After reading the account of the Lincoln County Commissioners’ discussions and joint public hearing regarding its budget, I felt it necessary to address the impact of LB34 on county budgets. Passed during the 2024 special session, LB34 (Property Tax Limitation Act) was designed to limit annual property tax increases for cities, counties, and certain other taxing entities. The goal was to limit spending tied to property taxes, as opposed to limiting either property value growth or mill levy increases individually, while also allowing increases from other revenue generators. This provision became effective on July 1, 2025.

Under LB34, the annual property tax revenue increases are limited to the greater of 0% or the rate of inflation percentage based on the state and local consumption expenditures and gross investment (SLCE), which has averaged 3.9% over the past 20 years compared to the Consumer Price Index’s 2.6%, plus actual growth. The cap applies to property taxes collected from existing properties, excluding revenue from new construction, improvements, annexations, or changes in use.

“Exceptions” to the cap for allowable increases relate to voter-approved overrides, public safety services, emergencies (as declared by the Emergency Management Act), bond repayments, and costs related to county attorneys and public defenders. However, some of these exceptions require an equal deduction in the budget for the subsequent year.

The key exception to the cap deals with the “carryover authority” provision that allows up to 5% of unused taxing authority from the prior year, providing flexibility for frugal entities that did not use their maximum authority. However, it was never intended to encourage taxing authorities to view it as a “use it or lose it” proposition since political subdivisions can always ask the voters to approve a bond issue if they have needs above the cap. At that point, of course, you need to make your case to the voters, i.e., property taxpayers.

In the case of Lincoln County, the commissioners are proposing a sizable one-year property tax increase for road improvements and other projects, along with additional bonding authority for road projects. I normally don’t weigh in on local issues, but when the Legislature is getting blamed for the excessive property tax increase, I felt it was necessary to explain the bill. The timing of this increase is especially troublesome, considering current grain prices and the stress currently being felt in the agricultural economy.

In the end, your local taxing authorities determine your property taxes. There have been several opportunities for taxpayers to voice their concerns regarding proposed property tax increases and the local projects funded with them. You must decide what is most important to you.

In fairness to the Lincoln County Commissioners, they historically bring forward very conservative budgets and have held their tax increases in check. That is what made them eligible for the carryover provision. I know they have many items to consider when setting their budget, including a long-term plan for road improvements that will improve public safety. Being an elected official is not easy, and the commissioners must look at their budget from all viewpoints.

As Senators, we face similar challenges when considering our votes on complex legislation, particularly when it comes to changes to Nebraska’s tax structure. Part of the beauty of our state is the diversity in types of communities and industries, but it can also make it challenging to adopt fair policies that don’t either favor or disfavor some. Despite not collecting property taxes at the state level, rapidly rising property taxes are a problem that Senators are often asked to solve by their constituents. In the end, this Legislature felt capping property tax increases, while allowing the local political subdivisions to determine their budgeting priorities within that amount and targeted exceptions, was the fairest way to address local spending of property tax dollars. This is in addition to our efforts to send more state tax dollars back into local communities through increased school funding and taking over community college funding entirely.

It has been a pleasure serving as your State Senator. I have enjoyed the challenge and will continue to do my best to serve the interests of District 42. Please continue to reach out to me about issues important to you at 402-471-2729 or by emailing me at mjacobson@leg.ne.gov.