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Thank you for visiting my website. It is an honor to represent the people of the 42nd 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.
Sincerely,
Sen. Mike Jacobson
I want to focus my comments this week on Tax Increment Financing (TIF) and why it is the best economic development tool that the state may have ever created. I say this because TIF (if properly approved) has no cost to the taxpayer while growing our total tax base and having no impact on our current tax base.
With TIF, as the name implies, the “Incremental” increase in property taxes due to the project getting built is “divided” into two portions: the base property tax value and the increase in the incremental value. The increase portion is then used to repay the TIF bond. This division of taxes stays in place for up to 20 years (if the project is in an extremely blighted area) or when the bond is repaid, whichever comes first. The local TIF authority, the Planning Commission, and the City Council must approve all traditional TIF projects, and the City Council must approve all Micro-TIF projects.
The initial TIF bond is funded by the developer (applicant). They generally will borrow those funds from their project lender. The CRA will then issue the bond and send the funds back to the developer (applicant). The developer will also hold the TIF bond, which gives them the right to receive the increase portion of the divided property taxes resulting from the project. That bond is generally pledged to the lender as additional collateral.
If the TIF project results in the developer owning the project post-construction, the developer pays all the property taxes going forward including the incremental real estate taxes. Those incremental real estate taxes then repay the TIF bond over time. If the taxes collected along the way do not produce sufficient property tax revenue over the life of the bond, it is the developer who takes the loss.
So, let’s do a quick recap. Who funds the fund? The developer. Who receives the bond proceeds? The developer. Who repays the bond? The developer. Who takes the loss if the project does not generate sufficient funding to repay the bond? The developer.
And, if the project otherwise would not have been built, would the “increment increase” ever exist? NO.
And there is much more!
A TIF bond only captures the incremental increase in “property taxes.” All of the pre-development property tax base continues to be collected by local political subdivisions. Additionally, all new sales taxes on materials purchased for the project and all new personal property taxes go to the taxing authorities.
When using TIF for housing, we make great progress in solving our housing shortage and create jobs. The new residents moving to the area to live in the new housing will fill open jobs and generate more disposable income to grow our sales tax base.
If you sit on the board of a local taxing authority and oppose TIF, I would like to know why. Do you not want to build new housing or improve existing housing in blighted areas? Do you not want to fill the open jobs? Do you not want to grow our tax base?
I also want to mention the recent audit on the use of TIF in Nebraska issued by State Auditor Foley. I have great respect for Auditor Foley and do not disagree with some of his findings. I have always believed that Omaha has used the program in a very aggressive fashion (such as the proposed street car project). He also found that a few smaller communities do not have a good system in place to monitor the progress of the TIF bond repayment, causing some taxes to continue being divided after the bond has been repaid. However, these are not problems in every community. I know firsthand that the North Platte Area CRA has a great system in place and is in full compliance with state law.
If we want to continue our current growth path, it will be imperative that our local leaders understand TIF and how it works.
It is a privilege to represent you in the Nebraska Legislature, and I look forward to hearing from you regarding issues that are important to you. I can be reached at 402-471-2729 or by emailing me at mjacobson@leg.ne.gov.
Over the past few weeks, I have gotten many calls and emails regarding Medicare Advantage and why Great Plains Health and several other rural hospitals gave notice that they will no longer be accepting those plans as of January 1, 2025. One constituent in particular called me last week and asked that I provide the rest of the story behind the GPH decision to discontinue accepting Medicare Advantage plans.
Medicare is the federal health insurance program for Americans age 65 and older and provides a range of health service for seniors. Medicare Advantage is a private plan alternative to traditional Medicare that is required to provide the same “minimum” levels of coverage as Medicare. Insurance companies with Medicare Advantage plans contract with the Medicare program and receive payments for providing services on a per beneficiary basis.
