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Property tax; Senators Briese and Groene agree!
As I prepared my column this week on the Revenue Committee’s property tax relief proposal, I kept coming back to a column written by Senator Briese that appeared in the Omaha World Herald earlier this week. Unable to improve on his work, he has given me permission to adapt his work to my thoughts and present the result as our update to you:
The Legislature’s Revenue Committee Advanced Legislative Bill 1106 with AM2870 to general file. It’ll lower valuations for all Nebraska property taxpayers, increase state aid to all school districts, limit property tax increases and reduce the property tax burden for all real property owners. Yet some of our friends in the education community object to it.
LB1106 will create foundation aid, a common sense and fair approach, guaranteeing state financial aid for every Nebraska public school student no matter where they attend a public school. Some equalized districts — districts that receive state support through the Tax Equity and Educational Opportunities Support Act (TEEOSA) — raise concerns over a shift away from equalization aid. But even after full implementation, foundation aid would comprise only roughly 50% of total state aid. The equalization component of TEEOSA would remain in place. At the end of the day, total state aid for the equalized districts would still hinge on the equalization formula.
Some in the education community are concerned the current proposal would lower basic allowable growth rate (BAGR) for districts from 2.5% to 2%, suggesting this impairs their ability to grow their budgets. But for the last 10 years, the legislature has adjusted the BAGR, causing an average budget authority increase of 1.48%. Even with those budget reductions, by utilizing a variety of exemptions to budget limitation, schools have on average increased their spending by a robust 3.5 to 4% annually.
We currently require the issuance of bonds for school construction to be preceded by a public vote. Large ag-land valuation increases have given a growing number of districts the ability to avoid this public vote requirement by levying taxes for a special building fund within their general fund levy, then using that fund for construction of new school buildings. Our proposal would simply require a public vote, reaffirming the expectations of the taxpayer to have a voice in the decision to build new school facilities.
Currently, schools can bank unused budget authority, which allows considerable leeway to exceed the existing budget limitation. Our proposal resets budget authority to 110% of the actual 2018-19 general fund expenditures, but then still allows schools to bank unused budget authority going forward.
Existing statutes provide a levy limitation for our taxing entities, including school districts. These levy limitations are an effort to protect the taxpayer. However, in many districts, the levy is far enough below the limit so as to make the limit ineffective. Our proposal would remedy this in year four by essentially limiting growth in property taxes to 2% annually, plus actual growth. At the same time, foundation aid is forecast to grow at 4.5% per year. Plus, if things go awry, a district maintains the option to call upon its voters to approve a levy override.
Some in the education community express concern that the property valuation reductions contained in our proposal will cause a reduction in overall district revenue for a handful of districts during the first three years. But it does appear that if spending increases in those districts are kept to an average of 2-3%, those issues are negated.
Others are simply concerned about assumptions as to actual valuation growth coupled with the proposed valuation reductions. But this is where the equalization formula provides a backstop. If resources fall, the equalization formula is designed to provide the aid necessary to match needs.
A few have expressed concern about elimination of what is perceived by many to be an unfair perk to a handful of districts, the averaging adjustment. But our proposal increases overall state dollars going to every district, more than replacing those averaging adjustment dollars.
Considerable compromise has gone into LB1106, and no one is getting everything they want. If future revenue projections go awry, we as a legislature can and will make adjustments. We do value public education.
Contact Sen. Mike Groene: email@example.com or 402-471-2729.