Lawsuit Alleges Officials Misappropriated Nebraska Lottery Funds

W. Don Nelson, a former chief of staff to then-Nebraska Gov. Bob Kerrey, and Jon Oberg, a former director of the Nebraska Department of Administrative Services, filed a lawsuit last Thursday accusing officials in Nebraska Gov. Jim Pillen’s administration of diverting Nebraska Lottery funds away from their intended purpose.

“In 2004, voters amended the Nebraska Constitution to require that 44.5% of state lottery proceeds fund the [Nebraska Enviromental] Trust, thereby enshrining the statutory funding mechanism into the Constitution,” the legal filing states.

It continues, “since 2004, the Legislature has lacked any discretion to distribute lottery proceeds as it sees fit. Distribution is governed by the Nebraska Constitution.”

The suit, filed in Lancaster County District Court, contends that lottery proceeds that are required by law to go the Nebraska Environmental Trust (NET) were instead used this year to help balance the state budget and provide property tax relief.

The filing names as defendants Nebraska Treasurer Joey Spellerberg, Department of Administrative Services Director Lee Will, Budget Administrator Neil Sullivan, Director of the Nebraska Department of Water, Energy, and Environment Jesse Bradley, and Director of the Nebraska Game and Parks Commission Tim McCoy.

It seeks a temporary and permanent injunction and a return of the $13.5 million the plaintiffs say was transferred from the NET to the state.

‘Shell game to cover budget gaps’

Nelson and Oberg are represented by the American Civil Liberties Union (ACLU) of Nebraska and Gutman Law Group.

In a press release issued by the ACLU, Oberg stated, “The sorry truth is that the state is playing a shell game to cover self-created budget gaps at the expense of the Trust’s constitutionally-mandated conservation efforts, which are much needed to combat dangerous wildfires and extreme drought as well as to provide ongoing protection of wildlife and natural habitats. Budget integrity requires both honesty and playing by the rules. Unfortunately, Nebraska is once again failing on both counts with this plan to circumvent the law. The bottom line is that the Trust is not a tool to solve our state’s budget problems. We are asking the judicial branch to check this overreach and enforce what voters decided decades ago.”

Added Nelson, who was involved in the creation of the NET: “If we let the government drain money out of it every time the budget is short, this will be a trust in name only. I couldn’t stand by and watch that happen without doing something.”

Carter Matt, an ACLU of Nebraska staff attorney, said in the release, “We are working to make sure this is the last time that officials ransack the Trust to solve a budget problem.”

According to the Nebraska Lottery’s annual fiscal report, it collected $185.4 million in sales revenue in the 2024-25 fiscal year, producing $45.7 million in beneficiary transfers.

Nebraska legalized lottery play in November 1992 and launched its first games in 1993.