This story was updated at 9:30 p.m. on Oct. 14 with comment from State Sen. Jason Prokop. He acknowledged that lawmakers may have mistakenly created an interim funding gap for the BIA this fiscal year.

This story was previously updated at 5 p.m. on Oct. 14 with comment from DED. The agency said it was given $15 million in spending authority from lawmakers for the BIA, but that it did not receive actual interim funding to support the program this fiscal year.

For the last few months, Joe Toscano, co-founder and CEO of Service Stories, has barely seen his wife while scrambling to keep the startup afloat.

“There was a month where I was just not sleeping, my whole nervous system was broken down,” he said. “I had to call the team … the first of August and just say, ‘Hey, we all either need to go on back pay or I don’t have a job for you.”

It wasn’t supposed to be this way.

Toscano had expected a financial runway, with state help, that would last through November or December, letting him step back from fundraising to focus on building the company.

That’s what the Business Innovation Act, the Nebraska Department of Economic Development’s program to support entrepreneurship, is supposed to provide.

But for a few months, new contracts were delayed as the agency had a legal review and also sorted out a new funding source for the program. Little of that process, or its timeline, was communicated to entrepreneurs, some of whom were left to wonder if the BIA lifeline is still reliable.

In early May, Toscano received pre-approval for a $70,000 prototype grant through the BIA. Come July 1, he was told, there would be a contract ready to sign. Then, Service Stories could file for expense reimbursements under the grant.

That didn’t happen. New contracts didn’t materialize for Toscano or other applicants. BIA administrators, who Toscano doesn’t blame for the delay, tried to keep applicants updated.

In August, Toscano started to plan for Service Stories as if the state funding would never come. “That was really scary,” he said. “No longer is there even a communicated potential date (for the contract).”

Then, on Sept. 17, just weeks from Service Stories running out of money, the BIA contract arrived.

Now, Toscano is grateful but also wary of the grant funding. “Until I see that (reimbursement) clear two or three times, I’m not gonna plan my business around this money,” he said. “I just can’t.”

Toscano received his first reimbursement on Oct. 13.

The holdup in new BIA contracts has been common knowledge in the Nebraska startup community. But word of it seems to have not reached policymakers.

Neither State Sen. Robert Clements, chair of the Legislative Appropriations Committee, nor State Sen. Jason Prokop, who was involved in changing the BIA’s funding during the 2026 legislative session, said they had heard of any issues when contacted by SPN.

“If there is any type of delay in those dollars getting (to businesses) because of internal agency dynamics, that’s a problem … that needs to be resolved and resolved quickly,” Prokop said.

State Sen. Teresa Ibach, also involved in changing the BIA’s funding, did not respond to email inquiries from SPN. The Greater Omaha Chamber and the Lincoln Chamber of Commerce/Partnership for Economic Development declined to comment for this story.

Legal review

About $3 million of BIA money intended for startup equity investments was also held up since July. That funding is intended for Invest Nebraska, the state-affiliated venture capital nonprofit.

As Dan Hoffman, the CEO of Invest Nebraska, understands the situation, the delay was because of a legal review of DED contracts to be ready for potential audits.

“Which is understandable, given the agency and the large dollar amounts that they’ve disbursed over the last five years,” Hoffman said. “We’re still on track to receive (Invest Nebraska’s BIA funding).”

A $2.5 million DED contract is under investigation by the Lincoln Police Department after the state auditor flagged it, though the contract is not associated with the BIA.

In a statement, DED confirmed that all BIA “contract templates awarded” for fiscal year 2027 had been under legal review. The fiscal year runs July 1, 2026, to June 30, 2027.

Part of the review included contract changes such as “the updated wage reporting requirements under (a new 2026 state law),” the agency said, and eliminating “the need for multiple contract extensions over the life of the award.”

Another change is that awardees can no longer get reimbursed for expenses that happened before a BIA contract was signed.

Despite the legal review, 23 new BIA awards have been approved since July. Previous BIA contracts have also been getting paid, with over $1.5 million already disbursed from July through September, according to DED.

