As I write this article, I am reviewing all the information received over the past few months to prepare for the last of the scheduled property tax working group meetings to be held at the Governor’s residence on Monday, July 8. I will focus my comments this week on where we go from here and what we might expect to take place during a special session that is tentatively scheduled to begin on July 25.

Although the Governor has floated many of the provisions discussed by the working group during his town hall meetings, the final proposal from the working group will not be complete until after the July 8 meeting. At that time, the working group proposal will be made available to all the members of the Legislature. As I have mentioned in the past, this is a framework but certainly not the final bill. Every Senator will need to bring their ideas to the table to get the necessary 33 votes.

The working group has focused on removing most, if not all, of the public school “general” fund expenses from the property tax rolls and replacing them with funding from the state. The new state funding would need to come from eliminating certain sales tax exemptions, creating and/or increasing certain “sin” taxes (cigarettes, vaping, skill games, and alcohol), and cuts in state spending. The framework of the plan would also include using the LB1107 income tax credit dollars to help fully fund the plan.

The primary challenge for the working group is to determine which sales tax exemptions should be considered for repeal and what other products or services should be added to the sales tax rolls to generate the necessary funding. The goal will be to bring total property taxes down by at least 40% and bring sales taxes more in line with income and property tax revenues.

It is always important to remember that property taxes are assessed locally, and all the funds generated from property taxes remain with the local political subdivisions. Meanwhile, the state collects income taxes and sales taxes to fund the bulk of state operations. Local municipalities are allowed to add an additional “local option” sales tax to the state’s 5.5% sales tax that is kept locally to use those funds to hold the line on property tax increases.

Public schools rely almost exclusively on local property taxes and funds from the state to cover the operations costs. Meanwhile, they must fulfill many federal and state mandates that all cost money. It is also important to remember that our state Constitution requires the state to provide public education for all school-age children. At this point, there are 244 local public school districts ranging in size from 53 students (McPherson County) to 53,000 students (Omaha Public Schools). Every district is unique. Family incomes, property values within the districts, students with special needs, and students where English is their second language (ESL) are all examples of why every school district has different funding needs and local funding sources.

The TEEOSA formula was created many years ago to try to determine how to best balance every school district’s funding needs by targeting state funding to districts with higher needs and lower resources. However, the current formula has shifted most of the TEEOSA funding to about 27 of the largest schools or towns with higher numbers of ESL students. North Platte Public School is the only school district located in Legislative District 42 that receives TEEOSA funding. Each of the other school districts began receiving “foundation aid” of $1,500 per student last year when the Legislature appropriated $325 million in “new” annual funding for public schools across the state.

I expect that any property tax reform proposal will include a grandfathering of any existing general funds with a formula to provide for increases as needs change. My goals are to ensure that rural Nebraska does not lose out if the formula is changed and that rural Nebraska does not take on a disproportionate tax burden when all taxes are considered. I remain opposed to adding agricultural inputs to the sales tax rolls and will continue to look to make changes so that all businesses are on a level playing field when it comes to the taxation of property, sales, and income.

Regardless of how we decide to change tax revenue sources, we must set hard spending caps that account for actual growth and inflation but curb waste. Without spending limits we will be wasting our time. Property taxes are currently rising at a rate of $1 million per day. This is not sustainable. Every political subdivision must reevaluate its spending and focus on “needs” versus “wants.” I have received many emails and calls from constituents paying more in property taxes than in their total mortgage payment. Many are at risk of losing their homes. For that reason, I will be looking for compromise on any plan to achieve the necessary property tax relief.

I look forward to continuing to hear from you regarding issues that are important to you. It is a privilege to serve as your State Senator, and I will continue to give my full effort to make a positive difference for the District and the State. You can reach me at mjacobson@leg.ne.gov or 402-471-2729.