Committee: No easy answers for property taxes, school aid

By GRANT SCHULTE

Associated Press

LINCOLN, Neb. (AP) - A committee that spent months looking for ways to reduce Nebraska’s reliance on property taxes to pay for schools finished its final work session Monday with plenty of ideas but no clear-cut answers.

Lawmakers on the special joint committee failed to reach a consensus despite help from mediators who tried to bring them to an agreement.

Even so, senators on the committee said the hearings and testimony helped them identify “themes” for next year’s session to address farmer and rancher complaints that property taxes are rising too quickly. Agricultural property taxes have soared in recent years because of skyrocketing prices for farm and ranchland.

“I think it’s given us some direction,” said Sen. Kate Sullivan of Cedar Rapids, who co-chaired the committee.

Some committee members expressed interest in changes that would give school districts an incentive to lower their property tax levies. One proposal would eliminate the minimum levy that schools have to charge before they become eligible for state equalization aid. Some districts keep their levy higher than needed because they don’t want to lose state aid, Sullivan said.

Several senators voiced support for proposals that would limit the growth in the taxable value for agricultural, residential and commercial property.

Sen. Mike Groene of North Platte said he plans to introduce a bill that would slow the growth of property taxes by using the average valuation over six years to calculate a property owner’s tax burden. The two years when valuations were highest would be eliminated, which Groene said would reduce the sharp increases that farmers and ranchers have seen in recent years.

Groene said his proposal would apply to agricultural, residential and commercial property to help it win support from urban lawmakers.

Sen. Mike Gloor of Grand Island, the committee’s co-chairman, said lawmakers need to create tax and school funding changes that are sustainable, predictable and visible.

Gloor and other lawmakers said their recent efforts to reduce property taxes have gone largely unnoticed by the public. The state budget approved earlier this year includes $204 million annually for the property tax credit fund - a tax credit of $141 for a $150,000 home - but Gloor said many residents aren’t aware that it exists.

One possible idea: Instead of posting the credit as a line item on property tax bills, the state could send every property owner a check. However, doing so could turn the tax credit into taxable income.

“We have a perception problem,” said Sen. Adam Morfeld of Lincoln. “People don’t understand the relief that they’re getting from the state.”

Sen. Paul Schumacher of Columbus warned that any cut in property taxes could add pressure to sales and income taxes, or force lawmakers to raid the state’s cash reserve.

“There’s no free lunch here,” Schumacher said. “It’s great to play Santa and say, ‘Let’s cut property taxes.’ But where do we play Scrooge?”

Nebraska’s school aid formula distributes money by calculating a school’s needs and subtracting what it can generate through local property taxes and a few other sources. The difference between a district’s needs and its local resources determines how much state aid it receives.

Nebraska schools received $3.8 billion in funding from various sources in the 2013-14 school year to cover operating and construction costs. Local property taxes accounted for nearly $1.7 billion of their operations funding and $228 million in construction funding. The rest came from the state and federal government, fees and other sources.

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