As expected, the property tax working group made more progress last Monday, but we still do not have a final draft. A last meeting is scheduled for July 22 to pull together final thoughts. Senator Ben Hansen will likely draft the bill to be introduced once the expected special session begins on July 25.

If the plan moves as anticipated, we will be looking at funding the current general fund expenditures for public schools with state dollars instead of local property taxes. The money for state funding would come from a combination of state agency spending cuts, changing the LB1107 income tax credits to direct property tax credits and expanding those credits, new or increased taxes on tobacco, vaping, alcohol, and hemp products, and elimination of certain sales tax exemptions. If the Legislature cannot agree on changes that can fully fund this effort, there would need to be some ongoing property tax levy with the state making up the difference. All existing bonds and any new capital improvements that require new bonding would continue to come from local property taxes, just as they do for the local community colleges under their recent funding change.

I have heard from some asking how this approach differs from the EPIC tax proposal. The main difference is that the EPIC proposal would have eliminated all other forms of taxation other than a consumption tax (sales tax) and excise taxes. The ballot initiatives would have placed this language in the state Constitution so that only a Constitutional change could allow us to ever use any other form of taxation. Additionally, the EPIC option would have sent all funding to Lincoln with no guarantee that any of those funds would return to rural Nebraska.

Under the proposal we are currently discussing, the state would only take over the cost of general fund expenditures for public schools, and some level of local property taxes would remain in place. Sales taxes and income taxes would also remain. Local school boards would still manage the public schools (just as the boards of governors of the community colleges do and just as the Board of Regents does for the University). However, they would no longer have taxing authority. So, local control would be shared between the elected boards and the taxpayers. Should the state fail to fully fund the agreed-upon funding, the local public schools would have the ability to go back to property taxes to fund the difference. Keep in mind, however, that there will be limits on the rate of increases in funding going forward. The details of that funding are still to be worked out.

I have said from the beginning that no matter how we fund our local political subdivisions, spending caps must be in place if we ever want to get ahead of runaway spending that puts us right back to where we are today. With that in mind, the plan would also limit property tax asks for counties and municipalities as well.

I was recently on a call with the leaders of both the Nebraska Association of County Officials (NAACO) and the League of Municipalities. I explained to them that the proposal will likely limit their property tax ask to the greater of zero or the Consumer Price Index (CPI) plus “real” growth. The plan would also have allowances for declared emergencies, funding for public safety needs, or voter-approved overrides. They were both extremely unhappy with the plan and wanted to have no less than a 3% annual increase allowance regardless of the rate of inflation (CPI).

My question back to them was very simple. Are you telling me that if we go into a recession and the CPI goes to 1% or less, you still want to ask for a 3% increase in real estate taxes from local taxpayers? They responded that they didn’t know if they could curb their costs. My follow-up question was to ask them how local taxpayers on the brink of losing their homes will find the additional funding to pay higher taxes. A 3% annual tax increase over a three-year period would equate to a 10% compounding increase in property taxes. Does that make sense to you?

This type of opposition – so far unsupported by historical or projected numbers for local spending needs – is why property tax reform has been so difficult in the past. I remain committed to doing what is necessary to make progress in reducing your property tax burden regardless of the hurdles placed in front of us.

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.