Both traditional Medicare and Medicare Advantage must cover services that are “reasonable and necessary for the diagnosis or treatment of the illness or injury. Under Traditional Medicare, patients receive care at Medicare-certified facilities, and the facility or the provider then submits a report of their cost to Medicare Administrative Contractors for processing and reimbursement determination. These facility or provider claims are also subject to various compliance and auditing efforts to prevent improper payments. Because they take place after care (and sometimes after payment) has been provided, these processes are sometimes called “retrospective review”. Medicare Advance insurers by contract, frequently require patients and providers to obtain prior authorization before receiving care. Over the years, the use of pre-authorizations as a tool to deny care and delay payment to providers has exploded. The combination of denying pre-authorizations, not approving transfers from acute care to long-term care, and forcing providers to accept payment rates well below Traditional Medicare has brought us to the place we are today. Let me be very clear, this problem was not caused by the hospitals, this issue is fully is in the hands of the Medicare Advantage insurers who are trying to increase profits at the expense of the providers and the patients.
On May 17, 2023, the Permanent Sub-Committee on Investigations launched an inquiry into the barriers facing seniors enrolled in Medicare Advantage in accessing care. The following is a quote from that report.
“Although the Subcommittee’s recommendations in this report are targeted at regulators, this should not distract from the fact that it is insurers who are using prior authorization to protect billions in profits while forcing vulnerable patients into impossible choices. This is particularly troubling when recent analyses indicate that Medicare Advantage is more expensive than Traditional Medicare, with one assessment concluding that in 2024, the government spent 22 percent more to fund Medicare Advantage plans than it would have had those beneficiaries been enrolled in Traditional Medicare. There is a role for the free market to improve the delivery of healthcare to America’s seniors, but there is nothing inevitable about the harms done by the by the current arrangement. Insurers can and must do better, for the sake of the American healthcare system and the patients the government entrusts to them”
It is a privilege to serve as your state Senator and I look forward to hearing from you on issues that top of mind for you. I may not have all the answers, but my staff and I will work hard to find the answers.
Last week, the North Platte Area Chamber and Development Corporation held its annual meeting and awards dinner. Congratulations to all the deserving award winners; they all played a role in the continuing economic growth of our area.
I was honored to be asked to say a few words at the event. My remarks focused on the value of economic growth and the need to grow Nebraska. Clearly, Nebraska is a high-tax state compared to our neighbors. There are many reasons for that, but it has much to do with our population. Although South Dakota has half the population of Nebraska, they have no income tax and low property taxes, but charge a sales tax on many items. They also have fewer counties and fewer public schools. But, most importantly, a large portion of the sales tax revenue is collected from people who live outside the state but come to South Dakota for their tourist attractions.
If Nebraska wants to lower its tax burden by growing the state, we will need to see through the income tax cuts that are phasing down to 3.99%. This will make Nebraska competitive with our neighbors and neutralize the competitive disadvantage when recruiting and retaining employers. Lower income taxes help attract and retain employers who place a high priority on where they locate based on income taxes.
We will also need to have housing available if we want to attract workers to fill those newly created jobs. A large component of housing costs is our property tax rates followed closely by our high insurance rates. The insurance rates are higher almost entirely due to our high incidents of hail and wind losses. As a result, we will need to continue to be creative in providing incentives that have no direct upfront costs to the state. Today that incentive tool is Tax Increment Financing (TIF), where the developer repays bonds for improvements over time from incremental property taxes that otherwise would not be collected had the project not been built.
I believe that restoring some sales taxes that were exempted over the years and using those dollars for direct property tax relief would go a long way toward restoring the balance of our tax base. We can also take a page from the South Dakota playbook by collecting sales taxes from those traveling through Nebraska. Having non-residents help offset our high tax status is always welcome.
There will be more debate this coming session regarding ways to lower property taxes. The debate will likely focus on both state spending cuts and revenue growth to add to the property tax credit fund established through LB34 during the special session. Because of the focus on providing property tax relief, other spending bills will struggle to get traction in this coming session.
I also want to comment this week on questions I have received regarding the Corporate Transparency Act. This is a federal act that is designed to provide transparency regarding ownership of corporations, LLCs, and other partnerships. If you are an owner of a corporate entity created before 2024, you have until yearend to report the ownership makeup of the entity to FINCEN. Although most initially react to this requirement as more government overreach, we need to keep in mind that if we are serious about restricting foreign ownership of farmland and other businesses, we must know who the underlying owners of these entities are. Today, all that is on the public record for these entities is the list of board members and officers. These positions can easily be filled by U.S. residents willing to be paid to serve in these roles. If you have questions regarding this new law, I encourage you to contact the attorney who created your entity or your tax preparer to help you with the filing requirements.
