Among new bills introduced into the Nebraska Legislature this session is the latest attempt to address a decades-old challenge — how to provide residents with real property tax relief.
LB 974, introduced by the Revenue Committee on Jan. 13, has already made it through its first round of committee hearings. The legislation addresses school funding and at what levels real property should be valued.
Under the bill, property currently valued at 90% of actual value for purposes of taxes levied by school districts would be lowered to 85% for 2022 and following years.
For the 2020 tax year, agricultural land will be valued at 65% of actual value for purposes of taxes levied by school districts. For 2021 and thereafter, the value drops to 55%.
District 47 State Sen. Steve Erdman of Bayard said if property values are decreased by 10% and school districts aren’t allowed to raise their mill levies, a vote of the people would be required to override the levy limit. Consequently, property owners end up paying just as much as they did before.
Erdman said the Legislature needs to stop trying to solve the property tax problem from inside the box. “We don’t have a shortage of revenue because we don’t tax people enough. We have a shortage because the state spends too much.”
Erdman said Nebraska has been ranked as having between the fifth and seventh highest property tax burden in the nation.
He added that LB 974 phases in valuation decreases. But in western Nebraska where agriculture is hurting, relief is needed immediately.
“There’s a problem when you lower values from 100% to something less,” said Tony Baker, Aide for District 43 State Sen. Tom Brewer of Gordon. “The schools are used to getting a certain level of revenue from property taxes and that will go down with lower valuation. That incentivizes the school districts to raise their levies. To keep them from doing that, the Legislature needs to give them more money.”
Baker said that’s the simple reason why property taxes are so high in Nebraska. It’s also incredibly hard to solve. “Property taxes are too high because the Legislature doesn’t appropriate enough money for K-12 education,” he said. “There are 47 other states that appropriate more money for K-12 than we do. And since 1966, school districts have made up the difference by raising property taxes.”
Nationally, an average of 40% of K-12 education is paid for by property taxes. The Nebraska average is 60%. But in Brewer’s District 43, 72% of K-12 education is paid for by property taxes.
“We need to figure out a way to get the Legislature to pay more for K-12 education,” Baker said. “That’s the only way property taxes will go down.”
Another piece of legislation, LR 5CA, was introduced last year by Sen. Brewer and could become a factor this session. If passed, it would ask voters to approve or deny a provision to the state Constitution that no more than 33% for funding for schools could come from property taxes.
Baker said that if LB 974 doesn’t pass, and a petition ballot initiative to rebate 35% of property taxes to property owners doesn’t get the signatures it needs by July 2, LR 5CA could come into play.
District 48 State Sen. John Stinner of Gering said the 59-page LB 974 from the Revenue Committee is a major piece of legislation that will take a lot of time for the senators to debate.
“I haven’t seen the fiscal note on this, but I know it will be a big funding bill,” Stinner said. “This is targeted property tax relief above the $275 million we’ve already appropriated.”
Stinner said he’s been favorable to everything that’s come up in terms of property tax relief, so he’s predisposed to be favorable to LB 974, although many of its provisions still need to be hammered out.
Stinner estimated the bill could go to the full Legislature for a first round of debate sometime next week.