The Legislature debated a number of important issues this past week. LB 640 was up first. This bill proposed to cap the property tax portion of total general fund revenue supporting K-12 school districts at 60%. It also sought to lower the maximum levy for school districts from $1.05 to $1.00 per one hundred dollars of taxable valuation. Although LB 640 would have resulted in property tax relief, the revenue needed to fund the legislation would have been transferred from the Property Tax Credit Fund. This fund currently disperses $224 million in dollar for dollar property tax relief annually. Senators generally saw it as robbing one pot and putting it in another, making it doubtful that the bill will be on the agenda again.
LB 409 seeks to revise the state school aid formula (TEEOSA) by reducing the base limitation rate from 2.5% to 1.5%, which would reduce the amount of increase in TEEOSA aid provided to school districts for the next two school years. It changes the local effort rate from $1.00 to $1.02, which also reduces the amount of state aid provided to school districts because the formula assumes a district has increased resources. Furthermore, LB 409 reduces net option funding by 4.5%. This legislation was necessary due to the significant revenue shortfall that the state is facing. Since TEEOSA school aid represents 69% of total general fund aid to local governments, it was not feasible to leave it off the table when considering budget cuts. Even with LB 409, the amount appropriated to TEEOSA represented the largest increase in the Appropriations Committee’s recommendations for the next biennial budget.
The Legislature also discussed LB 622, which would legalize marijuana for certain medical conditions, and LB 661, which would provide for confidentiality of lethal injection drug sources. Both bills were given a couple hours of debate and now the bill’s sponsor must show the Speaker of the Legislature that he/she has the 33 votes to overcome a filibuster in order for the bill to be placed on the agenda again.
Senators also discussed numerous bills on consent calendar this past week. Consent calendar is limited to non-controversial bills that don’t contain a lot of changes and do not have a general fund impact. This procedure gives bills that don’t warrant a priority designation the chance of passage. An example of this is LB 463, the bill I introduced that would allow a village chairperson to appoint cemetery board members from the county, as well as the village. I introduced this legislation because some villages were having difficulty finding people to serve on the board.
The week ended with discussion on LB 461, the governor’s proposal for tax relief. LB 461 would change the way agricultural land is valued from the current market based approach to an income-producing approach. Capitalization rates would be derived using estimated net income divided by the market value of land as determined using comparable sales. Capitalization rates would be adjusted to assure that aggregate taxable values fall between 55% and 65% of market value. The percentage growth in aggregate taxable value statewide for agricultural land would be limited to 3.5%.
LB 461 also decreases the top individual and corporate income tax rate to 5.99% over a number of years when the expected rate of growth in general fund receipts is at least 3.5% and 4% respectively. The Earned Income Tax Credit would be increased from 10% to 12% of the federal credit. The personal exemption would be reduced for the higher income and a new credit would be created for the lower income. However, calculations reflect that when fully implemented, wealthier Nebraskans are the biggest beneficiaries of this tax relief plan, which offers approximately $10 in income tax relief for every $1 in property tax relief.
I am working on an amendment that alters the trigger mechanism for income tax reductions by increasing the percentage and requiring that it be based on actual rather than expected growth rates. It also would require any increased revenue above the trigger level to be distributed to the Property Tax Credit Fund, with a smaller portion directed towards lowering the top income tax rate. I spoke on the floor that I am opposed to LB 461 as it currently stands because my constituents overwhelmingly favor property tax relief over income tax relief. Although some senators questioned why we were even discussing tax decreases when facing an approximate $1 billion shortfall in revenue projections, many senators support the governor’s efforts. It will be an uphill battle to substantially change this legislation.
Next week will be devoted to budget deliberations. By legislative rule, the 2017-18/2018-19 biennial budget has to be passed by the 80th day, which falls on May 10 this year.
Again, I encourage you to notify me of your thoughts on legislation that senators are discussing. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is firstname.lastname@example.org and my telephone number is (402) 471-2733.
