Ensuring Property Tax Relief: Strengthening Nebraska’s School Funding and Tax Caps

Last week Governor Pillen provided state senators with the newly published 2024 School Property Tax Collection Report and asked them to consider legislation to address inconsistencies in state aid to schools.  

We applaud the Governor’s ongoing efforts to improve the competitiveness of the state’s education systems and believe addressing the perceived disparities in the state aid funding model (TEEOSA) to be a critical step in the right direction.  

In addition to simplifying and adding greater transparency to the current school funding model, we encourage that new levels of funding provided by the state have proportionate offsets in local funding sources. Each dollar of additional state aid should result in a dollar reduction in property taxes.  

To ensure dollar-for-dollar property tax relief, Nebraska’s property tax caps should be tightened to be equal to annual inflation after adjusting for new funding. Nebraska schools are currently subject to a variable rate “soft” property tax cap that is 4-7% depending on the size of the school district. This tax cap is considered “soft” because it can be overridden by the local school board without going to a referendum vote of residents in the district. 

Nebraska should apply a property tax cap that increases by consumer price inflation each year to all units of local government. This should be a “hard” cap that can only be overridden by the will of the voters expressed in a referenda election. Therefore, schools, cities, counties, and other local units of government should all be subject to the same hard cap. 

In addition, the soft Truth-in-Taxation cap should kick in on the first dollar of increase in the levy after adjusting for new state aid.  

Imposing a tight cap is especially important when providing additional funds through the school formula. Without a tight cap, much of the new state funding will end up fueling new local spending rather than property tax relief. As a result, the total combined spending of state + local government will go up faster than if the state never sent new money to local governments. The only way to ensure the state doesn’t fuel spending growth is to impose a tight cap on local property taxes.