Proposals to Limit School District Tax Increases Considered
The Revenue Committee heard testimony last week on two bills that, with some exceptions, would cap annual increases in the amount of property taxes collected by public school districts.
Albion Sen. Tom Briese, sponsor of Legislative Bills 986 and 987, said a cap on public schools’ taxing authority is “critical” if the Legislature is to direct more state funding to schools in an effort to reduce an overreliance on property taxes to fund public education.
Under LB 986, a district’s property tax request — the amount of taxes requested to be raised through its levy — could not exceed its property tax request authority, which the state Department of Education would calculate each year.
A district’s property tax request would increase by the highest following percentage:
• the base growth percentage, equal to the percentage increase in the Consumer Price Index for all Urban Consumers, or 2.5%, whichever is greater;
• 40% of the annual percentage increase in the district’s student enrollment;
25% of the annual percentage increase in the district’s limited English proficiency students; or
• 25% of the annual percentage increase in the district’s poverty students
The resulting amount then would decrease by an amount equal to the increase in a district’s non-property-tax revenue, which includes certain state sources. If revenue from those sources decreases, a district’s property tax request would increase by an equal amount.
Briese said this “floating cap” would ensure that any new state aid to public schools results in property tax relief. At the same time, he said, LB 986 allows for “reasonable” tax asking increases for fast-growing districts. LB 986 also would allow a district to exceed its property tax request authority by an amount approved by 60% of legal voters. A 75% majority of a school board could exceed a district’s property tax request authority by 4% to 7% depending on the number of students they enroll.
The limit would not apply to the portion of a district’s property tax request needed to pay the principal and interest on approved bonds.
Under LB 987, a district’s property tax request could not increase by more than 3% from the previous year or the percentage increase in inflation, whichever is greater. Briese said the bill would allow a district to exceed its property tax request by a factor based on real property valuation growth. A district also could exceed the limit by an amount equal to a reduction in state aid resulting from a valuation increase.
Under certain conditions, a district also could exceed the limit by a majority vote of its board or by an amount approved by a majority of registered voters.
The limit would not apply to certain portions of a district’s property tax request, including amounts budgeted to pay for certain health and safety hazards or amounts pledged to retire approved bonds. It would apply to property tax requests set in 2023 through 2028.
Nicole Fox testified in support of both bills on behalf of the Platte Institute. She said Nebraskans generally do not want to cut public school funding but do want to keep property tax increases at a “reasonable level.”
Craig Beck testified in opposition to LB 986 and LB 987 on behalf of OpenSky Policy Institute. He said the cap in LB 986 could interact with existing school levy and budget limitations in a way that prevents some schools from accessing their full property tax request authority. Additionally, Beck said, requiring districts to reduce their property tax requests by the amount of non-property-tax revenue they receive could violate federal coronavirus relief funding requirements.
Jason Buckingham testified in opposition on behalf of the Greater Nebraska Schools Association and Ralston Public Schools. In certain cases, he said, neither bill would allow a district to increase its property tax request enough to make up for a reduction in state equalization aid caused by large valuation increases.
The committee took no immediate action.
The Unicameral Information Office is operated by the Clerk of the Legislature. Find additional coverage at update.legislature.ne.gov.
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