Thank you for visiting my website. It is an honor to represent the people of the 38th legislative district in the Nebraska Unicameral Legislature.
You’ll find my contact information on the right side of this page, as well as a list of the bills I’ve introduced this session and the committees on which I serve. Please feel free to contact me and my staff about proposed legislation or any other issues you would like to address.
Sen. John Kuehn
Bill introduction has concluded and a total of 487 bills and resolutions have been introduced for consideration by the legislature this session. Each bill will have a public hearing in the committee to which it was referenced during the next five weeks. Floor debate continues on carryover legislation from last session.
In the Appropriations Committee we continue to work on the development of the preliminary budget adjustments to the biennial budget. In conjunction with the recommendations made by the Governor, the committee is considering deficit requests to address expenses that were not foreseen during last year’s budget process. Addressing the projected revenue shortfall is also part of our work to guarantee a balanced budget.
In addition to the bills I discussed last week, LR 378CA, the Constitutional Right to Farm Amendment, and LB 792, the “revolving door” bill, I introduced two other bills for consideration this session.
LB 720 would make the unauthorized capture of images by unmanned aerial vehicles a trespassing offense. UAVs, commonly known as “drones”, have become very popular among people who use them for both hobby and commerce. Many of these drones have the ability to capture photos and video during their flight. As the technology advances, the law regarding an individual’s right to privacy with drones flying over personal private property and taking photos and videos has not kept pace. LB 720 requires express permission to capture an image over private property using a drones flying below 200 feet. It does not affect the flying or use of drones, but rather protects citizens, their homes, businesses, and farms from unauthorized photos and videos. I look forward to the discussion about the appropriate use of this new and exciting technology.
LB 979 is a bill enabling the substitution and use of a class of medical products called “biosimilars”. Biosimilars are an innovative class of pharmaceuticals that provide treatment options for health care providers and patients. LB 979 updates Nebraska statutes to allow for the substitution of biologic products only with FDA approved interchangeable biologics. Current state law governs the substitution by pharmacists of generic drugs for their branded counterparts, and similar statutory direction is needed to craft state policy allowing for the substitution of FDA approved interchangeable biologics. The bill would provide guidance for health care providers and patients as use of these innovative products grows.
If you should have any questions about the legislation I have introduced or any other matter before the Legislature, do not hesitate to contact my office at 402-471-2732 or email at firstname.lastname@example.org. For daily updates during the session, please follow me on Twitter at @JohnKuehnDVM.
Senator John Kuehn, District 38
The second week of the legislative session saw the continued introduction of bills for consideration and debate on carryover priority bills from the 2015 session. During the week, the Governor also introduced his proposals to address the property tax crisis and the revenue shortfall. Committee meetings will begin during the third week and legislators will begin making their way through several hundred pieces of introduced legislation.
LR378CA is a proposed constitutional amendment I introduced which would establish a constitutional Right to Farm in Nebraska. As introduced, the amendment states “the Legislature shall pass no law which abridges the right of citizens and lawful residents of Nebraska to employ agricultural technology and livestock production and ranching practices without a compelling state interest.” As Nebraska’s number one industry, one in four Nebraskans is employed in an agriculture related field. Small business in Nebraska, the bulk of Nebraska’s industrial sector, and much of our transportation and shipping industry in Nebraska is directly linked to the success of our ag producers. Throughout the country we have seen continued baseless attacks on agriculture, including the use of GMO technology in crop production and antibiotic use to protect animal health. Locally in District 38, we have seen activists protest livestock production practices. As fewer and fewer consumers have a connection to the farms and ranches that produce their food, Nebraska agriculture must be mindful of the need to proactively protect our industry from activist legislation and regulations intended to restrict agriculture on a purely ideological basis. I look forward to working with farmers and ranchers across Nebraska to advocate on their behalf.
LB 792 is a second bill I introduced that would require a two year period after leaving office before state-level elected officials could serve as lobbyists. State senators, constitutional officers, and other state-level elected politicians would be prohibited from using the influence of their former office to lobby lawmakers immediately after leaving office. Staff who serve in a policy-making role would be restricted for one year. Commonly referred to as “revolving door” policies, federal law, as well as statutes in 33 other states, reflect similar ethical provisions. This year there are 314 paid lobbyists on record with the Legislative Clerk’s office. Voters should have confidence that influence and relationships elected officials develop while in office are not used to bring undue influence on the policy making process in the immediate years after leaving office.