A funding change

Perhaps most confusing has been the new funding mechanism for the BIA and what it means for startups this year.

In his December memo reinstating the BIA after a two-month pause, Gov. Jim Pillen instructed his administration to find $15 million annually for the BIA without tapping the state’s general funds. 

State lawmakers did so in the 2026 legislative session by creating the Business Innovation Cash Fund. But the money for that cash fund comes from the state unemployment insurance tax (SUIT) through the Nebraska Department of Labor, which also controls the fund.

Now, DED and the Department of Labor are mandated by law to sign a memorandum of understanding about using the cash fund by Sept. 30 of each year. BIA data is also shared with the Labor Department. That way the commissioner of labor can, by Dec. 31 every year, decide how much of next year’s SUIT tax rate to pay into the Business Innovation Cash Fund.

With the new SUIT mechanism in place, lawmakers cut the BIA’s $11 million general fund allocation for FY2027. 

They intended for replacement money to come from this year’s SUIT taxes. That would give time for DED and Labor to get their ducks in a row for future BIA funding, said State Sen. Jason Prokop.

“We didn’t want there to be any type of lapses,” he said. “That I’m absolutely clear on: There should be no time period where there are not dollars available for the Business Innovation Act.”

Not adding up

But it seems that lapse did happen.

The legislature gave the authority for DED to spend up to $15 million from the Business Innovation Cash Fund, according to the agency. But lawmakers didn’t actually put any money into the cash fund to replace the BIA’s cut general funds. So the program was left without dollars for this fiscal year.

SPN asked Prokop about DED’s assertion. He said it was “plausible” that because of the new funding mechanism, lawmakers assumed — but did not mandate — that the BIA would be funded from SUIT taxes this year, leaving a surprise gap. “That’s probably fair,” he said.

“People need to be able to run their businesses without the fear of a rug pull … it flipped our world upside down and I just feel so sorry for anybody who maybe lost their business in this time because of that.”
— Joe Toscano, CEO of Service Stories

In following the process the legislature did lay out, DED and Labor instead prepared for next year. The SUIT tax intended for the BIA will only be collected starting April 2027, DED said, with transfers into the Business Innovation Cash Fund starting in June 2027.

So the signed DED-Labor memorandum of understanding about SUIT money states that “in the first year of this agreement, no funding shall be released to DED until after June 1, 2027.”

In August, unrelated to the MOU, Labor gave DED $8 million from current SUIT taxes to cover the BIA’s funding gap.

Labor “has committed up to $15 million, as needed, for this fiscal year,” DED said. “Based on cash flow projections from DED’s business innovation manager, the agency will have sufficient funds to cover all BIA requests for reimbursement this fiscal year.”

In a joint statement, DED and Labor said they “recognize that the Business Innovation Act is vital to the State of Nebraska and has the full support of the Governor.”

The agencies did not say if the BIA funding change contributed to the delay in new grant contracts.

Growing pains, not a pause

Despite the BIA contract delays, Invest Nebraska’s Hoffman doesn’t see this as another threat to the program like its near-shutdown last year.

“These are growing pains,” he said. “There was more uncertainty, I think, in 2025 when everybody was taken aback by the program being paused. I don’t get that sense this time around.”

But entrepreneurs applying to the BIA need certainty about their funding, Hoffman said.

That is especially true for startups, which are often losing money as they build up their products and revenue. Before July, Service Stories had roughly $4,000 in revenue and $32,000 in expenses each month for about five employees.

The BIA contract and funding delay meant Toscano cut expenses — mostly salaries — down to $12,000 a month. He had just hired someone in June, and suddenly had to ask employees “What do you need for rent and groceries?” to make sure, even with the salary cuts, they could last.

Now Toscano has to rebuild Service Stories’ momentum and hope that with the $70,000 in BIA funding finally available to him, the company can become profitable. He still considers the BIA a great program.

It is, after all, part of Nebraska’s business-friendly environment that drew him to come home and start the company.

But “without consistency, without stability, without predictability, all entrepreneurs are just on ice,” Toscano said. “Entrepreneurship is already (chaotic). Why make it worse?”