Modified property tax proposal stalls
Lawmakers resumed debate July 22 on a major property tax measure after it was modified to address concerns raised regarding an earlier proposal.
As introduced by Norfolk Sen. Jim Scheer, LB1106 would have repealed outdated sales tax provisions. A pending Revenue Committee amendment would replace the bill with a modified version of the proposal contained in the committee’s LB974, which remains on general file after debate in February.
Elkhorn Sen. Lou Ann Linehan, the committee’s chairperson, said Nebraskans pay some of the highest property taxes in the country because the state relies too heavily on property taxes to fund public education.
Like the original proposal, Linehan said, the amendment would reduce property valuations for school tax purposes over three years—thereby reducing the amount of property taxes they collect—while simultaneously increasing state aid to schools via a new foundation aid component.
“We as a state need to continue to properly fund our schools,” she said. “However, we also need to help businesses stay in business by lowering their property taxes, help our ag producers stay in business and help our homeowners stay in their homes.”
Among other changes to the state’s school funding formula, Linehan said, the amendment would limit schools districts’ basic allowable growth rate to 2 percent. She said some districts had opposed the previous proposal because it would have tied budget growth to the inflation rate.
Linehan said the amendment would address some school districts’ concerns by allowing them to carry forward a portion of their unused budget authority to future years.
She said the amendment also would reduce school districts’ special building fund levy from the current 14 cents per $100 of taxable valuation to 6 cents. School districts also would have to receive voter approval before building a new school building, Linehan said.
Sen. Tom Briese of Albion supported the amendment, saying it represents a “generational opportunity” to remedy the state’s property tax crisis. He said the amendment would increase state school aid to each district while limiting property tax increases.
He said the proposal allows schools to reasonably grow their budgets while allowing their tax asking authority to increase by 2 percent plus the value of new property.
“I just don’t think we’re asking anything that’s unreasonable of our partners in the education community,” Briese said.
Sen. Mike Groene of North Platte also supported the amendment, saying that Nebraskans are demanding property tax relief. He said the proposal would introduce long-term stability to the state’s school funding formula and provide schools with at least 15 percent of their costs through foundation aid.
Groene said some school administrators oppose the proposal not because it would underfund schools but because it would reduce the amount of property taxes they could collect.
“If you’re going to wait around … for the education establishment to support what we must do for our citizens,” he said, “it will never happen.”
Also in support was Plymouth Sen. Tom Brandt, who said rising agricultural valuations have resulted in high property taxes in rural Nebraska for years. Recent large residential valuation increases mean homeowners in urban areas will see higher property tax bills too, he said.
“This is not a rural problem only,” Brandt said. “This is now a Nebraska problem.”
Sen. Wendy DeBoer of Bennington opposed the bill and filed a motion to bracket it, which effectively would end debate on it this session. She said the Legislature should find a way to reduce property taxes but that the coronavirus pandemic has changed the state’s economic outlook since lawmakers debated the previous proposal earlier this year.
“I don’t think we have the money for this bill,” DeBoer said. “If we give more money from our state budget to schools in an attempt to lower property taxes, it’s got to come from somewhere.”
Sen. Sue Crawford of Bellevue also opposed the measure. She said the state’s school funding formula directs state equalization aid to districts where needs are greater than resources. Many educational leaders are concerned about the proposal because the state often has not met the requirement to fully fund that equalization aid, Crawford said.
By dedicating up to 15 percent of state tax revenue to foundation aid, she said, the proposal could make it even more difficult for the state to meet its obligation to Nebraska’s neediest students in the future.
Gering Sen. John Stinner said he supports property tax relief but that the proposal “ties the Legislature’s hands” by requiring the state to make up school districts’ revenue shortfall created by limiting the amount of property taxes they could collect.
If state revenue growth is flat or negative due to the pandemic’s economic effects, he said, the Legislature could be required to cut other budget items in order to fully fund the state school aid proposed in the amendment.
“I’m not sure the revenue’s going to be there to support all the services that provide for the well being of our citizens,” Stinner said.
After three hours of general file debate, the Legislature recessed without voting on DeBoer’s motion, the amendment or the bill. Per a practice implemented by Speaker Jim Scheer, the sponsor of a bill that is facing a potential filibuster must demonstrate sufficient support for a cloture motion before the measure will be scheduled for additional debate.