Property tax relief through increased school funding proposed

A bill that seeks to reduce local property taxes by increasing state funding for public schools was considered Feb. 10 by the Education Committee.

LB303, introduced by Seward Sen. Jana Hughes at the request of Gov. Jim PIllen, would make several changes to the Tax Equity and Educational Opportunities Support Act, or TEEOSA. The bill would increase school foundation aid by 6% —  from $1,500 to $1,590 per student — beginning in fiscal year 2025-26.

According to the measure’s fiscal note, the impact would be a $112.9 million increase in state general funds for Nebraska schools over the next two fiscal years.

The measure would lower the maximum property tax rate that schools may levy from $1.05 to $1.02 per $100 of taxable valuation. It also would create a base levy adjustment to reduce TEEOSA aid if the potential general fund levy is less than 30 cents.

Finally, LB303 would create a 15-member School Finance Reform Commission, which would evaluate the TEEOSA formula and provide annual advisory recommendations regarding school funding in the state.

Hughes said 111 Nebraska schools saw a decrease in state aid during FY2024-25 due to rising property valuations. Lowering the maximum levy cap and increasing foundation aid would reset state aid closer to 2023-24 levels while also providing some relief to taxpayers, she said. 

“While LB303 doesn’t fully restore all districts to their previous state aid levels — and doesn’t significantly reduce property taxes — it is a step in the right direction,” Hughes said. 

Pillen testified in support of the bill, saying the recent rise in property valuations have made the funding formula under TEEOSA increasingly unpredictable.

The measure would allow Nebraska to continue working toward a long-term school funding solution and reduce the state’s overreliance on property taxes to finance education, he said.

“We must start managing the [TEEOSA] formula and not allowing the formula to manage us,” Pillen said. 

Tim Royers also supported the bill on behalf of the Nebraska State Education Association, describing the measure as “the best school funding bill to come from the governor’s office in at least a decade.”

A continued investment in school funding, especially in light of concerns about a fiscal deficit, showcases the state’s commitment to fulfilling its constitutional obligation to provide public education, Royers said. 

Andy Rikli, superintendent of Papillion La Vista Community Schools, testified in support of LB303. In 2024, only 58 of Nebraska’s 244 public school districts received equalization aid under the TEEOSA formula, he said, disproportionately benefiting the state’s largest districts.  

“While most of Nebraska’s biggest systems — OPS, Lincoln, Millard and Papillion La Vista Community Schools — have long received TEEOSA equalization aid, the fact that so many smaller, rural districts often do not receive any equalization aid has proven to be problematic,” Rikli said. 

Shane Rhian, chief financial officer of Omaha Public Schools, opposed the measure, citing budget concerns.

OPS anticipates no longer qualifying for district-wide free school meals under the National School Lunch Program, he said, which may reduce the district’s property allowance under TEEOSA and result in a loss of up to $30 million in state aid.

“Lowering the levy lid to $1.02 under LB303 would effectively prohibit the district from replacing approximately one-third of that projected $30 million loss in state aid,” Rhian said. 

The committee took no immediate action on LB303.