Both of these bills reflect the priorities and objectives that motivated me to seek elected office. As a fourth generation livestock producer in Nebraska, advocating for Nebraska agriculture is my greatest priority. Additionally, transparent, accessible, and effective government is the core of my political ideology. In the past week there has been much speculation about my motivation for introducing both of these bills. It is disheartening to me that cynicism in the political world runs so high that it is somehow odd that a farm kid from Heartwell representing an agricultural district would introduce a bill protecting agriculture, or that any senator would impose restrictions on themselves in the name of good government.
If you should have any questions about LR378CA, LB 792, or any other matter before the Legislature, do not hesitate to contact my office at 402-471-2732 or email at email@example.com. For daily updates during the session, please follow me on Twitter at @JohnKuehnDVM.
Senator John Kuehn, District 38
The second session of the 104th Legislature convened on Wednesday, January 6. Within the first few days of bill introduction, several significant issues have been proposed for consideration. I have introduced three pieces of legislation. LR378CA is a proposed amendment to the Nebraska Constitution protecting the Right to Farm and Ranch in Nebraska. If passed, the amendment would be placed on the general election ballot in November. LB 720 protects privacy from capture of images from unmanned aerial vehicles, commonly known as drones, without permission. LB 792 is a “revolving door” bill mirroring federal guidelines that prohibits elected officials and policy-making staff from serving as lobbyists for a specified amount of time following the conclusion of their service. I look forward to working with my colleagues on these pieces of legislation.
The issue of greatest urgency facing my work as a member of the Appropriations Committee this session is the currently-projected $110 million decrease in revenue. The Nebraska Constitution requires a balanced budget, so the disparity between revenue projections and the budget passed last session must be addressed. While there are several potential ways to address the projected shortfall, a number of factors influence my approach to the issue.
First, agriculture commodity prices continue to remain below the highs of the recent years and some areas of livestock production continue to fall. Decreased farm income, and the resulting ripple effects through the economies of our local rural communities, represents more than a mere hiccup or blip. Agriculture is by its nature cyclical, and all indicators point toward a downward trend in the cycle. To that end, I am hesitant to simply fill the revenue gaps with Cash Reserve funds or other temporary fixes. Until the ag economy begins to improve, I expect revenue projections will likely continue to drop.
Second, it is my belief that state government should reflect the values of the voters and constituents who empower it. Families in District 38 have already been tightening their belts and restricting their spending as farm incomes fall. Just as taxpayers are prioritizing their spending and making difficult choices, lawmakers should do the same. Although it is always a challenge, lawmakers need to make strategic reductions now to avoid drastic and draconian cuts in future years should revenues continue to decrease.
Thus, I will be working with my colleagues to find reasonable, measured, and strategic reductions in spending to match the General Fund budget to meet the most current revenue projections. The shortfall, while significant, is certainly within our reach to address responsibility without negative effects on any single program or constituency. The Revenue Forecasting Board will meet again at the end of February with the potential to again revise the revenue projections. Their conclusions could require additional adjustments during the session.
A new voice will be answering the phone in my office this session, as John DeWaard joins my staff as Administrative Assistant. Nick Knihnisky will be available to assist with constituent services and policy questions as my Legislative Assistant. If you should have any questions, do not hesitate to contact my office at 402-471-2732 or email at firstname.lastname@example.org. For daily updates during the session, please follow me on Twitter at @JohnKuehnDVM.
Senator John Kuehn, District 38
The Second Session of the 104th Nebraska Legislature will convene on Wednesday, January 6, 2016. Known as the “short session”, the second session consists of 60 legislative days and is currently scheduled to adjourn on April 20. Legislation introduced last session remains on the worksheet for consideration this session, as well as new bills introduced during the first ten legislative days.
