitution was prepared for the November 1992 general election ballot.

1992 Preliminaries

With almost half of the proposed lottery proceeds left undesignated by the Legislature, the scramble was on to lay claim to the millions of anticipated revenue that would be available to the state. Interest groups of every stripe lined up to lay claim to the dollars as the 1992 session of the Legislature began. One of those interests eyeing the money was The Nature Conservancy. A nationwide environmental group, The Nature Conservancy, in other states, had utilized money from state-run and lottery-financed trust funds to provide dollars to protect wildlife habitat and natural areas.

In October 1991 The Nature Conservancy randomly polled 300 registered voters in Nebraska and found that 88 percent felt more needed to be done to protect the environment. Tellingly, 78 percent of those polled favored dedicating 25 percent of the proceeds from the proposed state lottery as a revenue source. Those polled also favored increasing the state tax on cigarettes as another way to fund environmental action. This information was shared with the governor and key state legislators.

In his state of the state address Gov. Nelson called for the creation of an environmental trust fund. So, early in the session, Sen. Chris Beutler of Lincoln introduced LB 1026, which included provisions for the creation of the trust fund, a governing board, recommended priorities and funding sources from 25 percent of the state lottery and two pennies of a 10 cent increase from 27 cents to 37 cents on a pack of cigarettes. For the Environmental Trust Fund, the money would be available until July 1993 and then cease. It was estimated that money from the lottery would begin coming in at about that time.

The remaining eight cents of the tax increase would go to other state projects—two cents for prisons, two cents to higher education and four cents to renovate state buildings and bring some up to federal Americans with Disabilities Act (ADA) standards. The bill was referred to the Legislature’s Revenue Committee.

Special Interests Weigh In

The public hearing on the bill was held Jan. 23 and drew a plethora of state government interests (and the state director of The Nature Conservancy) in support, and the tobacco and vending machine interests in opposition. Highlighting the importance of the bill to the governor, his chief of staff, former Sen. Sandy Scofield, testified on his behalf. From the back and forth among committee members and those testifying, it appeared that raising the cigarette tax by such a large amount would be a tough sell. And there were questions about the role and makeup of the Environmental Trust board, as well. After the hearing, the special interests went to work lobbying the eight Revenue Committee members. It would take five positive votes to get the bill out of committee and on to the floor of the full Legislature for consideration.

Committee action on legislation is held behind closed doors although lobbyists sometimes linger in the hallway to provide “advice” to senators before they vote on killing or advancing a bill. The executive session to consider LB 1026 was held on Feb. 18, so the various potential claimants to the cigarette tax money—and those opposed to any tax—had almost a month to bend legislative ears.

While the debate within committee is not recorded, the votes are. According to the printed record, LB 1026 survived a motion to kill the bill, with only three senators voting to do so. The motion needed the required five to pass. The bill was then amended and sent to the floor of the Legislature with the needed five votes.

The Amendments

The tobacco lobby had struck: the tax on cigarettes had been cut in half from 10 cents to five cents per pack. And other interests had weighed in: The new allocation gave one cent to cancer research projects at the University of Nebraska Medical Center and Creighton University (a private institution); one cent for state building construction; one-half cent for ADA compliance projects; one-half cent for the prisons; one cent for bonding projects at UNL, UNO and Chadron State College; and the amendment cut the allocation to the Environmental Trust Fund in half—from two cents to one cent.

The “new” LB 1026 made some changes in the structure of the governing board, but it continued to authorize the creation of an Environmental Trust Fund (an important element of the bill, as we shall see later), reaffirmed the trust fund would get 25 percent of the lottery money (if the lottery was approved by the voters in November) and most importantly: the bill did away with the “Legislative Assistance Fund” and allocated that 24.5 percent of the lottery proceeds to solid-waste programs for site assessment, monitoring, closure and remediation. After July 1, 1997, that portion of the lottery money would transfer to the Environmental Trust Fund, which then would be the beneficiary of 49.5 percent of the total proceeds. Old landfills had been a constant thorn in the side of municipalities for years because of their costs and the lack of funds cities and towns had available for dump cleanup, so the lottery money would be a big help, even for a limited period of time.

