Nebraska Gov. Jim Pillen on Wednesday announced measures to further cut state spending, including a cut in state agency spending and a hiring freeze on most positions.

Pillen said in a news release that the measures are necessary after the state paid out $307 million more in state tax refunds than anticipated in fiscal year 2026, which ended June 30. Tax receipts have come in below projections in March, April and May, leading to a current expected deficit of $172 million.

That’s after lawmakers closed a $646 million budget hole in their most recent legislative session.

The governor has previously sought to cut spending to provide more property tax relief to Nebraska residents and had called for additional cuts during the current fiscal year.

“I am pleased with the progress we have made, but I’m not satisfied,” Pillen said in a news release.

Accompanying the release was a memo Pillen sent to state agencies, boards and commissions in which he called on them to “exercise additional fiscal restraint.”

Among the measures outlined in the memo:

• A freeze on creating any new positions or filling any vacancies without approval from the state budget office. The freeze does not apply to law enforcement or corrections positions.
• A 5% reduction in budgets for all state agencies.
• All agencies, boards and commissions must provide monthly cash flow projections.
• Agency leaders are directed to “concentrate” on eliminating redundant processes, services regulation and aid programs.
• Agency leaders are directed to reduce their agencies’ physical footprint and “consolidate teams and services.”

All state entities are required to submit their plans for reducing spending by the end of the month.

The memo also said agencies should “prepare for downward adjustments to appropriations” not only in the current fiscal year but also in the 2028 and 2029 fiscal years.

The U.S. Supreme Court has agreed to hear Nebraska’s lawsuit against Colorado over a proposed canal that would take water out of the South Platte River in Colorado and send it to a reservoir in Nebraska.

Nebraska claims Colorado is deliberately obstructing efforts to build the ditch, known as the Perkins Canal, even though everyone agrees Nebraska has the right to do so. The canal is necessary, Nebraska says, because Colorado isn’t sending enough water into Nebraska.

The Perkins Canal would divert water from the South Platte River near Ovid to a storage site somewhere in Nebraska. The South Platte River Compact, ratified by both states and Congress in 1923, requires Colorado to guarantee a flow in the river of 120 cubic feet per second at a water gauge near the state line during the irrigation season. The compact also authorizes Nebraska to build the canal and grants the right to use the power of eminent domain to acquire land on which to build it. Initial work was done on the canal more than a century ago, but the project was abandoned as unfeasible.

Nebraska resurrected the idea in late 2021, citing fears that urban development along Colorado’s Interstate 25 corridor and plans to expand water storage were causing Colorado to violate the terms of the 1923 compact. 

The idea that Nebraska might actually build the canal has water users in the lower reaches of the river worried that doing so would disrupt the water augmentation process that underpins much of the crop irrigation along the South Platte, especially between Fort Morgan and the Colorado-Nebraska state line. It is designed to help Colorado meet the terms of the 1923 compact. 

Colorado land owners have resisted Nebraska’s efforts to buy land in the Julesburg area so the canal can be built. Colorado Attorney General Phil Weiser and Gov. Jared Polis, while recognizing Nebraska’s right to build the canal, have nevertheless sworn to do all they can to protect Coloradans’ property and water rights. Seeing such rhetoric as subverting Nebraska’s right to build, Nebraska sued Colorado in the Supreme Court in July 2025, alleging that Colorado is obstructing Nebraska’s efforts to go ahead with the Perkins project. Nebraska also attacked Colorado’s water augmentation system, saying it doesn’t work.

To understand augmentation, it’s important to know that Colorado operates on the prior appropriation doctrine, meaning the oldest (senior) water right holders get their water first. During dry periods, senior users may place a “call” on a stream, forcing junior users to stop taking water to ensure the senior rights are fulfilled. When someone pumps water out of a river basin, it eventually pulls water out of nearby streams and rivers, which can illegally shortchange senior surface-right holders. In that case, the junior wells would have to be shut down until senior rights were satisfied

To avoid such shutdowns, called “curtailment,” Colorado devised a system called augmentation in which the water that is pumped during the irrigation season must be replaced during the winter months so it flows back through the aquifer into the river in the following irrigation season. Some augmentation is done simply by buying water rights from upstream users, increasing the amount of water in the river. The system is highly complex and requires detailed accounting of river flows.

In a prepared statement issued last week, after the high court agreed to hear the case, Colorado Attorney General Phil Weiser said Colorado is in compliance with the compact.

The court’s decision, he wrote, “merely opens the door for Nebraska to bring its claims against Colorado. Nebraska’s burden to prove those claims is incredibly high and we will vigorously defend Colorado’s full entitlements under the compact.”

Perkins Canal needed because Colorado is harming Nebraska

But Nebraska officials insist water augmentation isn’t doing what it was supposed to do. In its 55-page complaint to the U.S. Supreme Court, Nebraska calls the augmentation system illegal and a violation of the river compact.

“Colorado’s water administration system, including its augmentation plans, have harmed and will continue to harm Nebraska,” the lawsuit reads. “For example, many augmentation projects … allow junior well owners to pump water out of priority during the irrigation season, provided they pump or divert additional water during the non-irrigation season and apply it to recharge ponds. This method assumes that water will percolate back into the water table and make its way to the South Platte River in time to make whole downstream senior users.”

Kent Miller is general manager of the Twin Platte Natural Resources District, which includes most of the South Platte River in Nebraska. He’s said he’s watched the river since 1972 and is skeptical that augmentation even works.

“Those plans have not been working, and I base that on the fact that the Western Irrigation District rarely receives what it’s supposed to receive,” Miller said. 

In May, U.S. Solicitor General John Sauer filed an amicus brief with the high court recommending that the court allow the suit to go ahead, but with conditions. 

In its lawsuit, Nebraska addresses augmentation because of its complexity and insists that any mechanism Colorado uses to comply with the compact should be simple. In his amicus brief, Sauer recommended tossing the argument.

“Nebraska reads Article VIII (of the compact) as mandating that compliance mechanisms be ‘simple,’ and it alleges that Colorado has violated that requirement,” Sauer wrote. “But Article VIII imposes no such requirement; it merely authorizes Colorado officials to enforce the Compact without action by the Colorado legislature. Because Nebraska’s Article VIII claim is facially meritless, it should not be permitted to proceed further.”

Sauer further recommended disallowing arguments that Colorado is obstructing Nebraska’s efforts to build the canal, saying Nebraska offers no evidence of such obstruction.

In signaling its acceptance of the lawsuit on Monday, the Supreme Court said it wants to hear all of Nebraska’s complaints and let the justices judge for themselves whether parts of it lack merit. Colorado originally had 30 days to respond to the court’s action but, on July 2, requested a 60-day extension.