Two bills introduced at the request of the Governor were heard before the Revenue Committee in a lengthy hearing this past week. LB 337 was introduced by Senator Jim Smith, who serves as the Revenue Committee chair. It would phase in an income tax reduction for those in the top income bracket. The top bracket would be lowered from 6.84 percent to 5.99 percent over an eight-year period, or by approximately 0.11 percent a year. However, the decrease would only be triggered if the expected rate of growth in net General Fund receipts, as determined by the Nebraska Economic Forecasting Advisory Board’s October forecast, is 3.5 percent or greater. When fully implemented, LB 337 would reduce state revenue by $288 million.
Testifiers representing the business community offered support for the legislation, claiming that LB 337 will help grow the state. Opponents wanted the Legislature to focus on property tax relief and others expressed concern that LB 337 could have a negative impact on funding for local schools and other governmental services.
In October 2015, the Forecasting Advisory Board projected a 3.6 percent growth in revenue, which would have triggered a tax cut in 2016, if LB 337 would have been in effect. However, projections quickly dropped, as the state is now facing a projected $900 million shortfall.
LB 338 was introduced by Senator Lydia Brasch, the Agriculture Committee chair, at the request of the Governor. It creates the Agricultural Valuation Fairness Act. Rather than valuating agricultural land according to sales, which can be influenced by other uses for the land, the bill proposes to assess agricultural land based on its capacity to produce income. LB 338 also places a 3.5 percent cap on increases in valuation of such land from year to year. Under the bill, county assessors are to use a range of incomes for land capability groups and capitalization rates, as determined by the Property Tax Administrator, in calculating the agricultural use value. The income ranges are to be based on the average yield information for the ten prior years published by the U.S. Department of Agriculture.
Although most testifiers were in support of LB 338 and felt that it was a step in the right direction, concern was expressed that it didn’t go far enough in efforts to provide property tax relief. According to an analysis by Nebraska Farm Bureau, if LB 338 would have been in place in 2017, taxable values for agricultural land would have been $2.2 billion lower statewide. This equates to an approximate 2 percent reduction in agricultural land values or about a $20 million reduction out of $3.8 billion in property taxes levied statewide. Agricultural land values statewide increased more than 6 percent from 2015 to 2016 and more than 263 percent over the last decade.
LB 661, introduced by Heartwell Senator John Kuehn, was heard by the Government, Military and Veterans Affairs Committee. This legislation seeks to amend public records laws by providing confidentiality of information relating to the drugs used in carrying out the death penalty. Following the November vote to reinstate the death penalty, the Department of Corrections recently revised the lethal injection protocol in an effort to add flexibility so that the death penalty can be carried out. Originally, the revised protocol authorized the supplier of lethal injection drugs to remain confidential, but this portion was removed after the public hearing where testifiers criticized the secrecy and lack of transparency in the process. This bill seeks to reinstate the confidentiality provision. When introducing the bill, Senator Kuehn mentioned that some of the same drugs used in lethal injections are used in operating rooms, causing him concern about their availability if this bill is not passed. Fifteen of the thirty-one states that have the death penalty withhold information on the identities of those supplying the lethal injection drugs.
This past week before the Revenue Committee, I introduced LB 546 at the request of the Nebraska Department of Revenue and the Nebraska Department of Economic Development. The intent of the bill is to simplify the application and administrative aspects of the Nebraska Advantage Act by amending several areas of the current law that has caused delays in approval of applications and benefits earned under this tax incentive program.
Rob Clements, a banker from Elmwood, was selected by Governor Ricketts this past week to fill the vacancy of Senator Bill Kintner. His district covers all of Cass County, a portion of Sarpy County, and the northeast corner of Otoe County. I look forward to working with him on state issues, as well as issues concerning Otoe County.
As legislative committees continue with public hearings on bills, I encourage you to contact me with your comments and opinions. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402) 471-2733.