Bill would create threshold for state aid to municipalities

Only municipalities with higher property tax levies would qualify for state aid under a bill heard by the Revenue Committee Jan. 26.

Current law distributes state aid to municipalities based on population.

LB119, introduced by Lincoln Sen. Bill Avery, would cap the amount of state aid to municipalities at $9.9 million annually and distribute it among municipalities with nonbond property tax levies that are at least 75 percent of the state average.

The bill would have an operative date of July 1, 2011, and would reduce general fund expenditures by approximately $1 million annually.

Avery said LB119 is the result of work done by the Government, Military and Veterans Affairs Committee as part of the interim budget review process. He said the purpose of the bill is to reduce general fund expenditures for state aid to cities by 10 percent without inflicting undue harm on cities that maintaining a responsible effort to raise their own funds.

“The goal of the committee was to provide aid to those cities that already had high levies and may have challenges raising their revenue lost by cuts in state aid,” Avery said.

Lynn Rex, representing the League of Nebraska Municipalities, testified in opposition to LB119, specifically the levy threshold. Municipalities have different sources of revenue, she said, and LB119 would punish cities that rely on other revenue sources to keep their property taxes down.

Pam Spaccarotella, finance director for the city of Omaha, also opposed the bill, saying there are different ways to measure local effort for state aid to cities. Omaha receives only 20 percent of its revenue from property taxes, she said, but its local option sales tax accounts for more than 42 percent.

“There are a variety of different ways to measure whether or not a city is adequately taxing its citizens,” Spaccarotella said.

Randy Gates, finance officer for the city of Norfolk, also testified in opposition to LB119. He said the bill would eliminate state aid to Norfolk and penalize the city for its lower property tax rate.

The committee took no immediate action on the bill.