I look forward to continuing to hear from you about 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.
This week, North Platte Regional Airport (Lee Bird Field) held a groundbreaking for the new Terminal Building. This is a major milestone for North Platte and the entire region. Many years of planning went into the development of the plan and the fundraising to make this project a reality. I cannot begin to adequately thank U.S. Senator Deb Fischer for her work in making this happen. It was Senator Fischer who secured an additional $7 million in federal dollars that got the funding to the finish line. Her committee role and tenure in the U.S. Senate were key. I have always appreciated her intellect and ability to get things done. We are so fortunate to have her in Washington working for us.
With the election a month out, much attention has been given to the potential election results and the impact it could have on the Nebraska Legislature. There are 15 current Senators who are either term-limited or have chosen not to run for a second term. This will bring at least 15 new Senators to the 108th Legislature to join the Senators who are just now completing their first two years. With nearly two-thirds of the body made up of those who served less than three years, there will be many leadership changes and a significant loss of institutional knowledge. However, I am impressed with the leadership skills of many in my class and have been impressed with the backgrounds of several likely incoming Senators as well.
Once the election is over, there will be a push to identify likely standing committee chairs for the next biennium, as well as slotting the remaining Senators into the 14 standing committees. Standing committees typically meet for either one, two, or three days each week, and Senators are assigned a combination of standing committees so they have a committee meeting every day. The Appropriations Committee is the only committee that meets five days per week. The three-day committees meet on Wednesday, Thursday, and Friday, while the two-day committees meet on Monday and Tuesday. There are four one-day committees that meet either on Monday or Tuesday and the Nebraska Retirement Systems committee meets on an as-needed basis.
I currently serve as vice-chair of the Banking, Commerce and Insurance Committee and the Natural Resources Committee. I plan to run for Chair of the Banking, Commerce and Insurance Committee this next biennium and hope to move to the Revenue Committee for my three-day committee. I am also optimistic the third caucus will continue my service on the Executive Board and the Committee on Committees. There are several Special Committees and Select Committees that many of us serve on as well.
The next big legislative event will be the Annual Legislative Council Meeting to be held on December 12-13 in Kearney. This will be the first official meeting where all the returning and incoming State Senators meet to discuss potential rule changes and get a general overview from the Speaker regarding the coming legislative session.
Now that the Capitol construction is coming to an end, every Senator will be back to officing on the first or second floor of the Capitol. No one will remain in the tower. However, assigning offices is no small feat. All returning Senators will remain in their old offices until the first day of the session when leadership and standing committee chairs are elected. Every standing committee has an assigned office in the Capitol, so those newly elected chairs will move to their new offices following the election. From there, offices are assigned based on seniority. If you are an incoming Senator or a senior Senator who moves offices, you may be without a computer or phone for a day or two until all the other moves are completed. Meanwhile, bill introduction is taking place, and committee meetings are beginning. The first week of a new biennium is a real zoo, but somehow it seems to work.
I have begun drafting bills for the next session and look forward to your input regarding issues that are important to you. Now is the time to get that information to me so it can get included in newly proposed legislation. 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.
I want to thank the Lincoln County Farm Bureau for hosting me at a town hall meeting at the McKinley Education Center this past Saturday night. It was a great opportunity to hear from constituents firsthand on issues important to them.
I began the meeting by updating those in attendance on the Special Session and what I believe was accomplished. Clearly, the session fell short of the Governor’s expectations, but frontloading the LB1107 income tax credit and setting up a mechanism to fund additional direct property tax relief was important. It was also important to ensure that, going forward, the local property taxing authority of cities and counties will be capped at a rate in line with inflation and real growth. Additionally, the body was able to engage in some good discussion on what items currently exempt from sales tax could, in fact, be added back to the sales tax rolls to provide additional property tax relief.
