Legislative Testimony: LB986, Adopt the School District Property Tax Limitation Act

Good afternoon, Chairwoman Linehan and members of the Revenue Committee. My name is Nicole Fox. The Platte Institute SUPPORTS LB986.

Local school districts rely to a large degree on property taxes to provide the high-quality education Nebraska’s children deserve and for which they have a right.

From our research, which includes numerous scientific surveys of Nebraska voters on state and local tax policy, while most Nebraskans are willing to pay a generous amount in property taxes for this purpose, 77% are also concerned about their ability to afford paying their property taxes either now or at some point in the future.

Forty-three percent say local property taxes have become a greater concern since the beginning of the COVID-19 pandemic, while only 8% said they were a lesser concern.

Nebraskans don’t always agree on the best way forward when it comes to tax policy, but

• 60% have favored a constitutional cap on the annual growth of property taxes, compared to 24% opposed, and
• 62% favor further limits on local property tax rates or valuations. Only 17% were opposed.

Nebraskans generally don’t want to cut school funding, but they do favor measures to keep increases in property taxes at a reasonable level, which LB986 does.

LB986 would prohibit school districts from raising property taxes beyond the greatest of 2.5% base growth or Consumer Price Index (CPI) inflation, 40% of student enrollment growth, 25% of limited English proficiency (LEP) student growth, or 25% of poverty student growth.

Bond obligations would not be included in the property tax request.

When we look ahead to education funding reform, this bill also has a provision that would reduce the asking by the amount of additional non-property tax revenue sources in a given year or would increase the asking if those revenue sources are reduced from the prior year. We’ve all discussed ways in this committee to increase the non-property tax revenues available for districts, and LB986 is set up for a time when senators decide on some more of those ways.

Our economic landscape has changed significantly in the past year with a current 40-year high inflation rate, and this bill would accommodate that reality for districts. However, districts would still be required under Nebraska’s new Truth in Taxation law to directly notify taxpayers and justify tax increases at current levels of inflation.

LB986 would also provide voters the option to approve exceeding the required property tax request. Sixty percent support of voters would be needed at a special election, which is a good number because that’s about how many Nebraskans think property taxes need these additional limits. Requiring a vote of the people would give taxpayers an opportunity to say “NO” if the increases are inappropriate at that time, or to approve an override if boards have made a good case for them. But the school board could also exceed the limit by a supermajority vote.

LB986 has another provision that is more flexible for districts. Should a school district choose to not increase their property tax request by the full amount allowed, they may elect to carry forward the unused increased tax authority to future years. While this is reasonable, we propose that the committee consider also setting a number for how much total carryover authority can be used at a time.

Thank you to Sen. Briese for introducing LB986 and providing a solution that addresses Nebraskans’ concerns about rising local property taxes.