Southeast Community College Board votes to raise property taxes by 40%
Property owners in southeast Nebraska should brace for sticker shock ahead of next year’s property tax bills. The Board of Governors for the Southeast Community College system (SCC) voted on Tuesday to raise property taxes by roughly 40% across the 15-county service area, according to coverage by the Lincoln Journal Star. Tuesday’s preliminary approval will be considered for final approval at the board’s September meeting.
Nebraska’s Southeast Community College system covers the fifteen counties in the southeast corner of the state, essentially covering the fourteen counties south and east of York along with Saunders County. These are the counties that will be immediately impacted by the tax increase.
There are two factors that will contribute to a 40% tax increase for homeowners. First, property valuations increased by 15.3% across the service area, and so the same tax rate will yield roughly 15% higher taxes. Second, SCC’s board voted unanimously to raise its tax rate. The service area imposed an average property tax rate of 9.37 cents per $100 of property value in 2022, according to statistical data from Nebraska’s Department of Revenue. The board voted to increase their tax rate to 11.25 cents per $100 of value, the maximum allowed under state law, which is a 20% rate increase for 2023 taxes.
All told, the increase in taxable value combined with the increase in the tax rate will result in a total tax increase of roughly 40% year-over-year.
Background
The background context for the SCC board vote is a new state law that changes how community colleges will be funded. The legislature passed LB 243 in 2023, which will replace the community college property tax with state funds on a dollar-for-dollar basis, and then the state will grow those replacement funds by 3.5% per year.
Once state replacement funds are phased in, community colleges will no longer be able to levy property taxes for operations unless the state falls short on its commitments, in which case the colleges can re-levy their property taxes to make up any state shortfall. The state replacement funds will automatically grow by 3.5% each year into the future, a fact which undercuts any proclaimed need to raise taxes by 40% today in order to address future concerns. Community colleges will regain the ability to levy property taxes if the state fails to meet its commitments to fund community colleges.
The state law will reduce property taxes by roughly 6% across the state by eliminating the tax altogether. This repeal represents a rare opportunity
The SCC can rightly claim that the state will soon pick up the cost of the increased property taxes. That is true. The state law will replace community college property taxes based upon where they were for the 2023-2024 year. And state lawmakers will have a front row seat to SCC’s property tax increases, as SCC covers Lancaster County, home of the state capital in Lincoln. Home owners and business owners in Lincoln will see their community college tax bills skyrocket over the next year.
A tax increase isn’t needed
The Board of Governors claims to be responding to the new state law that will limit their ability to levy property taxes in the future. According to SCC President Paul Illich:
“We have to set those rates based on future needs because we no longer have the ability to wait and go up later in property tax…You set it based on your future needs. This is not a one-time thing.”
In other words, the community college system doesn’t need an immediate tax increase, but they’re raising it for the future. President Illich is concerned about the long-term impact of LB 243, and so the SCC board is locking in a tax increase of 40% ahead of the state replacing those property tax dollars.
Going forward, the state will be on the hook for the SCC’s decision to hike taxes. Taxpayers in the service area will therefore be impacted by higher state taxes to fund the Board’s decision. Even worse is if other community colleges unnecessarily raise their taxes as a tax grab to capture more state funds, which will stress state finances.
The SCC board should reconsider this tax grab ahead of the final September approval meeting and set more realistic tax rates for local taxpayers, not tax rates that are simply geared towards capturing as much state funding as possible. Community college systems will push the state toward deficit if they all raise property taxes by 40% ahead of the state replacing their property tax funds. Property taxes are already rising incredibly rapidly based upon valuation increases.
If community colleges force the state’s hand, then state lawmakers might need to revisit the amount of property tax revenues that they will replace in order to reset the basis at which the cover the community college tax burden. The state should not allow local decisions to drive up state commitments by 40% year-over-year, and the state shouldn’t allow community colleges to achieve a long-term state funding windfall through an unnecessary short-term property tax hike.