Legislative Testimony for LB974: Change taxation and school funding provisions

Thank you, Vice-Chair Friesen and members of the Revenue Committee. My name is Nicole Fox, Director of Government Relations at the Platte Institute. I am here to testify in support of LB974.

Nebraskans cannot afford for the Legislature to fail on property tax reform. In 2007, the Property Tax Credit Fund was created, because at that time, we were thought of as a high property tax state.

In 2007 the fund was appropriated at $105M, and all property owners received a credit of $83.22 per $100,000 in valuation. In 2019, the fund was budgeted at $275M, and the owner of that same $100,000 in ag land valuation received a credit of $124.98 while non-ag landowners received $104.15.

At the time of the creation of that fund in 2007, total property taxes collected were $2.5B. This most recent tax year, total property tax collections were $4.3B. This outpaces inflation and the growth of the median household income.

The Property Tax Credit Fund is not working for hardworking Nebraskans.

This is not sustainable. If this trend continues, it will undermine Nebraska’s quality of life and economic competitiveness. It will give fuel to voter initiatives that will take decision-making power away from the Legislature and local governments. We will be stuck with a solution for lower taxes mandated by voters.

We need a proposal that provides structural reform, and we support LB974 because the Committee’s proposal aligns with several recommendations we have made at the Platte Institute.

It avoids increases in state tax rates, reduces local school district property tax assessment ratios with funding offsets provided by the state, and it provides foundation aid support for students enrolled in every school district.

Of course, we all know it could be more robust if there was appetite to reform sales tax exemptions.

But most importantly, LB974 represents a first step away from merely subsidizing local property taxes and toward permanent reform of our tax structure and funding responsibility for education.

In exchange for additional state aid, local school districts will have to give up a portion of their property taxing authority, unless there is an override vote.

This is a tough pill for a lot of school districts to swallow. But the only way to significantly and sustainably reduce our reliance on property taxes is to reduce how much property tax is allowed to be levied under the law.
 
62% of Nebraskans we polled say they support stronger limits on property tax valuations or levies as this bill provides.

LB974 is a good first step, but more changes will need to follow because the majority of Nebraska’s property taxing subdivisions would still adhere to current tax limitations under this bill.

If the state does not adopt additional policies to limit the growth of property taxes, such as a properly balanced cap on assessment growth, the gains from reduced school assessment ratios could be lost in the years ahead as other local property taxes rise.

Thank you for your efforts for property tax reform. This is a complex issue, and the Platte Institute commends you for your hard work. I would be happy to take any questions from the committee.