A significant portion of my work this session as a member of the Appropriations Committee will be addressing the $110 million revenue shortfall projected by the Revenue Forecasting Board in November. Although the budget for the 2015-2017 biennium was passed last session, the anticipated decrease in revenue will require adjustments to that budget to meet Nebraska’s constitutional requirement of a balanced budget. The Revenue Forecasting Board will meet again in February, potentially reducing or increasing revenue projections once again. The legislature will also need to address deficit spending requests from the Department of Corrections for higher than anticipated costs for inmate medical care, a federal fine assessed to the Department of Health and Human Services, and a request for additional funds to address deferred maintenance of facilities at the University of Nebraska.
The property tax crisis will play a central role this session as well, as lawmakers seek to address the imbalances in local funding for education and increased spending by local political subdivisions. Specific proposals and initiatives will be more clear at the conclusion of bill introduction.
Given the short time of the session and the number of important issues for the Legislature to consider, the designation of a bill as a “priority” will be critical. Each senator can prioritize one bill, standing committees can prioritize two bills, and the Speaker can prioritize up to twenty-five bills. It is not likely that bills without a priority designation will be considered on the floor by the entire body. Bills not acted upon by the legislature will effectively “die” upon adjournment of the 104th Legislature in April.
During the coming few weeks I will outline the bills I will be introducing this session, as well as keep District 38 constituents up to date on the issues that emerge. If you should have any questions, do not hesitate to contact my office at 402-471-2732 or email at email@example.com. For daily updates during the session, please follow me on Twitter at @JohnKuehnDVM.
Senator John Kuehn, District 38
A number of voters in District 38 have inquired about the various exemptions and credits that exist within the property tax system. There are certain classes of taxpayer status that are exempt from taxes, as well as certain types of real property and tangible personal property that is exempt from property taxes. The Property Tax Credit Fund was begun in 2007 to provide direct property tax relief to taxpayers.
One of the most significant exemptions is the Homestead Exemption. Eligible homeowners have a portion of their “homestead” exempt from property taxes based on their income and value of their home relative to the county average. Homeowners can apply for the Homestead Exemption if they are 65 years or older, have a developmental or certain permanent physical disability, or are qualifying veterans. Unlike exemptions based on taxpayer status which simply remove that class of property from the revenue of a political subdivision, the revenue not paid by eligible homeowners who receive the Homestead Exemption is compensated from the state General Fund to the local government. In the 2015-2017 budget $144 million of revenue to local political subdivisions will be reimbursed.
Other exemptions include the increased value of real property due to planting of trees along a highway and of preserving historically significant property. Property owned by state or local governments, agricultural and horticultural societies, educational organizations, religious groups, charitable organizations, and cemeteries is exempt from tax. Those lost revenues are not reimbursed by the state. Non-depreciable tangible personal property, household and personal items, business inventory, livestock, wind generation personal property, and certain data center parts are also exempt from property tax.
The use of Tax Increment Financing, known as TIF, is also a frequently asked question regarding property tax policy. TIF allows cities to issue bonds to cover public costs for private development of residential or commercial projects in areas determined to be “blighted”. The increased value of the redeveloped property generates higher property tax revenue, which in theory is used to pay the costs of the bonds. The statutes regulating the TIF program have evolved significantly since the original adoption of the law authorizing TIF in 1979. The number and cost of TIF projects have risen dramatically over the past decade, from 393 projects costing $25 million in 2004 to 655 projects totaling $55 million in 2014. TIF projects are locally initiated and managed, and the costs and benefits are borne locally. The use of TIF has allowed many communities to promote significant local redevelopment and community improvement. Accusations of inappropriate use of the program have also been made. I encourage taxpayers to engage in local community discussions about TIF projects to understand the benefits as well as the costs of specific projects, as projects vary greatly within and between communities.
The Property Tax Credit Fund uses state General Funds generated primarily from income and sales tax to provide a direct credit to property owners. Each taxpayer receives a credit based on the valuation of their property. In the coming year, $204 million of General Funds will be paid to political subdivisions to cover the credit. That will amount to over $90 of credit for every $100,000 of property value, or about a 5.5% of the typical property tax bill in tax year 2015. The existence and continued growth of the Property Tax Credit Fund is recognition of the imbalance in Nebraska’s tax system.
