News Release: State Budget and Property Taxes Discussed on September 6 Conference Call
Contact: Adam Weinberg
New Report: Nebraska’s Crowded Budget
How State Spending Impacts Property Tax Reform
Nebrasaka's Crowded Budget (PDF of Report)
OMAHA, NE – A new report from the Platte Institute shows that increases in state spending on programs like Medicaid, corrections, and government pensions are making it harder for the Legislature to come up with additional money for state property tax relief programs.
The policy study by Platte Institute Policy Director Sarah Curry, “Nebraska’s Crowded Budget and its Impact on Property Taxes,” is now available at PlatteInstitute.org/Policy. Video and audio files of Sarah Curry discussing the report may be downloaded for broadcast or web use here.
The report reviews the last 20 years of state spending growth to determine which areas of the budget are growing faster or slower than the state’s overall tax collections, and how the demands made on the state budget impact potential reductions in local property taxes.
Because property taxes are levied locally, the Legislature’s remedies are limited to changing local authority to collect property taxes, or spending more state tax dollars to offset property taxes.
A copy of the new report is attached to this release and an author photo is available at PlatteInstitute.org/Photos.
“Areas of the budget that are growing faster than revenue, such as Medicaid, corrections, public employee pensions, and aid to individuals are putting pressure on other areas of the budget, including state aid to education, the University and State Colleges, and aid to local governments. These programs are being crowded out of the state budget. In the most dramatic case, aid to cities and counties were entirely crowded out of the state budget when those expenditures were eliminated,” Curry writes.
Meanwhile, state revenue growth has been far below historical averages over the last two years, following a downturn in ag commodity prices.
“Particularly in the current revenue picture, new programs and spending cannot occur unless at least one of two things happen—either cut spending in other areas or raise taxes,” Curry writes.
The report contains four graphics (files available here) measuring state revenues, spending growth in different areas of the state budget, and the growth of state expenditures on property tax relief programs. Curry will hold a news conference call to discuss the report tomorrow, Thursday, September 6 at 10:30 a.m. Central Time.
To call in, dial (605) 475-4000, Access Code: 106202#. The call may be recorded for broadcast and will include Q&A.
Here are highlights from the report:
- Nebraska’s total state spending is at record levels, reaching more than $11.8 billion per year or $6,180 per person.
- Though it may not seem like it, the State of Nebraska spends significantly on reducing reliance on local property taxes, arguably with little success. Major programs to offset property tax reliance include the TEEOSA state education aid formula, the property credit fund, the homestead exemption, and the personal property tax reimbursement. These programs cost nearly $1.8 billion annually.
- Property tax relief programs, excluding TEEOSA, have increased their annual spending from $50 million to nearly $300 million in the last decade.
- The average growth rate for the actual revenue collected by the state over the past five years is 3.7 percent per year, which is below the 36-year historical average of 4.7 percent.
- In fiscal years 2016 and 2017, the state experienced the third lowest back-to-back revenue growth over the past 36 years, and subsequently experienced the third lowest growth of the last 17 biennial budgets.
- Since 1998, average annual appropriations growth for Medicaid was 5.7 percent, Corrections has grown at 5.4 percent, and the state Retirement Board, which manages pensions, has seen appropriations grow at 6.4 percent. In contrast, appropriations for the University and State Colleges grew an average of 2.6 percent annually, state aid to public school districts grew at an average of 3.9 percent, and direct aid to cities and counties was eliminated entirely.
- Spending more state money on the property tax without additional limitations to local property taxing authority will only add to the state’s already crowded budget and likely lead to significant increases in state taxes. To succeed at providing needed revenues at both levels of government, while improving Nebraska’s overall tax system, Nebraska’s efforts on property tax relief must mature into property tax reform.
The Platte Institute advances policies that remove barriers to growth and opportunity in Nebraska. For more media resources, please visit PlatteInstitute.org/Media.