District 30 Update – End of Special Session – August 22, 2024
Sen. Myron Dorn

The Special Session of the Legislature ended this week. We convened July 25 and met for 17 legislative days, making this special session the longest in more than 60 years. The first three days were designated for bill introduction. Every bill had a public hearing, but of the nearly 100 measures introduced, only a half dozen or so were debated by the full legislature.

Two committees with major responsibilities during the special session were Revenue, and the one on which I serve, Appropriations. It was our task to hear LB 2 and LB 3, budget bills designed to adjust for any reductions in tax receipts coming into the state.

Over the course of a week, Appropriations heard from several agencies and divisions about their current financial status and how changes might affect the services they provide. We also took a hard look at how both the General Fund and the “Rainy Day” funds would be impacted. All of this depended on the form property tax relief would take and whether it required a broadened tax base, reductions and/or caps on spending, or a combination.

In the early days of the session, LB 1 and LB 9 were the primary measures being considered. I had worked on LB 9 over the summer months along with Senators Hughes, Conrad and Brandt on fashioning a school funding plan that would retain local control, lower property taxes and phase in the changes over a period of time. The bulk of property tax we pay goes to school funding. LB 9 received favorable reactions when introduced in the Revenue Committee and was initially used as the vehicle for the committee’s proposal.

Options favored by the Governor for broadening the tax base, such as eliminating current sales tax exemptions on soda pop and candy, or increasing sales tax on tobacco products, were deliberated at length on the floor. We also discussed eliminating a sales tax on necessities such as electricity and water.

Another topic generating substantial debate was home ownership versus renting, the question being raised would renters see any kind of benefit of property tax relief while paying additional sales tax. There was also considerable conversation about capping the amount of spending allowed by political subdivisions.

The Revenue Committee eventually turned to LB 34, introduced originally by Sen. Brewer to freeze valuations for a time. That section was gutted and the bill became a tool for “front loading” property tax credits, which were created in a previous session of the Legislature (and required applying for the credit on income tax filings.)

As a result, LB 2 and 3, the budget packages sent to the floor by the Appropriations Committee, represented a combination of budget reductions, lapsed or unexpended funds and interesting earnings to come up with a total of $750 million. Projected economic growth was also a factor we took into consideration.

The full Legislature gave final approval on August 20 to LB 34 which limits annual increases in city and county property tax collections and modifies the existing property tax relief program mentioned above to ensure it benefits more Nebraskans.

Under LB34 a city, county or village may increase its property tax request authority by the product of two factors:
• the prior year’s amount of property taxes levied increased by a percentage that accounts for total property valuation growth due to new construction, improvements and certain other changes, minus any exceptions used; and
• the greater of zero or the annual percentage change in a price index that tracks state and local government expenses.

Among other exceptions to the limit, a political subdivision also may increase its property tax request authority by amounts needed for emergencies, budgets for public safety services or as approved by voters.

LB34 requires the state treasurer to transfer $750 million in general funds — including the approximately $565 million previously allocated to the refundable income tax credit program — to the new program in fiscal year 2024-25. Under the bill, if General Fund net receipts increase by more than 3% annually, the excess amount will be transferred to the new program’s cash fund. The “front loading” aspect of LB 34 means property tax relief will appear on the school district funding portion of property tax statements, and will no longer require an application for credit on your income tax return.

The bills, LB 2, 3, 4, 34 and 34A, were signed into law by Governor Pillen on the 20th and took effect immediately. Each bill carried the “e” or emergency clause, allowing them to become law upon the Governor’s signature.

Before we adjourned on Tuesday, a proposal that would allow lawmakers to tax owner-occupied housing at a different rate than other classes of property stalled on the second round of debate. Under LR2CA, sponsored by Sen. Tom Brandt of Plymouth, voters could have amended the state constitution to allow the Legislature to provide that owner-occupied housing constitutes a separate and distinct class of property for tax purposes and provide for a different method of taxing it than other types of property. The argument against this method contended that local governments would have to collect more property taxes from commercial and agricultural property owners to make up the difference. The measure did not have enough votes for cloture (33 required) and effectively ended the special session.

My fellow senators agree the work is not finished. This special session did allow us to focus on a narrower range of issues (property and other taxes) and generated some ideas we will continue to pursue in the next regular session beginning in January. As many have said before – if rewriting school funding and overhauling Nebraska’s tax structure was easy, we would have done it by now. I welcome the work ahead on this issue, and I look forward to hearing from you as always. mdorn@leg.ne.gov 402-471-2620. Thank you!