Legislators Debate Property Tax Relief and School Funding

Legislative bills that focus on property tax relief and education funding, Nebraska Farm Bureau priority issues, were up for debate in the Nebraska Legislature this week. In last week’s Newswire video, we talked about LB388, a proposal to provide property tax relief by balancing the three-legged tax stool. The bill would help deliver property tax reductions by replacing property tax funds with sales tax dollars generated through elimination of some sales tax exemptions, with the potential for an increase in the state’s sales tax rate through a trigger mechanism based on state revenues. The bill also includes provisions that seek to slow property tax collections by political subdivisions while still maintaining and respecting local control.

When the week started, LB388 did not have the votes for cloture, mainly because of the headwinds caused by increasing the sales tax rate and eliminating certain sales tax exemptions. During the proceedings, discussions were underway on the floor, aiming to identify the optimal position where the bill could secure a minimum of 33 votes for cloture and 25 votes to move it forward to Select File. Ultimately, the ideal position has not been determined yet, but the governing body has consented to advancing LB388 to Select File under the condition that it will not be deliberated until a consensus is reached. Following the advancement of LB388, legislators were immediately at work discussing what it will take to produce a package that can pass. Things on the table include eliminating all or part of the sales tax provisions (rate and expansion), paying for this by delaying the income tax cuts put in place last year or other means, and creating more revenue avenues for communities that are growing.

This week, the Legislature also took up General File debate on LB1331, a school funding measure. This measure is one of the Education Committee’s priorities and is another component of this year’s tax package. Its key elements include:

  • Creating allocated property tax funds to be paid to schools.  
  • These funds replace the funds currently used to pay for the refundable income tax credits claimed on a taxpayer’s tax return for property taxes paid to schools.  
  • Funds will be paid directly to schools at the beginning of the school fiscal year, which will reduce the amount of property taxes the taxpayer will pay. Beginning in the school fiscal year 2024-25, the amount of allocated property tax funds will be $750 million.  
  • For the school fiscal year 2025-26 and each school year thereafter, the total amount of allocated property tax funds will be the total amount from the preceding year plus $30 million.  
  • Allocated property tax funds will not be included as a TEEOSA (Tax Equity and Educational Opportunity Support Act) formula resource.  
  • Increasing per student foundation aid from $1,500/year to $3,000/year.  
  • For the school fiscal year 2024-25 and each school fiscal year thereafter, sixty percent of foundation aid shall be included as a TEEOSA formula resource.

After four hours of debate, much of which had nothing to do with the bill, the measure advanced to Select File on a 45-0 vote.  

We continue to share our ideas and offer our assistance. Hopefully, legislators will be able to come to an agreement on LB388.  

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