I have appreciated all of the great questions, conversation, and engagement of constituents regarding property taxes, and look forward to continuing the discussion. Please do not hesitate to contact my office by email at firstname.lastname@example.org or 402-471-2732. For daily updates, please follow me on Twitter @JohnKuehnDVM.
Senator John Kuehn, District 38
The policy challenges regarding reforming Nebraska’s Property Tax system can be broken down into two areas. The first is what functions of government we fund with locally paid property taxes as opposed state general funds. The second is how we equitably distribute the burden of who pays property taxes to support those functions of government.
The first area of consideration is what property taxes pay for. There are many schools of thought regarding “fair” tax policy. This leads to a discussion about the balance of funding government operation through a combination of property taxes, sales taxes, and income taxes. Currently, property taxes make up 39% of total taxes paid, compared to a total of 44% from sales and individual income taxes combined. Changing that distribution to reduce taxes collected on property would require sales and income taxes increases to cover the costs of functions currently funded by property taxes, functions of government that are currently funded by sales and income taxes to be scaled back or eliminated, or a combination of the two. Any reduction in total property taxes collected would most likely have an impact on the state General Fund.
At the center of the local versus state debate in rural areas is the issue of funding K-12 education, which makes up 60% of the average property tax bill. Current statute gives significant control of per student spending to local boards. In the 2013-2014 school year the average cost per pupil across the state was approximately $11,300. By comparison, the average cost for the school districts in Legislative District 38 was about $3,000 per student higher, with a wide range from $10,600 to $19,600. The percentage of that cost funded by local property taxes versus state general funds is determined by a rather complex formula that takes into account the local property tax base, reflecting the local ability to pay, and the needs of the district to perform the functions required by statute. School districts receive equalization aid from the state to make up the difference between the two.
As the value of agricultural land has increased in the past decade, the amount of state equalization aid from the general fund to rural districts has decreased dramatically. For the 2015-2016 school year, less than one quarter of the districts in the state will receive any of the $860 million in state equalization aid. For rural districts, that represents a dramatic shift in the burden of funding education to locally generated property tax dollars. Complicating the discussion is the fact the while only a minority of districts receive state equalization aid, the districts that do receive those general fund dollars educate over 80% of the roughly 300,000 students in Nebraska’s public schools. Re-evaluating the equalization process and increasing the amount of foundation aid each school district receives per pupil is a major step in rebalancing the funding of K-12 education between property taxes and general funds.
Furthermore, the expense incurred by counties and cities that are required by state statute or regulation must also be addressed. State general fund support for cities and counties has decreased significantly over the past decade, while operational requirements have increased. A careful examination of the regulatory burden imposed by state agencies and unfunded mandates in statute is underway. Dramatic increases in the tax revenue by community colleges and natural resource districts also stand out as areas of concern. At the core of these policies is the principle of local control of government. Local political subdivisions have the authority to collect property taxes in response to local needs. Granting budget authority to the state using state general funds gives greater authority to the state. If local control is a priority of taxpayers they must engage with their local boards and understand their spending to preserve local control.
The second area of policy concern is how the property tax burden is distributed among taxpayers and classes of property. In rural Nebraska, the inequity that has been created due to the rapid increase of agricultural land values compared to other classifications of property is at the heart of this discussion. One aspect of tax policy is to look at how “regressive” a tax is, or what proportion of an individual’s income is spent on the tax. For example, sales taxes have the potential to be highly regressive when charged against essential items such as food. A family earning $50,000 annually that spends $600 per month on food would pay a greater percentage of their income on sales tax of food compared to a higher income family earning at $100,000 annual income with the same food budget. Thus, exemptions for sales tax on grocery items are a policy decision to moderate the regressive potential of the sales tax. Conversely, income tax rates that increase as income increases is a “progressive” tax policy.
Since property taxes in Nebraska are based on the value of property, not on income, property taxes can be highly regressive in some instances, such as the tax burden passed through rent charged by property owners to tenants. On the other hand, it is assumed that owners of more expensive homes have higher incomes, so the tax would be more proportional to income. In the case of agricultural land and the improvements involved in agricultural production such as grain facilities, high taxes with decreased earning potential due to low commodity prices are highly regressive, meaning a greater proportion of total income is spent on taxes.