The League of Nebraska Municipalities, Creighton University and the University of Nebraska obviously had been successfully at work on Revenue Committee members (and the governor), lobbying for a share of the remaining cigarette tax revenue. But the pie was a lot smaller now.

A Coalition Is Formed and Complications Ensue

Let the lobbying begin. A coalition of interest groups was formed to work for the passage of the new LB 1026. This coalition was spearheaded by Sen. Beutler (the original sponsor of the bill) and the governor’s office. It included the heads of several state agencies, as well as lobbyists for the University of Nebraska and its medical school, state colleges, natural resources districts and the cities. Private interests included myself for The Nature Conservancy, lobbyists for the disabled, other environmental groups and Creighton University and its medical center and hospital.

Coalition lobbying can be very treacherous because each of the members necessarily owes their loyalty primarily to whomever they are representing. If a lobbyist can find an advantage for his or her client, they probably will take it. This is especially true when large amounts of money are at stake. At various times during the lobbying for the share of the cigarette tax increase, it was evident that one or the other interests was attempting to ensure their cut was protected or enhanced—sometimes to the disadvantage of other coalition members.

Sen. Morrissey’s Bill

Meanwhile, Sen. Spence Morrissey of Tecumseh had introduced a bill, LB 1257, a comprehensive landfill cleanup, recycling and environmental standard-setting program to be implemented by the state. Sen. Morrissey also designated LB 1257 as his “priority bill” for the session. This was very important because it guaranteed that it would be considered on the floor of the Legislature in 1992. At the end of this legislative session, all bills not considered would be dead. In other words, new legislation would have to be proposed in the 1993 session of the Legislature if senators wanted issues addressed again. New hearings would have to be held, and bills would have to clear committee votes to get back to the floor: a long and arduous process for controversial bills—like 1026 (containing a cigarette tax increase and allocation of lottery money). Unfortunately, no individual senator could be persuaded to take it as a personal priority bill for this session. It was designated a Revenue Committee priority, but that meant it had less of a priority than all of the 49 senators’ personal priority bills. And this was the “short” session of the Legislature—60 legislative days.

Another complication was that Gov. Nelson had proposed a comprehensive property tax reform bill that had to go to the voters for approval in the May primary election. This complicated and controversial measure took up considerable debate time, leaving limited time for other legislation to be considered.

Time Begins to Run Short

It soon became apparent that LB 1026 was not going to have high enough priority to be considered by the full Legislature in 1992. Efforts by the coalition then began to focus on finding a related bill to which could be attached the provisions of LB 1026: a complicated process because of the varied provisions of the bill. The Speaker of the Legislature could rule “out of order” any amendment that wasn’t “germane” to the underlying bill. And you could bet that the tobacco lobby would ensure there would be a challenge to any attempt to get LB 1026 moving forward in the process.

Without consulting my coalition partners and because I was beginning to believe the tobacco lobby had enough votes to stop any consideration of a cigarette tax, I approached Sen. Morrissey and his staff about the possibility of attaching the Environmental Trust Fund authorization and its funding from the lottery, and the solid waste cleanup portion and its lottery funding provisions, as an amendment to LB 1257, his priority bill —without the cigarette tax increase.

My lobbying client, The Nature Conservancy, which would have the capability to apply for money from the Environmental Trust Fund for years to come, was much more interested in seeing the fund authorized and funded by the lottery than in the penny from the cigarette tax, which would only be available to the trust fund for about a year anyway. It seemed our interest would be severely damaged if the Environmental Trust Fund and its lottery funding went down to defeat because it was tied to the cigarette tax increase.

