State Legislature Update
Sen. Roy Baker, District 30
PROPERTY TAX RELIEF STUDY REPORT
The Education and Revenue Committees have been holding joint sessions this summer and fall in an attempt to explore increasing state support of public schools as a mechanism to provide property tax relief. The first recommendation by the 2013 Tax Modernization Committee regarding property taxes was to increase the state aid commitment to schools to offset property tax use and reduce property taxes as a share of total state and local taxes.
There have been several situations over the past fifteen years that have substantially impacted Nebraska’s economy and the manner in which the public schools have been funded. The burst of the dot.com bubble occurred in the early 2000’s, which impacted retirement systems and the overall economic health. The Legislature was forced to reduce the state’s commitment to school funding, and raised the maximum general fund levy limit from $1.00 to $1.05 per $100 of valuation. The result was a greater reliance on local property taxes among the revenue sources.
The housing bubble burst occurred between 2007 and 2012. Home values bottomed in 2012. Housing was a key factor leading to the recession in Nebraska and across the nation. Home values are just now back to where they were in 2007, in general. As a consequence of that housing bubble burst, the taxable valuation of residential property flat-lined or went down.
Meanwhile, a good cash-grain economy in the agriculture sector led to rapidly increasing farm land values. The value of farm land has doubled or even tripled in some instances in a span of just a few years. Farm land owners are bearing more of the local property tax load, and are understandably not happy about it.
Taxes of any kind have never been popular. Senators report hearing the most dissatisfaction with property taxes, more so than with income and sales taxes. Farm land owners have led the outcry for fairness and property tax relief.
Rural senators on the committee suggest finding a way to provide some property tax relief targeted toward agricultural landowners. With the number of urban senators exceeding that of rural senators, the success of such proposals is in question. In the committee work sessions, we have heard the recitation of both urban and rural myths, each side believing the other has more tax loopholes and is somehow better off.
The State of Nebraska does not collect any property taxes. Thus, the only way that the Legislature can impact local property taxes is to provide more state support to local governmental subdivisions. The Legislature has taken small steps in recent years by providing property tax credits to all property owners. The 2015 Legislature boosted the annual amount allocated to property tax credits to over $200,000,000. Some property tax relief is better than none, but has not been enough in the eyes of many.
Most members of the committees agree that the state aid to schools equalization formula, known as TEEOSA, should remain in place, and that any additional state support of schools should be distributed to all public school districts in the state, equalized and non-equalized. In return, the districts would lower their property tax requests by the same amount as the supplemental aid.
The two largest school districts in District 30, Beatrice and Norris, both of which are equalized, have experienced increased taxable valuations, primarily due to the higher farm land values. However those districts have seen their state equalization drop as a result of the higher valuations, and have been unable to materially reduce the property tax levy. School finance has been unpredictable the past few years. Districts that used to be solid financially are now not, and others that were in poor shape financially are now in a good position.
It is probable that some school districts are being managed more efficiently than others. However, it does not appear that the current property tax concerns are the result of runaway spending by school districts, counties, or other governmental subdivisions. School districts already operate under spending limitations and property tax levy caps.
Attempts by your Legislature to solve the property tax dilemma by stepping on local control is not likely to be well received. Past attempts to impose State control over the property tax entities have not been successful. In 1996, voters rejected property tax limits for governmental subdivisions 490,113 to 167,204. In 2006 voters rejected the imposition of a state spending limit, with only 28% voting in favor. Again, it should be noted that school districts are restricted by spending limits.
As the joint Education – Revenue meetings continue, I will keep you informed. There are no easy answers. The goal is to reach consensus on legislation to be introduced in the 2016 session.
Your input is always welcomed. You may contact my office by telephone, (402-471-2620), email (email@example.com), or visit in person.