Policy changes to how property is assessed must go hand in hand with redistributing costs between local and state resources to be effective. If the total revenue needs remain the same in rural areas, decreasing valuations alone will likely result in levy increases to generate the revenue required. Most rural states employ a use-value assessment for agricultural land, as opposed to a market value assessment. Additionally, the period of time used to average valuations in many states is longer, which has a leveling effect on the tax burden in the face of volatile commodity markets. Any changes to the valuation process will affect all property taxpayers in varying ways. Carefully analyzing what those impacts will be and helping all taxpayers understand the implications is essential before statutory changes are made to avoid unintended consequences.
Finally, the nature of exemptions for specific classes and types of property from property taxes is also a policy consideration. While exemptions are important to promote certain industries or social priorities, they do shift the burden for funding local political subdivisions on the property owners who are not fortunate enough to receive an exemption. Expanding the tax base reduces the overall burden on all property owners. Accurate data about the economic impact of exemptions is needed to help inform policy decisions regarding their effectiveness and overall effect on local communities.
Nebraska’s property tax system has evolved over a period of decades, as have the economic conditions that have presented the current challenges. Reforming the system is neither a simple nor quick process. Ultimately, the participation of all taxpayers in the establishment of funding priorities and revenue decisions at the local level is critical to a sustainable and equitable property tax system. If you have any questions regarding property tax levies or any other issue across the state, please do not hesitate to contact my office by email at email@example.com or 402-471-2732. For daily updates, please follow me on Twitter @JohnKuehnDVM.
Senator John Kuehn, District 38
While the valuation of property subject to taxation by a political subdivision is dictated by market conditions and subject to the Uniformity Clause of the Nebraska Constitution, the amount of tax collected per $100 of valuation, called the tax levy, is set by each political subdivision annually. An examination of your property tax statement lists which political subdivisions you are paying taxes to and the levy rate. Expressed as a decimal figure, the rate is calculated as a percentage of total valuation collected in taxes.
To illustrate, you own a home with an assessed value of $100,000. The levy for your public school is .95, your community college is .1125, and your natural resources district is .045. Annually, you would pay taxes of $950 to your school district, $112.50 to your community college, and $45 to your NRD. If you own an 80 acre parcel of farmground with a market value of $5,000/acre your valuation for taxation purposes would be 75% of market value, or a total of $300,000. The same rates would apply. Tax levies are also subject to the Uniformity Clause in the sense that the rate must be uniform throughout the political subdivision, regardless of class of property.
The tax levy is under the sole authority of the political subdivision that charges the tax. The board of a political subdivision will establish its budget for the year, reflecting the revenue it must collect from property taxes. Using the total value of taxable property from the assessment and equalization process, the local board sets the levy to match revenue to their budget. The levy can be kept the same, lowered, or raised. A common statement is that a subdivision is “levy neutral”, meaning they have not changed their tax levy from year to year. That does not mean they are collecting and spending the same amount of taxes.
The only control of tax levies at the state level is in the form of limits. Established in state statute, levy caps set a maximum rate a political subdivision can charge. School districts have a levy limit of 1.05, the highest of all political subdivisions. Counties and cities are limited total levy of 0.45, with an additional 0.05 for joint agreements and the option to designate a portion to other agencies within the county or city, such as county fair boards, hospital districts, fire districts. Natural resources districts are authorized to levy up to $0.045, community colleges having a levy limit of $0.1125, and educational service units have a limit of $0.015.
Any political subdivision can exceed the statutory levy limit if approved by a public vote of the people in the subdivision. Public bonds can be issued by most political subdivisions, subject to a vote of the taxpayers. Property taxes collected to repay bonds are outside of the levy limit. Additionally, some NRDs levy additional taxes to meet compliance with the Nebraska Ground Water Management and Protection Act.
