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State senators discuss property tax relief
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State senators discuss property tax relief

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As the Nebraska Legislature prepares to reconvene July 20, a group of state senators plan to debate an amended property tax relief proposal they say continues or even increases school funding.

LB 1106 is a much-amended version of the LB 974 proposal, which had been blocked since Feb. 20 because backers couldn’t show they had 33 votes to overcome an expected filibuster.

The plan focuses on lowering property tax valuations and replacing property tax with state aid to school districts over a three-year transition period.

Revenue Committee Chairperson Lou Ann Linehan of Elkhorn, the primary architect of the proposal, said the plan is a simplified version of the current school funding formula, the Tax Equity and Educational Opportunities Support Act or TEEOSA bill, which passed in 1990.

She acknowledged that LB 1106 faces particular opposition from Nebraska’s largest school districts, which receive a considerable amount of state aid.

Linehan, along with Senators Myron Dorn, Tom Briese and Tom Brandt toured southeast Nebraska over the past week in hopes of building support and clarification for the bill. 

Linehan noted that although she represents a largely urban area including Elkhorn, she is originally from Crab Orchard and attended Lewiston High School, insisting she wants to make sure all rural schools are protected in any scenario.

The estimated three-year impact for Beatrice Public Schools would lower property taxes by roughly 6.59 percent according to information Linehan provided. 

BPS Superintendent Jason Alexander said he is concerned about the impact the COVID-19 pandemic will have on those figures.

“I think there’s a lot of work that can be done, and hopefully through honest, transparent communication between school officials and state senators we can get something put together that will deliver true property tax relief and doesn’t necessarily impact public schools in a negative fashion,” Alexander said.

Other state school districts are wary of what might happen to state support for education after the three-year transition period of LB 1106 ends.

District 30 State Senator Myron Dorn said that under LB 1106, if the state doesn’t have enough sales tax revenues to fund schools, districts would still have the ability to rely on property tax or even increase it - in order to have adequate funding.

Dorn said he agrees with LB 1106, noting that Nebraska currently has higher property tax valuations than the surrounding states.

A University of Nebraska-Lincoln article from July 2019 states that Nebraska property taxes are the tenth highest in the U.S., and account for 38% of total state and local tax collections. Sixty percent of those property taxes go to K-12 education funding, with state school aid being the second-lowest in the U.S.

The article further states the impact of income tax valuations on agricultural land. Since 1950, Nebraska property taxes on ag land are 46% higher than the national average, and in 2017, agricultural property taxes paid were 47% of Nebraska net farm income.

To reduce local property taxes, the valuation of agricultural property that can be taxed to support schools would be reduced from 75% of actual value to 55%, and residential and commercial property would be reduced from 100% to 87%.

Linehan said the previous proposal, LB 974, had 28 proponents on the floor in February.

It takes 25 votes of the 49 state senators to advance or pass a bill, but in recent years filibusters have affected the Legislature’s most controversial bills. To overcome a filibuster requires 33 votes, or two-thirds of the body.

"It's a good start," said Senator Tom Brandt of LB 1106.

Brandt noted that Omaha public schools receive over $300 million in state aid while many schools in his district such as Tri County and Diller-Odell receive little despite paying high amounts of tax on ag land. 

"The time has come for us to step up," Brandt said. "Within four years we could be looking at a 25% reduction in property taxes (with LB 1106)."

Dorn explained that a key component of the bill is Nebraska's overall economy remaining strong. 

"We're going to need to the state to continue to grow," Dorn said. "Over 30 years Nebraska has shown a little over 4% growth each year and we only grow the budget by 3%. The fear is that the Legislature won't live up to its promise. We need schools to trust us on this."

Linehan noted that Gov. Pete Ricketts has expressed satisfaction with the bill and the focus once the Legislature reconvenes will be on whether or not to pass the bill as it currently reads with a 3-year transition period; possibly spread the transition to 4-5 years; or pass the bill but delay the transition for one year. 

"We depend too much on property taxes for education in Nebraska," Linehan said. "This will bring property taxes down and provide more aid for schools. This is not using one-time money, the state can afford this plan."

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