The pushback from the urban Senators on expanding the sales tax base demonstrated why the EPIC consumption tax is unlikely to ever pass the Legislature. Further, if a version of this tax were to pass by a ballot initiative, the ability to return dollars to rural Nebraska would be very challenging. It is for that reason that I remain focused on finding ways to increase funding for the new property tax credit that taxpayers will begin to see on their 2024 property tax statement, which should be sent out in early December.
Remember that the property tax credit you will receive this year will represent the dollars that would have been paid out in an income tax credit in 2025 for those who paid their school property taxes for 2023 in the 2024 calendar year. Thus, we “front-loaded” the 2023 income tax credit to a property tax credit in 2024, thus eliminating the need to file for the public school income tax credit. For those who escrow their property taxes with their house payment, you will see a house payment reduction due to the net reduction in 2023 property taxes due in 2024 once your mortgage servicer recalculates your new escrow. Keep in mind that you may see an increase in insurance costs that would reduce the total payment reduction since they too would be included in your escrow payments, but regardless, your former sales tax credit is now coming early in the form of a direct property tax credit as outlined in LB34.
For those suggesting that there is a “lost year,” it should be noted that once your real estate is sold, the seller (owner) would be required to pay real estate taxes current at the time of the sale. The so called “lost year” would be made up then with a reduced property tax payment.
There has also been much discussion this past week regarding “winner take all” as it relates to the allocation of electoral votes in Nebraska. Each state can decide if they wish to allocate their electoral votes for President based on statewide results or by Congressional District. Nebraska has five electoral votes, one for each of our U.S. Senators and one for each of our three Congressional Districts. Nebraska has voted Republican for many decades on a statewide basis. The third Congressional District overwhelmingly votes Republican, and the first district (Lincoln and several eastern Nebraska counties) generally also votes Republican. The second district, however, which is essentially the Omaha metro area and parts of Sarpy and Saunders Counties, is considered a very “purple” district that swings back and forth between voting Republican and Democrat.
Nebraska is one of two states in the union that currently allocates electoral votes by district. Maine is the other state. Nebraska is generally a red state that votes Republican and Maine is a blue state that votes Democrat. In all likelihood, if the two states would both adopt the winner-take-all method, they would likely have no effect on the election.
So how did we get here? In 1991, the Nebraska legislature adopted LB115, introduced by then-state Senator Dianna Schimek, to cast electoral votes by district. The bill passed with 25 votes and was signed into law by then-Governor Ben Nelson. The rationale was that other states would follow our lead and more candidates would come to Nebraska. No states followed, and three years later, the first of several attempts to reverse the law began. Keep in mind that California has 54 electoral votes, and they are a winner-take-all state. Does anyone ever see the Democrats in California giving up that advantage? My view is that Nebraska should conform to other states and put us on an equal playing field. It is unlikely that a special session will be called to address this issue yet this year since the votes do not seem to be there to pass such a bill with the emergency clause (33 votes). I do, however, expect that this issue will return before the 2028 General Election.
It is a privilege to represent you in the Nebraska Legislature, and I look forward to hearing from you regarding issues that are important to you. I can be reached at 402-471-2729 or by emailing me at mjacobson@leg.ne.gov.
There have been several articles written and numerous newscasts suggesting that, somehow, property taxpayers lost out on their 2023 income tax rebate with the passage of LB34. I will devote this week’s article to explaining the misunderstandings and bringing more clarity to the situation. In the end, no one lost out, but some did end up with a bonus depending upon the timing of when they paid their 2023 property taxes.
LB1107 was passed by the Legislature in 2020 and was referred to as the Nebraska Property Tax Incentive Act. It created an income tax credit to help offset the property taxes paid to your local public school district. In most cases, property taxpayers receive their property tax statement in December of each tax year after all the taxing authorities have approved their budgets. Those property taxes are then “due” on December 31 of that year, but in all counties except Douglas, Sarpy, and Lancaster, the taxes for the current tax year are not delinquent if the first half is paid on or before May 1 of the following calendar year, and the second half if paid on or before September 1, of the following calendar year. In Douglas, Sarpy, and Lancaster counties, the taxes must be paid on or before April 1, and August 1.
