Plan to lower property taxes runs into fears it will hurt schools

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February 19, 2020 - 5:37pm

A proposal to lower property taxes ran into objections that it would hurt Nebraska schools in legislative debate Wednesday.


Supporters say the proposal, LB974, would lower property taxes over the next three years, by using money from state sales and income taxes, which are coming in above projections, to replace local property tax dollars. By year three, that’s supposed to lower agricultural property taxes by about 12 percent, commercial and industrial property taxes by 3 percent, and residential property taxes by 4 percent.

Sen. Lou Ann Linehan, chair of the Revenue Committee, said high property taxes are hurting young families’ ability to buy homes.

“It's been in everybody's interest for people to be able to buy their own home, so they can build wealth for their retirement, so they can raise their family, so we can have decent neighborhoods, which usually includes a very good public school,” Linehan said. “We're failing here in Nebraska -- and I don't know why we don't understand this -- we're failing because the state is not picking up its fair share.”

The proposal seeks to lower property taxes by lowering what percentage of a property’s value could be subject to taxation. That percentage would be reduced, for residential and commercial property, from 100 percent to 87 percent, and agricultural property would decline from 75 percent to 55 percent.

At the same time, state school aid would be increased by about $500 million. Sen. Patty Pansing Brooks of Lincoln said she was worried about the trade-off.

“I am very concerned, and would have to be shown completely otherwise, that this hurts my public schools. I understand that we get more state aid, but by cutting the property tax percentages, that is a direct loss to Lincoln's public schools of tens of millions of dollars a year,” Pansing Brooks said.

Linehan sought to counter that concern.

“We are not eliminating doing away with or cutting a single school. Everybody's going to get more money,” she said.

The proposal would have the state make up 100 percent of any loss of revenue for schools in the first year, and lesser amounts in the next two. Linehan talked about the message to schools.

“What we're trying to do here over a four year period is say ‘You need to slow your growth of spending,” she said.

And Sen. Mike Groene, chair of the Education Committee, said more money doesn’t necessarily produce better schools.

“The amount you pay in education -- never have I seen a study (that  it) relates to outcome. But we do adequately fund our schools, because we want our teachers to make an adequate living, and they have good benefits, and the airconditioner (needs) to work. The outcome in that classroom is the quality of the instructor. Not money,” Groene said.

Omaha Sen. Machaela Cavanaugh also relativized the importance of money, but in opposition to the bill.

“Are we talking about education? Or are we talking about what's in your pockets? Because I'm talking about children. I'm caring about education. I'm focusing on that. That's my concern today,” Cavanaugh said. “Your pockets are important. Everybody's pockets are important -- how much you've got in them. Sure that's important, but it is not more important than any single child in this state having access to education.”

Sen. Dan Hughes of Venango, supporting the bill, said Nebraska’s cities should support the goal of sending more aid to schools in rural areas like the one he represents, which are losing population.

“Kids are not coming back home. We are losing population to Lincoln and Omaha. So the amount of money that we are paying in rural Nebraska to educate that workforce for Lincoln and Omaha is huge. I think Lincoln and Omaha need to think about that a little bit,” Hughes said.

Hughes said this is a good time to increase school aid, because the state is in good shape financially. But Sen. Wendy DeBoer of Bennington said she’s worried the Legislature will act in haste.

“I'm concerned about making policy with a gun to our heads. When you have a gun to your head, if this is the only solution, this is the only train in the station, I'm worried that you might promise anything, even if you can't pay for it later,” DeBoer said.

One of schools’ biggest objections to the proposal is that it would limit increases in property tax asking – the amount districts can collect in property taxes -- to the rate of inflation plus real property growth due to construction. Linehan signaled she’s willing to make changes, but not to give up on limiting property tax increases.

“I am willing to negotiate, to work with people who have concerns about this bill. I am more than willing to do that. What I'm not willing to do is say we're just going to hand out $500 million (in additional state aid) and nothing else. That is not responsible,” she said.

The debate came one day after the Department of Correctional Services announced it will solicit ideas for  new prison construction. Sen. Pansing Brooks suggested building more prison beds, instead of enacting sentencing reform she favors, would create more competition for tax dollars needed to support schools.

“Are we going to save money? No, we're going to spend hundreds of millions of more dollars on a prison, hundreds of millions of more dollars to build more prisons. And now sudden we're in this ironic place where we're talking about cutting property taxes. What in the world? What world are we all in? Where are we?” she asked.

The Lincoln Journal Star reported the state is considering building a 1,600-bed prison between Lincoln and Omaha that could cost $200 million. Corrections Chief of Staff Laura Strimple said that was speculative, with the size, location, and cost of a facility yet to be determined.

Debate on the property tax/school aid bill is scheduled to continue Thursday.

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