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Nebraska winter weather made for an interesting and atypical week in the Nebraska Legislature. Despite the blizzard altering the week’s schedule, the public hearing addressing one of the most important topics before the legislature took place as scheduled. The Revenue Committee held hearings on the proposals for property tax reform on Thursday, February 4. Lasting all afternoon and well into the night, the primary focus was LB 958.
LB 958 begins to address the property tax burden in Nebraska through several components. First, the bill would put a limit on the rate of valuation increases on agricultural land. It is well documented that farmland valuation has increased at an atypical rate over the past few years, with a single year jump of 29% in 2013-2014. The disproportionate valuation growth between classes of property has shifted the burden of funding local government in rural areas like District 38 squarely on the shoulders of ag land owners. Under LB 958 the statewide aggregate increase for agricultural land valuation would be capped at 3%. Although the major valuation increases have already taken place, the cap prevents the disparity between property tax burden on different classes of property from being exacerbated.
Second, LB 958 increases accountability of local spending decisions and gives greater voice to local taxpayers for spending increases. All levy limit overrides must be subject to a vote of the people. Greater transparency of local spending and increased voter participation in spending decisions improves civic engagement in local government. Full local control over spending decisions remains.
Finally, LB 958 tightens the levy and spending limits on local government. Exceptions to budget limits for restricted funds are eliminated, as is carryover of unused budget authority. Levy limit exceptions for voluntary termination agreements and court judgements are also eliminated. With permission of a vote of the people local governments can still exceed spending limits, but the total budget expenditures will be accounted for in the levy exceptions, improving transparency of local government spending for voters and taxpayers.
The property tax problem is a complex, multifactorial issue. It evolved over a series of years and amidst unprecedented economic changes in the agriculture economy and the Great Recession. Addressing the problem will require multiple policy changes over several years. State and local governments alike will need to aggressively step forward to address spending, establish a tax policy that preserves local control, and prioritizes expenditures.
During the hearing there were many testifiers representing local taxing authorities who simply said “no”. Unable to answer questions about sustainable spending, acceptable rates of government growth, or alternative solutions to address the property tax burden, it was disappointing to see the attempts to obstruct property tax reform. Hyperbole was rampant, with some predicting catastrophe if local growth is restricted to only 3% per year. I am frustrated by the magnitude of fear baiting perpetuated and the lack of alternative solutions suggested.
Every level of local and state government must be willing to participate in action-based solutions, not simply resist change and push the responsibility to someone else. I am confident we can responsibly address the property tax challenges in a sustainable manner that preserves local control. To do so, all stakeholders must exhibit the political will to come to the table and participate in the process.
I encourage you to closely monitor the property tax bills as they progress through the legislative process. If you have any questions or concerns regarding property taxes 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