Property taxpayers who paid their 2019 property taxes in 2020 could claim the income tax credit on their tax return in 2021. The total credits claimed in 2021 was $82 million out of $125 million available. The difference represented those who failed to claim the credit. Property taxpayers who paid their 2020 property taxes in 2021 were able to claim their credit in 2022. Total credits claimed amounted to $422 million out of the $548 million appropriated. Taxpayers who paid their 2021 property taxes in 2022 were able to claim their credit on their 2023 income tax return. That totaled $562 million in credits claimed out of $763 available. Finally, taxpayers who paid their 2022 property taxes in 2023 were able to claim their credit on their 2024 income tax return. The total claimed was $477 million out of $809 million available.
In this summer’s special session, the Legislature passed LB34 which eliminated the LB1107 income tax credit and replaced it with a direct property tax credit; that means taxpayers will no longer need to claim a credit on their income tax return. Instead, a credit will appear on your property tax statement along with the existing property tax credit passed in 2007. This will allow all Nebraskans the ability to receive the credit without taking any further action, thus eliminating the gap between the credits paid and the credits available. The property tax credit will begin this year and will be reflected on your property tax statement be mailed to you in December 2024 by the local County Treasurer. The state will simply pay the credit directly to each county when the statements go to the taxpayers to make the counites whole.
Had LB34 not been passed, any property taxes assessed for the 2023 property tax year paid in 2024 would have been eligible for the income tax credit in 2025. Instead, you will automatically receive your credit on your 2024 property tax statement. If you pay your property taxes in the following year, you will pay the reduced property tax bill in 2025 instead of receiving an income tax credit in 2025. The amount of the property tax credit statewide will be $786 million as opposed to just over $500 million had the income tax credit still been in effect.
So, who got a windfall? Those who paid their 2023 property taxes in 2023 instead of 2024 and also claimed their income tax credit in 2024 before the special session will receive both the income tax credit and the property tax credit, but keep in mind that they also paid their real estate taxes well before they were delinquent. Regardless, all taxpayers are receiving more property tax relief because of LB34. The numbers are clear.
In the end, there was no other way to make the transition from the income tax credit, which was costly to apply for and not fully utilized, to the new property tax credit system where every property taxpayer receives their credit. It should also be noted that the state actually paid more to make the transition and every taxpayer will receive at least as much in credits as they would have under the original program. There is no lost year; it is simply a change in how the credit is received.
I want to remind everyone that the Lincoln County Farm Bureau has asked me to participate in a town hall meeting on September 21 at the McKinley Education Center beginning at 6:30 p.m. I hope you will consider attending to get any of your questions answered and share with me any concerns you have.
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.
I spent time last week updating you on the legislative efforts to bring property taxes down. Although the Legislature has limitations on what they can do to impact property taxes – which are assessed locally – the steps we took are now coming together.
It has always made sense that cities, counties, and most local political subdivisions should fund their own needs, with some exceptions. Meanwhile, public education is one of the Constitutional responsibilities of the state.
Today, the state already provides significant funding to public schools, but most of that funding has gone to larger schools where their property tax bases are smaller in relationship to their student population and student needs. The Legislature took steps two years ago to provide $1,500/student in “foundation aid” to all schools to help take pressure off local taxpayers. Additionally, the Legislature provides funding to schools that accept transfer students who live in other school districts and are seeking a better fit for them to maximize their learning experience, which is known as “option enrollment.” This funding approximates the average cost of educating a student and helps to offset the cost to property taxpayers in the receiving district who now take on the cost of another student.
I generally support option enrollment when it is used to improve student learning and when the receiving school district uses the additional student population to maximize teacher/pupil ratios. I am concerned, however, that unless we see significant student population growth from the recent economic activity, steps will need to be taken to address overhead expenses and better utilization of facilities. In the end, every school district needs to continue to manage per-pupil costs while still maintaining sufficient teaching staff and teacher compensation.
I have been watching closely the steps that all our political subdivisions are taking during this budgeting season. Property values went up approximately 8% this past year, so mill levies must come down to stop property taxes from climbing at that same rate. My early read is that budgets are getting scrutinized, and we will indeed see mill levies drop significantly to hold property taxes in check.
