Nebraska agriculture committee hears LB1188 to bar state real estate holdings in listed foreign adversaries; NIC warns of millions in transition costs

Lincoln — The Legislature's Agriculture Committee heard testimony on LB1188 on whether Nebraska should bar state and local governments from owning or holding interests in real estate located in designated foreign adversary nations.

Sen. Barry DeKay, chair of the Agriculture Committee and the bill's introducer, told the panel LB1188 "prohibits the state of Nebraska and its political subdivisions from owning or holding an interest in real estate located in adversary nations," saying the change updates federal references and aims to avoid national-security risk. DeKay said the measure is intended to prevent public funds from becoming entangled with jurisdictions that, in federal assessments, pose intelligence or coercion risks.

The bill drew support from John Morante, a registered lobbyist for State Shield, who framed the measure as both an ethical and fiduciary issue for Nebraskans with retirement accounts. "I can speak, to a high degree of certainty, that they do not want their pensions invested in a way that profits China and helps subsidize the bullets which could be fired at them," Morante said, pointing to federal reports and prior committee briefings as context for the security concerns.

In a neutral presentation, Ellen Hung of the Nebraska Investment Council (NIC) described how the NIC currently uses a commingled MSCI All Country World ex-U.S. index vehicle to gain international equity exposure and said LB1188 would force the NIC to move that exposure into a separately managed account (SMA). Hung testified that an SMA would "result in increased fees and expenses totaling $5,640,000 for the portfolios," with an estimated ongoing annual increase of about $1,540,000 and a one-time transition cost of approximately $4,100,000. She said roughly $3 billion is managed in the international commingled account, with roughly 2'.5% in REITs and about 3.2% overall exposure to China within NIC's international equity index.

Committee members pressed both proponents and NIC staff on scope and cost. Senators asked which nations are included on the adversary list; DeKay and witnesses cited the Committee on Foreign Investment in the United States (CFIUS) list referenced in statute, naming China, Russia, Iran, North Korea, Cuba and Venezuela under the Maduro regime. Lawmakers also asked what would happen if assets invested in those jurisdictions were suddenly rendered valueless; witnesses warned that if holdings went to zero it could produce significant losses for beneficiaries and could trigger required state contributions to defined-benefit plans.

Members and witnesses debated implementation paths. Morante and others said low-cost exchange-traded funds and other vehicles without adversary real-estate exposure exist and have been used by other states; NIC warned that the commingled index used by Nebraska is cost-effective because of scale and that fragmenting the holdings could raise fees further. NIC staff also noted that converting to an SMA could involve compliance work across foreign jurisdictions and complicated tax-reclaim processes.

DeKay noted a fiscal-note concern and said he would offer an amendment to delay the bill's compliance date to July 1, 2028, to allow more orderly implementation. He also described existing federal and state processes, including CFIUS screening and state-level divestment authority through the Department of Agriculture and the attorney general's office for certain properties.

The committee concluded the hearing without a vote. For the record, committee staff recorded 10 proponent letters and one opponent letter on LB1188.