Property tax, schools create taxing dilemma for Nebraska
December 17th, 2015
Nebraskans are upset about property taxes. But property taxes provide most of the money for Nebraska schools. That leaves lawmakers grappling with what to do.
In the last five years, taxes on Nebraska agricultural property rose 82 percent, says Bruce Johnson, a retired ag economics professor at the University of Nebraska-Lincoln. Meanwhile, Johnson says, residential property taxes went up only 7 percent, and commercial property, up 12 percent.
â€œThereâ€™s a huge, huge disparity,â€ Johnson said.
But that could change, says Sen. Mike Gloor of Grand Island, chairman the Legislatureâ€™s Revenue Committee.
â€œWeâ€™re already seeing a cooling off of the inflationary rate with ag land. But assessed value and sales prices for a lot of residential properties are starting to climb prettyÂ significantly,â€ Gloor said.
Against that backdrop, senators are trying to decide what to do about property taxes when the Legislature begins meeting again in January. At a recent public hearing,Â Speaker Galen Hadley told a roomful of people who came to testify, â€œWe know that thereâ€™s a problem. So if you get up and just tell us that thereâ€™s a problem, youâ€™re stating the obvious. If you could help us come up with possible solutions to the problem, it would really help us.”
Cathy Lang, a former state property tax administrator now with an educational advocacy group, reminded senators to think about how the money is spent.
â€œIt is the spending that drives the need for any and all tax revenues. Therefore the policies considered by the Legislature must address the size and the rate of change of that â€˜bucketâ€™ that you are filling with tax revenues,â€ Lang said.
By far the largest share of property taxes collected in Nebraska goes to schools. And property taxes account for about 54 percent of all school spending in Nebraska.
Much of the rest comes from state sales and income taxes, funneled to local districts through the state school aid formula. As ag propertyÂ values have gone up, that formula means many rural school districts have gotten less and less state aid, says Sen. Kate Sullivan, who chairs the Legislatureâ€™s Education Committee.
â€œConsequently, of our 245 school districts, about two-thirds of them are supporting their school districts solely on the property taxes that they receive,â€ Sullivan said.
The community of Chadron, in northwest Nebraska, still gets state aid, but the amount has fluctuated, says Chadron schools superintendent Caroline Winchester.
â€œWe lost $1.6 million in one year, and that was out of about a $5 million state aid budget,â€ Winchester said. â€œWe had to close four rural schools. We had to RIF (reduction in force)Â 16 positions, which is a tremendous economic effect on the community because itâ€™s not only those 16 positions but economically it hurts 50 other positions (that) are lost throughout the county.â€
Chadronâ€™s property taxpayers are already paying the maximum levy allowed by state law. Elsewhere in the state, property taxpayers have faced steeply increased bills, as rising agricultural propertyÂ values have sent state aid flowing elsewhere.
Among the beneficiaries of the state aid formula in recent years have been schools in cities like Lincoln, says Lincoln superintendent Steve Joel.
â€œOur needs continue to go up. We grow about a thousand students a year. The needs of those students that are coming into the system continue to go up as well, too,â€ Joel said. â€œOur valuation doesnâ€™t keep up with our student growth. We benefit from the formula the way itâ€™s written today. But weâ€™re one of the fastest-growing districts in the state.â€
Urban schools may benefit now, but that hasnâ€™t always been the case, Joel added.
As lawmakers continue to wrestle with changing the school aid formula or the property tax system, Sullivan says itâ€™s important to maintain perspective.
â€œThe reality is weâ€™ve got to find a balance. We have to keep that and retain that quality education that I think we have in the vast majority of our schools. But we need to balance that with the concerns of the taxpayers,â€ Sullivan said.
Lawmakers will continue to discuss how to find that balance, as the Legislature prepares to reconvene January 6
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