The Legislature gave first-round approval to the budget package this past week. Senators also stopped a measure that proposed to repeal the motorcycle helmet law for riders 21 years of age and older.
Progress has been made this past week on property tax relief, although it isn’t as comprehensive as hoped. LB 958, introduced on behalf of the Governor, sought to slow the increase in agricultural land valuation by capping statewide agricultural land valuation growth at 3% per year. It also aimed to slow the growth of property taxes levied by political subdivisions. After significant opposition was encountered from representatives of cities and other political subdivisions, the committee eliminated most of the bill, except for the portion that limits the unused restricted fund authority for community colleges to 3% of their prior year’s restricted funds. In the amendment proposed by the Revenue Committee, instead of the 3% cap on valuation, the committee is proposing an increase in the Property Tax Credit program. This program provides direct property tax relief for property owners through a credit on their property tax statement. Last year, funding for this program was increased by $64 million to $204 million in annual funding. This year, the proposed increase in credits would be directed to agricultural land owners. Since this is a new concept, the Revenue Committee will hold a public hearing on the proposed amendment on Thursday, March 24. After calculations are completed, an amount of funding will be added to the amendment.
A companion bill, LB 959, also introduced on behalf of the Governor, intended to slow the growth of spending and property taxes levied by school districts. It was advanced from the Education Committee, after being substantially amended. The bill now proposes to eliminate the minimum levy adjustment, which takes away state funding from schools with levies below $0.95. Additionally, it would tighten limits on a special project fund that schools use to address safety, environmental hazards, accessibility barriers and mold in existing buildings.
Two other bills promising property tax relief encountered roadblocks this past week. LB 717, introduced by Senator Mike Groene, proposed to use a 5-year history of comparable sales, excluding 20% of sales with the lowest valuation to sale price ratio, in an effort to remove abnormal high priced sales. It also would have frozen 2016 valuations at the 2015 level. An attorney general’s opinion stated that the bill is likely unconstitutional as it would appear to result in property within the same class being assessed at values that are not uniform and proportionate relative to their market value.
LB 883, introduced by Senator Jim Scheer and eleven other senators, including myself, was killed by the Education Committee. This legislation proposed to add a per student foundation aid component to the K-12 school funding formula, in an effort to reduce property taxes by giving every school district some base funding through the state aid formula. Currently, almost two-thirds of our school districts don’t receive equalization aid because their resources from property taxes exceed their needs, which illustrates the high dependence on property taxes in our school funding formula. This concept would require additional revenue to implement and I feel that this is a discussion that needs to take place.
According to calculations made by Senator Scheer’s office, under LB 883, schools in District #1 would have seen substantial increases in state aid. Following is the projected amount of additional state aid that schools would receive over the current amount, with the addition of $3,000 per student in foundation aid. Sterling Public Schools - $587,467; Johnson County Central Public Schools - $1,515,000; Johnson-Brock Public Schools - $389,596; Auburn Public Schools - $198,681; Syracuse-Dunbar-Avoca Schools - $2,123,988; Nebraska City Public Schools - $580,394; Palmyra District OR 1 - $1,135,510; Pawnee City Public Schools - $306,458; Lewiston Consolidated Schools - $37,773; Falls City Public Schools - $2,455,119; and HTRS Public Schools - $1,029,000.
Property taxes bear a disproportionate burden in support of our school districts, especially in our rural areas. I believe the concept of foundation aid has merit and I am hopeful that it plays a major role in the Legislature’s continued discussion of property tax relief this year and in following years.