As our country celebrates 249 years of existence, one common question still exists: What is a fair amount for citizens to pay in taxes, and how should the tax burden be distributed? We all agree we’d like to pay less in taxes, but reducing individuals’ tax burdens while still funding essential services and making investments to grow our economy is not as simple as it sounds. Many people have their own ideas of how to reduce taxes, but getting 33 state Senators – or a majority of those in Congress – to agree is a tall task.

Before proposing solutions, it is beneficial to understand how the current system operates. In Nebraska, the State funds its operations primarily from a 5.5% state sales tax and income taxes. These funds are collected statewide and help pay for all government agencies, state-owned roads, aid to public education, and other programs deemed beneficial to the state. Some agencies also collect fees and penalties that are used for State expenses. All the state revenue is currently fully appropriated.

Counties rely on property taxes, fees, and inheritance taxes to fund their needs. Counties collect local property taxes and distribute the funds to the local taxing entities, including the counties themselves. This ensures local dollars go towards local services that benefit those paying the property taxes. County responsibilities include maintaining and building roads, overseeing county law enforcement and emergency responses, and managing the county court system. Each county has an elected board, either comprised of commissioners or supervisors. This board also serves as the Board of Equalization in each county.

Municipalities, including cities and villages of all sizes, are also governed by a locally elected board with local control. In addition to property taxes and fees, municipalities can also collect a local option sales tax for additional revenue. The local option sales tax must be approved by the local voters. In the case of North Platte, its local option sales tax revenues have grown significantly over the past few years, which has helped to lower its property tax ask. Shifting the cost of maintaining city services from property tax payers to consumers allows for a lower cost of living for locals and takes advantage of tourism and travelers visiting the city.

There are a number of other entities that have tax-collecting authority, from rural fire districts to ag societies, from natural resource districts to educational service units. Community colleges used to be included on that list, but the state recently took over 100% of community college funding at the state level. By far, local public schools account for the largest portion of property tax collections.

The biggest challenge we face as lawmakers is how to fairly distribute state aid to schools and, in turn, how to fairly put limits on school spending. It is clear that we have runaway spending in many school districts, but there is also a wide variety in the needs of those districts across the state. Some of the smallest schools actually have a sizeable tax base because of the rural nature of the district. Conversely, urban schools often have more students with special needs or extra educational needs, such as students for whom English is a second language. Rural districts tend to have fewer of these types of students, but that, in turn, requires a disproportionate use of extra resources for the special students they have.

Over the last several years, the Legislature, in partnership with Governor Pillen and then-Governor Ricketts, has made significant financial investments in local public education. These investments were designed to address the slow shift to more reliance on property taxes in the last several decades, caused by unfunded mandates, rising costs per pupil, and state aid that didn’t keep up with increased costs. Over time, the TEEOSA formula has also been modified to shift more state equalization aid to larger metro-area schools. Even with more direct funding to small schools and direct property tax credits, school property taxes continue to rise in most districts as enrollment changes, the mix of special needs students shifts, and overhead expenses increase.

The solution to lowering school spending is unlikely to be one-size-fits-all. For some districts, it might be sharing administration with a neighboring district or combining sports programs. For others, it might mean taking advantage of virtual learning. It could mean reducing long-term costs by performing deferred maintenance or upgrading school properties. It is vital that school districts pursue conservative spending policies if we want to reduce property taxes. It will also be critical for school districts to communicate with state officials about what restrictions are workable. I remain open to suggestions that can be a part of the solution to a long-term, sustainable tax scheme.

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.