As the November elections draw closer, now would be a good time to familiarize yourself with all the ballot initiatives and the candidates who will represent your interests on the various boards and commissions. There are several debates scheduled as well. Plan to attend the debates and ask the tough questions to each of the candidates to understand their views and their commitment to making decisions that align with your values.
As I wrap up my comments this week, I want to mention the lawsuit brought by a young mother suing to stop the repeal of LB1402 from going on the ballot. LB1402 was passed by the Legislature this year. It repealed the funding for the LB753 Opportunity Scholarship Program (tax credits for those donating to the program) but left the scholarship program in place with a $10 million annual appropriation to fund scholarships to low-income students who choose to attend a private school that best fits them. This program, in many ways, mirrors the public school “option enrollment” program. Conversely, the total credits in LB753 were capped at up to $25 million annually.
LB1402 was in response to a ballot initiative funded largely by the Nebraska State Education Association (NSEA) to place a repeal of the funding mechanism of LB753 on the ballot this fall. Despite the Legislature’s change in LB1402, the NSEA once again spent hundreds of thousands of dollars in paid petitioners to place an initiative on the ballot to repeal the legislative appropriation.
The lawsuit challenges the constitutionality of repealing a legislative appropriation. The Nebraska Supreme Court has bypassed the District Courts due to the timing of the suit and will hear the suit this week. This ruling could have a significant impact on future legislation.
Finally, I want to remind everyone that the Lincoln County Farm Bureau has asked me to participate in a town hall meeting at 6:30 p.m. on September 21, at the McKinley Education Center. I hope you will consider attending to get any of your questions answered and share with me any concerns you have.
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.
I traveled to Thedford last week to meet with area residents regarding the next steps for the Sand Hills Discovery Center that is being planned to replace the former State 4-H Camp destroyed by fire two years ago near Halsey. I was able to secure $10 million in matching funds from the State to help fund the replacement of the facility.
After spending this past year looking for the best site to build the replacement facility, the committee decided to rebuild on the old site located on National Forest land. The decision was based on several factors, including the cost of land acquisition, infrastructure needs, and the fact that future fire risks are limited due to the loss of trees from the last fire. The strong support of the local Forest Service staff also played a huge role in selecting this site. The trade-off of building on leased land is the need to develop a detailed development plan prior to negotiating a lease and starting construction.
The development committee is comprised of two local representatives, two University/4-H representatives, and two Nebraska Community Foundation representatives. I will also continue to serve on this committee for now. We are also looking for local volunteers to serve on two committees to work on eco-tourism ideas and fundraising. The ultimate success of this project will depend on local support. I am grateful that the 4-H foundation contributed $2 million from the net fire proceeds, so with the dollar-for-dollar match from the Department of Economic Development, we now have $4 million collected. We expect that Phase One will require approximately $20 million. I have always said that economic development begins with stopping existing projects from leaving the area.
Last Thursday night, Julie and I attended the annual banquet for the Nebraska Family Alliance. Over 1,200 people were in attendance to celebrate the lives of the unborn and to remind us all how precious life is. The keynote speaker was Tim Tebow. Many of us know Tim as a Heisman Trophy winner, a first-round draft pick, and professional baseball and football player. We also know him for his strong religious faith. Tim shared how his father was convinced that he and his wife needed to have another child while they were serving as missionaries. During her pregnancy, his mother had serious complications and was advised to terminate her pregnancy by two separate doctors. However, she was determined to place her faith in the hands of God to protect her through the pregnancy. Later, she delivered their baby, a healthy baby boy that they named Tim. None of us know what God has in mind for us as we live our lives, but he remains in control always. His story is inspiring and one that we all can celebrate.
I have also gotten several inquiries regarding the impact that LB34 will have on the 2023 income tax rebate associated with LB1107. LB34 modified the LB1107 income tax credit to a “frontloaded” property tax credit. As a result, your 2024 property tax statement, which you should receive in December, will include the existing property tax credit as well as the new LB1107 credit. Property taxes are due on December 31 each year, but the first half is not delinquent until May 1 the following year, and the second half is not delinquent until after September 1 the following year. Because of this change, you will not be receiving an income tax rebate for 2023 property taxes paid in 2024, but you will receive your income tax rebate for 2023 if you paid them prior to January 1, 2024.
