LB 497

The information found on this page relates to Sen. Curt Friesen’s bill LB 497. A News Conference Call was held and you can listen to audio below. Additional materials are available below.

LB 497 was introduced by Sen. Curt Friesen to change how Nebraska K-12 schools are funded, and in the process, provide property tax relief to all Nebraskans.

The bill BROADENS the sources used to fund K-12 schools, REDUCES the overreliance on property taxes, and REPLACES the parts of our system that have created inequities in how the state of Nebraska treats students and taxpayers in funding schools.

LB 497:

  1. Ensures every public school in Nebraska receives state support equal to 50% of basic education funding needs.
    Today, we have schools where the state covers 100% of the basic education funding for students in some districts and less than 1% in others. LB 497 guarantees all students would get at least 50% of their basic education funding from the state.

    “Basic funding” is a required calculation in the state aid formula that estimates the cost of operating a school. The bill phases in the 50% minimum aid guarantee for “basic funding” over three years. The phase-in would start at 35% in 2020/21, jump to 45% in 2021/22, and then move to 50% in 2022/23 and each year thereafter.

  2. Adjusts the local resources component of the state aid formula resulting in more state equalization aid being delivered to schools.
    The additional aid to schools would be used to replace property taxes, in turn lowering property tax bills for Nebraskans.

    The bill lowers the local effort rate in the state aid to school formula from 1.0203 to .9750 beginning with school year 2020/21.

  3. Adjusts the state aid formula so districts with large bases of agricultural land would have a better chance of receiving equalization aid and provides relief to those who’ve experienced the greatest property tax increases.
    Many agricultural land-based schools receive little, if any, equalization aid. As a result, agriculture landowners have experienced the greatest increases in property taxes to provide local school funding. Statewide property tax collections on agriculture land increased by 152% from 2007 to 2017.

    The bill phases in a reduction in the value of agricultural land for school tax purposes. The valuation reduction is automatically reflected in the state aid formula and would provide additional aid to schools. The bill lowers the value of agricultural land from 75% to 55% in 2020, 45% in 2021, and 40% in year 2022 and each year thereafter.

  4. Puts provisions in place to ensure additional state aid dollars allocated to schools are used to replace and lower local property taxes.
    The bill is not a vehicle to increase school spending, but a vehicle to lower property taxes.

    The bill establishes an annual maximum property tax authority for each individual school district based on the amount of state aid a district receives, the prior year’s tax request, and a basic growth factor. State aid provided to a school district would automatically reduce the school’s property tax request. The state’s $1.05 maximum levy for schools would be replaced and a new maximum levy would be calculated for every school district every year where the maximum levy would be equal to the district’s property tax request divided by its assessed value. Schools would retain the ability to exceed the maximum levy under procedures allowed in current law.

  5. Broadens the sources used to fund schools and generates additional revenue for state aid to schools.
    The additional state aid would be allocated to schools for use in replacing property taxes.

    The bill generates an estimated $523 million per year in additional revenues for allocation to schools to replace and lower local property taxes.

    The bill repeals state sales tax exemptions including: real property maintenance, motor vehicle maintenance, dry cleaning, pet services, non-business legal services, food consumed at home (exemption for SNAP), storage, personal care (hair, massage, tattoos, nails, etc.), travel agencies, zoo admissions, and dating/escort services ($287 million).

    The bill also increases the cigarette tax by $1.50/pack ($98 million) and increases the alcohol tax ($121 million).

    The bill also repeals the $10,000 personal property tax exemption ($17 million).

  6. Provides a one-time $150 million allocation to help replenish the state’s cash reserve fund.

    The state budget would not be impacted by the additional state aid until FY2020-21, but the new revenues in the bill would be collected the year prior allowing for the transfer of $150 million of the new revenues to be allocated to the state’s cash reserve fund in FY2019-20.

Twelve senators have co-sponsored the bill:
Albrecht – Dist. 17, Bostelman – Dist. 23, Brandt – Dist. 32, Brewer – Dist. 43, Briese – Dist. 41, Dorn – Dist. 30, Erdman – Dist. 47, Gragert – Dist. 40, Halloran – Dist. 33, Hughes – Dist. 44, Kolterman – Dist. 24, Murman – Dist. 38.

Supported by the Nebraska Agriculture Leaders Working Group:
Nebraska Cattlemen, Nebraska Corn Growers Association, Nebraska Farm Bureau, Nebraska Pork Producers Association, Nebraska Soybean Association, Nebraska State Dairy Association, and Nebraska Wheat Growers Association.

The Legislature’s Revenue Committee will determine whether the bill (or parts of the bill) advance to the full legislature for debate. Revenue Committee members include:
Linehan (Chair) – Dist. 39, Friesen (Vice Chair) – Dist. 34, Briese – Dist. 41, Crawford – Dist. 45, Groene – Dist. 42, Kolterman – Dist. 24, Lindstrom – Dist. 18, McCollister – Dist. 20.

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Estimates of Changes to State Aid

Changes in General Fund Property Taxes Levied by Schools

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