Budgetary management and local authority to set property tax levies is a reflection of the value among Nebraska voters of local control. Locally elected officials with the best knowledge of the needs and challenges of a community control the cost to educate a child, maintain local services, manage ground water, and provide vocational education. Local voters have a direct say in whether to issue bonds for school construction, city infrastructure upgrades, or hospital expansion. Local voters determine what the spending priorities are within each local community. As taxpayers and voters, every Nebraskan has an ability to influence the amount they pay in property taxes by engaging in the budget process with their local governments. I encourage citizens to do so.
There are several policy issues at the state level which can address the fundamental process of the property tax system. Next week I will address the state policy issues and the impact they may have on local control, alternatives to revenue sources based on property, and the state budget.
Your voice is important in these conversations. Examine your property tax statements, understand the needs of local spending, and talk to your local officials about the challenges they face. If you have any questions regarding property tax levies or any other issue across the state, please do not hesitate to contact my office by email at firstname.lastname@example.org or 402-471-2732. For daily updates, please follow me on Twitter @JohnKuehnDVM.
Senator John Kuehn, District 38
Property taxes paid on a specific piece of real estate or on tangible personal property is the product of the valuation of the property, determined by the county assessor, multiplied by the tax levy, the rate set by the board of the political subdivision collecting the tax. This week I will discuss the process of valuation of property and its role in your property tax bill.
The responsibility for maintaining the roll of all taxable property and its value lies with the County Assessor, a publicly elected county official. The office of the assessor establishes the list of all taxable property and its owners, as well as the taxes due. The Assessor must establish the “valuation” of the property for tax purposes. In Nebraska, real estate is valued at the market value of the property. Therefore, if the market demand, and therefore prices, of a particular class of property is increased in an area, the valuation also increases. If local housing demand is high for the number of available houses, the actual sales of homes in your area will reflect a higher value of your home. Conversely, if the ag land market stagnates, the lower prices per acre will mean your farmland has a lower value at sale and the valuation will decrease accordingly.
The valuation for property tax purposes is based on the average actual value over the past three years. This rolling average is to prevent large, sudden changes in valuation based on a singular economic event. It does, however, mean that if property values rise rapidly for two years and then plateau, the assessed valuation will continue to rise during the third, fourth, and fifth years until the previous increases are removed from the average. On the other hand, a sudden drop in market value will not be immediately reflected as well. Valuations for tax purposes will rise and fall at a lower rate and over a longer period of time than the changes in actual market conditions.
Determining the value of a piece of property for taxation is subject to the “Uniformity Clause” of the Nebraska Constitution. Certain property can be classified differently for the purposes of determining its value and based on characteristics of that property. Most notable different classifications in property for taxation are agricultural and horticultural land, personal real estate, tangible personal property, and livestock. Under the Uniformity Clause, once actual market value has been determined for a piece of property, the County Board of Equalization ensures the values assessed are uniform for the type and nature of property within a county. The County Board of Equalization is composed of publicly elected members of the County Board of Supervisors. They correct any assessment on a piece of property that is undervalued or overvalued compared to other similar property based on the current market conditions in their county. Property owners who feel their valuations are not consistent with the local market or with comparable property can protest their valuation.
Constitutional amendments passed by Nebraska voters in 1972, 1984, and again in 1990 created a special distinction for agricultural and horticultural land for the purposes of taxation. Agricultural and Horticultural land is assessed at 75% of the actual value and must comply with the Uniformity Clause with other subclasses of ag land, but not with other types of real property. It is important to note that distinction only applies to the land used for production. Homes and improvements are valued at 100% of their actual value whether located rurally or in a town.
Increasing value of property is not in and of itself negative. In fact, increased value of property means greater net worth and owned assets for property owners. If you wish to sell your land, home, or business, rising property values mean your sale proceeds are increased. Many taxpayers see increased valuations and assume an automatic increase of their property tax bill. Without adjustments to the levy rate, that correlation is true. It does not have to be. The levy rate as set by the local board determines the ultimate effect of the value of your property on the amount of taxes you pay.
Next week I will discuss the levy rate, levy restrictions, and the impact on your property taxes. As always, I look forward to hearing your ideas and concerns on the many issues facing the Legislature during the interim and in coming years, particularly regarding property tax reform. Please do not hesitate to contact my office by calling 402-471-2732 or sending an e-mail to email@example.com. For daily updates, please follow me on Twitter @JohnKuehnDVM.
