LB 454 – School Property Tax Stabilization Act Summary

LB 454 implements the School Property Tax Stabilization Act with the goal of increasing the state’s share of the cost of education in school districts who presently rely, overwhelmingly, on property taxes. Under the act, stabilization payments would be directed to schools where state aid currently accounts for a minimal share of funding. Schools’ eligibility for stabilization payments would be determined after TEEOSA aid is calculated. Thus, the act does not affect or interfere with TEEOSA aid. Stabilization payments would be calculated by the Dept. of Education using the same data used for calculating TEEOSA aid.

Schools’ are eligible for stabilization payments if the property taxes required to fully fund formula needs exceeds a threshold percentage of formula needs. Under the committee amendment, the threshold percentage is set at 70 percent of formula needs in year one (school year 2021-22) and phased down in 5 percent increments to 55 percent in year four (school year 2024-25). Thus, in year one, if a school’s property taxes required to fund its formula needs exceeded 70 percent of formula needs, it would be eligible for stabilization payments. Stabilization payments equal 50 percent of the difference between the property tax requirement and the formula needs threshold.

Estimates of the total amount of stabilization payments in year one and additional amounts to be distributed in years two – four are shown below. In year one, the payments are estimated to equal $65 million. In year two, payments would equal $95 million, which is an additional $30 million compared to year one. The estimates are based on school year 2020-21 data and estimate the payment amounts had the act been in place for the current school year. The total number of schools which would receive payments is also shown. Please note the estimates do not account for changes in valuations, spending, other receipts or TEEOSA aid in years 1-4.

When completely implemented, it is estimated $167 million in stabilization payments would be distributed to 207 schools. The share of property taxes necessary to fully fund formula needs in all schools would be less than 77.5 percent. [100% – (50% x 45%)].

Clarifying language in the act assures stabilization payments will not be considered receipts in TEEOSA calculations. The change is needed to avoid a “yo-yo” effect for schools receiving stabilization payments. Without the change, schools would recive payments one year, lose them the next, then receive them again the following year.