Going forward, any state revenues that exceed 103% of the budget will be automatically added to the property tax credit fund. State spending cuts, coupled with new revenue sources, are expected to significantly contribute to this fund going forward. Getting this mechanism in place was one of the most important accomplishments of the special session.
I also want to remind everyone that the Lincoln County Farm Bureau has asked me to participate in a town hall meeting at 6:30 p.m. on September 21, at the McKinley Education Center. I hope you will consider attending to get any of your questions answered and share with me any concerns you have.
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.
Now that the special session has ended, it is time to reassess the progress made and chart the path forward from here. I’m looking forward to being able to spend more time in the District again. The Lincoln County Farm Bureau is hosting a town hall meeting at the McKinley Education Center at 6:30 p.m. on Saturday, September 21. I will be there to recap the special session, lay out my plans for the next session, and listen to your input on what is most important to you at that meeting.
In case you cannot attend, here’s a brief overview:
Governor Pillen brought a very aggressive property tax relief proposal to the Legislature that focused on eliminating sales tax exemptions, increasing so-called “sin” taxes, and using the new funding along with cuts in state expenditures and transfers of excess reserves to allow for the frontloading of property tax relief directly through your property tax statement. Although the new sales tax revenue was not approved, the frontloading of the property tax relief, the spending cuts, and the fund transfers were approved and will appear on your property tax statement next year.
The plan also placed caps on the amount that cities and counties can request from property taxpayers each year. This was a key component to help ensure that property taxes do not rise faster than inflation and the growth of local economies. Although these caps currently do not apply to public schools and other taxing authorities, there will be efforts in January to bring all political subdivisions under an appropriate cap. It is important to note that if there were no sales tax exemptions, the state would have collected over $7 billion in sales taxes in 2023. Instead, $2.3 was collected with the sales tax base. Total property taxes collected by local political subdivisions statewide was $5.3 billion in 2023.
It was clear early in the session that the progressives in the body were united in their opposition to any sales tax exemption repeals. They were joined by conservatives opposed to any new taxes, even if those new taxes would reduce property taxes. Although we were not able to bring more new revenue to replace property taxes, we were able to debate which proposed sales tax repeals could be on the table next session. That will be a starting point for the next Legislature. With the large number of term-limited Senators leaving the Legislature at the end of this year, the new freshman class will play a huge role in getting necessary legislation passed next year.
It is important to remember that all property taxes are assessed locally. About 50% or more of the property tax burden funds local public schools. Although the State has significantly increased its support of all public schools, the bulk of the state funding goes to the larger school districts. To the extent that the State can provide additional funding to public schools across Nebraska, reliance on local property taxes can be reduced.
As was done with community college funding, the Governor’s goal is to substantially fund general operating expenses for public schools with State dollars while still maintaining local control of public schools by locally elected boards. The primary change will be the funding source and the degree to which spending increases. The goal is to allow for spending to grow with the rate of inflation plus growth in students and other factors unique to individual schools; in other words, to meet the schools’ needs. Determining the right structure will take some time. I intend to meet with all public schools in District 42 before January to fully understand their individual challenges.
In addition to reforming our revenue collection and spending systems, we must continue to find ways to grow Nebraska. The greatest challenge to lowering our state’s tax burden is the fact that our state needs to grow by another 1 million residents. To do that, we must have a competitive income tax to attract and retain large employers to locate in Nebraska. We also need competitive property tax rates to make housing and new commercial development affordable. With investors’ interest in buying agricultural land as a hedge against inflation, we are seeing these properties’ values climb to lofty levels and taking the property tax burden up with the price increase. For those producers who are trying to make a living off the land, these taxes are devastating. In the end, all classes of real estate need relief if we want to be competitive.
This problem did not emerge overnight, and we will not find an overnight solution. It will be important for the next legislature to find common ground when solving our tax challenges. I am committed to working with the incoming freshmen, and those who do not align with me politically to find that common ground.