Senator John Kuehn, District 38
Property taxes have been a significant topic during my conversations with constituents. As the primary revenue raising tool for local political subdivisions, property taxes accounted for $3.565 billion in revenue in 2014, roughly 39% of all state and local taxes. Property taxes to fund government were authorized by the Territorial Legislature before Nebraska was even a state, and Nebraska’s property tax policies have evolved over 150 years into a fairly complex system of moving parts, levies, and exemptions.
This column is the first in a series of four to help taxpayers in District 38 understand what property taxes fund, how valuations are determined for property, the principles of the levy rate, and the policy issues that are at the root of so many conversations among taxpayers.
In 1966 a constitutional amendment was adopted by Nebraska voters to eliminate the use of property taxes by the state. Since that time, property taxes have been exclusively levied by political subdivisions, commonly referred to as “local government”. Nebraska statute has authorized over 30 different kinds of political subdivisions, most of which are funded, at least in part, by property taxes. The taxing rate, known as the levy, is set by the locally elected boards that govern each political subdivision. Most subdivisions have a cap or limit on the maximum levy they can charge defined in state statute.
A quick look at your property tax statement will list which political subdivisions are collecting a tax, the levy rate, and the amount of tax collected on your property for that entity. School districts collect the largest component of property taxes, around 60% of the total. On average across the state, counties and cities/villages make up roughly 17% and 10% respectively, with community colleges, natural resource districts, and educational service units comprising the majority of the remaining tax collected. Depending on your locale, the proportion of your property tax bill funding different subdivisions may vary significantly. You may have property in a fire district or sanitary improvement district that also collects taxes. I encourage taxpayers to carefully examine their property tax statement and understand which entities are taxing them and how much. Because property taxes are levied and spent locally, local and regional circumstances change the proportional distribution of your total property tax bill.
The current discussion over the property tax system in Nebraska is the result of the culmination of a number of developing trends over the past decade. Property taxes collected is a product of the valuation of the property multiplied by the tax rate, or levy. If valuations increase, the levy rate can be decreased to collect the same amount of taxes. If the levy rate remains the same or is increased as valuations increase, the total taxes collected will increase as well. Statewide property valuation from the period of 2003-2013 increased by approximately 77%. During that time period, total property taxes levied increased approximately 67%, indicating a large increase in local taxes collected. Taxes levied by community colleges have skyrocketed by 124%, while taxes collected by natural resources districts have doubled in a decade, an increase of 101%. In both cases, total taxes levied significantly outpaced even the dramatic increases in valuation over the past decade.
Moreover, agricultural land values have risen rapidly in the last decade, resulting in a 162% increase in property taxes on farmers and ranchers. Nebraska ag land owners pay the third highest property taxes in a ranking of all 50 states. During that same time period, valuation of residential and commercial real estate has increased at a much lower rate than ag land. For many rural Nebraskans, this has created a significant imbalance in the distribution of the property tax burden among property owners.
Some political subdivisions also receive public funding from other sources of tax revenue, including state general funds from sales and income taxes. Some municipalities have local sales taxes. The funding mix for local governments has historically been a reflection of the view of local control of these political subdivisions, including their budgets, as opposed to state appropriations for locally determined needs. Funding for K-12 education, the single largest component of property tax revenue, is also a complex mix of local resources via property and needs specific to a local district. In theory, the differences among districts between resources and needs is equalized through equalization aid. However, over half of the school districts in the state, located in rural Nebraska, do not qualify for state equalization dollars, shifting almost the entire funding burden to local taxpayers.
Next week I will address the process of property valuation and its impact on property taxes. As always, I look forward to hearing your ideas and concerns on the many issues facing the Legislature during the interim and in coming years, particularly regarding property tax reform. Please do not hesitate to contact my office by calling 402-471-2732 or sending an e-mail to firstname.lastname@example.org. For daily updates, please follow me on Twitter @JohnKuehnDVM.
Senator John Kuehn, District 38