This last week was full of District 42 events! Julie and I had a wonderful time being part of the Sutherland annual Independence Day parade and talking to local constituents. I then welcomed Governor Pillen to North Platte to discuss his plans to connect Nebraska, an issue especially critical for those of us in western Nebraska. On Friday, we attended the celebration for the 10^th Anniversary of the opening of the Prairie Arts Center. Finally, we rounded out the week by attending the North Platte Pow Wow. In addition to being a time to experience Native American singing, drumming, and dancing, it was also a special chance to celebrate veterans. I look forward to attending more of these types of events throughout the interim!

This week, I want to continue discussing property taxes by giving you some more insight into the changes the Legislature made this year to the funding of community colleges.

As a reminder, property taxes are only assessed by local taxing authorities. In 2021, Nebraskans paid over $4.73 billion in property taxes. In comparison, $3.1 billion was paid in state and local sales taxes, $3 billion in net individual income taxes, and $644 million in net corporate income taxes. Schools accounted for 60% of the property tax recipients, followed by 16% going to counties, 11% to cities and villages, and just over 5% to community colleges. The remaining 8% of property taxes are collected by Natural Resources Districts, Educational Service Units, Fire Districts, Townships, and other local taxing authorities.

Originally, the funding for Nebraska community colleges was intended to be divided, 40% from State funding, 40% from local property taxes, and 20% from tuition. Although tuition continues to account for about 20% of the funding, the balance between state and local funding broke down over time, with local property taxes providing more than double the resources that the state appropriated.

LB342, enacted in 2007, created a state funding formula to fill in the difference between community college needs and locally available resources (FTE’s). Needs are based on enrollment and the cost of education (REU’s). Local resources are derived from property taxation. The formula allows for a 3% automatic growth upon the most recent years of expenditures, plus any additional growth experienced by the colleges.

The Legislature also enacted the Property Tax Credit Act in 2007 to provide property tax relief to Counties based on the real property value in each county. This credit began at $105 million and has steadily increased over the years. LB1107 was enacted in 2020 to increase appropriations to the Property Tax Credit Fund and establish the Nebraska Property Tax Incentive Act, which created a new income tax credit for property taxes paid to fund school districts.

LB873, passed in 2022, expanded the LB1107 credit program to add a new refundable income tax credit for property taxes paid to fund community college. The value of the tax credit is $50 million for calendar year 2022, $100 million for 2023, $125 million for 2024, $150 million for 2025, and $195 million for 2026. Since community colleges are expected to levy $265 million in taxes in 2023, a $195 million tax credit would offset 75% of the entire community college property tax burden.

Now in 2023, the Legislature approved LB253. LB253 provides that, beginning in Fiscal Year 2024-25, community colleges will no longer levy property taxes to fund operating expenses. Instead, the state will fund 100% of the operating expenses levied in Fiscal Year 2023-24, but in no case less than 7.5 cents per $100 of valuation. In the case of Mid-Plains Community College, this will result in additional funding because their leadership has kept their levy below the 7.5%. Kudos to Mid-Plains. The state will increase its funding by 3.5% each year to account for inflation. If the state does not meet its obligation, community colleges can implement a levy to make up the difference. The community colleges also retain the ability to levy 2 cents for capital improvements and continue any levies required to repay existing bonds.

As you can see, this is real property tax relief that the Legislature has provided to a local taxing authority. I was disappointed to hear the Southeast Community College Board of Governors has initially voted to raise their tax levy to the maximum this year to generate more reserves prior to the new law going into effect. The goal of the Legislature was to reduce property taxes, this action is insulting to the legislature and the taxpayers who live in their area. I have joined several of my colleagues by signing a letter addressed to the Board asking them to reconsider this action and wouldn’t be surprised if there was legislation introduced to make adjustments to the law next year if the Board moves forward. I hope that the Board does the right thing.

Please continue to contact me about issues impacting you at mjacobson@leg.ne.gov, or feel free to call my office at 402-471-2729. My door is always open!