Sen. Morrissey indicated initial interest in this idea, but only if his bill continued on a smooth track to passage with little opposition—which seemed to be happening. He did not want to burden his priority bill with unwanted baggage and possibly incur the wrath of the tobacco lobby—and maybe the other coalition interests that were depending on the dollars for their projects from the cigarette tax.

What a Complicated Web We Spin

As the legislative session dwindled to a few days, it became apparent that LB 1026 was near death unless it was attached to another bill as an amendment. And those prospects were looking bleak as the tobacco lobby pulled out all the stops. I went back to Sen. Morrissey. His priority bill had by that time cleared the first of three readings required before a bill could be sent to the governor to be signed into law. I assured him that from my conversations with various senators the vehement opposition to LB 1026 was to the cigarette tax increase and not to the Environmental Trust or landfill cleanup portions of the bill. He did not want to take away votes from his bill by adding these provisions, but he also was keenly interested in using the lottery money dedicated to the landfill cleanup in LB 1026 as a way to pay for the landfill cleanup portion of LB 1257. The deal wasn’t completed yet. But close.

On the last day of the legislative session that bills on Select File (second of the three required readings) could be debated and amended and still be advanced to Final Reading (third and final consideration) and passage, a bill, LB 431A (an appropriations bill whose main bill, LB 431, had either been killed or amended into another bill) seemed available to be used as a vehicle for the struggling LB 1026. Periodically, these “orphan” appropriations bills are used on Select File to move legislation that had stalled on General File, or first reading. Problems arose. Many senators were upset because they had not had a chance to even read, let alone debate and amend LB 1026. Now it was being proposed that the bill be slammed into LB431A and sent to Final Reading. The tobacco industry lobbyists were all over that breach of legislative protocol.

Morrissey Makes His Move

Now was the time to move. Sen. Morrissey’s staff prepared the lottery-financed Environmental Trust Fund and landfill closing fund portions of LB 1026 as an amendment to LB 1257, his priority bill, which conveniently was to be debated for the second time right after LB 431A was being considered. As efforts to amend LB 1026, which included the cigarette tax increase, faltered, Sen. Beutler, who had braved the tobacco lobby onslaught for weeks, decided to wave the white flag. LB 1026 and the cigarette tax increase were dead. But Sen. Morrissey had his amendment ready and gave it to Revenue Committee chairman Sen. Tim Hall of Omaha to add to LB 1257. Sen. Hall was more than happy to offer the amendment because if it was adopted, it would now commit all of the lottery proceeds to legislatively approved programs. Sen. Hall had been concerned that with the demise of LB 1026 half of the lottery money would be up for grabs in the 1993 legislative session—something as Revenue Committee chairman he was not looking forward to.

It was not until the amendment was offered that I informed my lobby coalition colleagues what was going on. The reaction was mixed: one screamed at me in the Capitol Rotunda, “You can’t do that! I’m going kill that amendment!” Another said, “I could kiss you.”

Sen. Hall’s amendment was adopted by voice vote with no debate or opposition. I am sure many legislators were not even aware what provisions it contained. The Environmental Trust Fund was so well buried in LB 1257, the Omaha World-Herald in its recap of important legislation considered that session didn’t even mention it. The bill—as amended—moved to the third and final reading. And on the 60th and last day of the 1992 legislative session it was approved by a 44-3 vote and sent to the governor for his signature. So, the Environmental Trust was created and would be funded by the lottery, which was approved in November by nearly 63 percent of the vote.


Over the years, many attempts have been made to raid the Environmental Trust Fund. A pot of available money is always tempting for special interests and money-hungry senators to fund their pet projects. For the most part, those grabs have been rebuffed. I always have been concerned that tax-supported entities like state agencies and natural resources districts are first in line with their hands out to the trust board for money for their projects. In my mind, those dollars should be reserved for organizations that do not receive tax dollars. I believe that was the original intent of the legislation.

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