It is a privilege to represent you in the Nebraska Legislature, and I look forward to hearing from you regarding issues that are important to you. I can be reached at 402-471-2729 or by emailing me at mjacobson@leg.ne.gov.
The legislature adjourned on Saturday around noon after a debate on LR2CA. LR2CA is a constitutional amendment introduced by Sen. Brandt. If passed, voters would be able to vote on whether the Legislature should be allowed to value “owner-occupied” residential real estate differently than other classes of real estate. A similar constitutional amendment was passed for agricultural land many years ago and we now value ag land at 75% of market value. The goal of proponents is to assess owner-occupied residences at a lower value than other types of property. However, the definition of “owner-occupied” and the percentage of assessment for each class of real estate would be up to future Legislatures.
The challenge with this idea is that lost revenue would simply shift to the other classes of real estate unless there is a funding source to make up the difference. That could have a negative impact on other types of primary residences – like rented homes, duplexes, and apartments – as well as commercial property. And, given the number of Senators in support of LR2CA, it is very likely the voters would not see it on the ballot until the 2026 election. Modeling is not yet available for the Legislature to see exactly what the impact might be and changing the proposal later is challenging from a procedural standpoint. There are many Senators who support providing targeted relief to homeowners – who have seen an alarming rise in property taxes in recent years – and would like more time to fully evaluate the best path forward.
It is important to remember that assessed values in a taxing district are added together to determine the local property “tax base.” This value is then divided into the tax ask by each political subdivision to determine the mill levy. Capping values does not reduce taxes because the mill levy simply goes up to make up for the loss of value to raise the funding needed. Likewise, capping the mill levy does not reduce taxes if the values rise. The only way to hold property taxes down is to place caps on the amount of tax dollars requested by the political subdivision. If we want to be able to change valuation levers to make the property tax burden more equitable, then we will need to explore a number of categories and combinations.
The Legislature will reconvene at 9:00 a.m. on Monday, August 19. Our only business will be to check in to allow for the constitutionally required layover day between Select File and Final Reading for LB34 (which essentially replaced LB1), LB2, and LB3. We will then take up those bills on Final Reading on Tuesday. Both LB2 and LB3 are appropriations-related bills dealing with fund transfers and state spending reductions to help fund the gap in funding that could be created by LB34.
LB34, if passed, restricts cities and counties from increasing their property tax requests by more than the sum of an inflation index, with certain exceptions. The tax request can also be increased when there is real growth in the tax base (increases that do not involve value increases for existing property), increased spending for public safety (including police, fire, and the court system), to respond to declared emergencies, or by a vote of the people. No other revenue sources are capped. So, cities and still collect local option sales taxes, charge fees, and raise funds from locally operated utilities, garbage services etc. Counties still have inheritance taxes and fees generated from services they provide to the public. Both can also issue voter approved bonds.
LB34 also frontloads the LB1107 fund and converts the return mechanism from an income tax credit to a property tax credit that will appear on your property tax statement. This credit will be in addition to the existing property tax credit you currently receive. All the sales tax exemptions that were originally proposed to be repealed in LB1 were eliminated along with all so called “sin tax” increases and other new taxes. Since the new funding sources were eliminated, no additional property tax cuts could be provided.
Clearly the original plan was very aggressive and was always destined to be reduced. However, there were too many in the body who were unwilling to embrace any broadening of the sales tax base. While some tax exemptions, like the one for legal services, as never been exempt, many were put in place by prior legislatures. As the state allowed the TEEOSA formula to systematically eliminate smaller rural schools from receiving state aid, those schools were forced to rely on funding from local property taxes. If the state were able to increase the revenues available for school funding, our property taxes can be reduced. That was the goal of the Governor’s plan.
I do, however, believe that the debate during the special session did sort out many of the issues some had with sales tax exemptions. We had some important discussions about taxing “needs” versus “wants” for consumers, as well as end user taxes versus business-to-business transactions. It is likely that the next session will bring back many of those exemption will be back on the table as possible revenues to reduce property taxes, but at a more measured pace.
It is hoped that the special session will end this week and we all can return to our districts. It is my intention to hold a town hall meeting in North Platte soon to share information from the special session and get input for bills for the session beginning in January.
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.
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