After several years of no legislation passed providing property tax relief in the unicameral, Nebraska farm and ranch organizations hope this will be the year.

This week, the unicameral began debating LB289, which supporters say would provide property tax relief while also changing the way K-12 schools are funded in the state.

On Tuesday, supporters — including the Nebraska Farm Bureau — pointed out the bill would provide an estimated $500 million in property tax relief.

In a press conference call Tuesday, Steve Nelson, Nebraska Farm Bureau president, said LB289 tackles several things agricultural organizations have been asking for in dealing with property tax issues in Nebraska — including addressing the way schools are funded by ensuring the state takes a greater responsibility for funding all of Nebraska's K-12 students.

"LB289 broadens the sources used to fund K-12 education, replacing and reducing the overreliance on property taxes to fund schools," Nelson said. "We've talked many times about the importance of balancing the three-legged stool in Nebraska. LB289 moves us to a better balance of the sources of revenue in funding education in the state of Nebraska. When fully implemented, LB289 is estimated to reduce statewide property taxes by $500 million per year."

New revenue

Jay Rempe, senior economist at Nebraska Farm Bureau, said the bill would devote about 25% of the sales and income taxes collected in the state each year toward K-12 aid, and would address student funding inequities by establishing per-student foundation aid for every school in the state.

In addition, the bill would establish a minimum aid guarantee to ensure one-third of an individual school’s needs are covered by the state.

"The information I've seen suggests that per-student foundation aid will equal about $3,400 in Year 1 and roughly $3,600 in Year 2," Rempe said.

The bill replaces funds from property taxes with new sources of revenue — which includes eliminating sales tax exemptions for about 20 different goods and services, increasing the state’s sales tax rate by a half-cent, increasing cigarette taxes, and eliminating the state’s personal property tax exemption, among other items.

The bill would direct the new tax revenue to the state's Property Tax Credit Relief Fund, which is currently at $224 million. It would use a portion of the credit fund for school aid, but also provides a floor of $115 million in property tax credits for the 2019 tax year and beyond.

With the additional tax revenue and funds from the property tax credit, Rempe said the total amount of state aid would rise to an estimated $482 million the first year, and $563 million the second year.

"If we took that and superimposed it on this school year and asked, 'What would have happened this school year if those elements would have been in place?' it suggests property taxes would have been about 12% less this year to fund schools," Rempe said.

When fully implemented, LB289 would lower Nebraskans property tax bills anywhere between 7% to 20%, with Nebraskans seeing reductions in taxes paid for schools in the range of 15% to 40%, depending on the school district.

To help ensure the new revenues generated under the bill translate into property tax relief, LB289 contains measures to slow growth in school spending by limiting growth in schools’ budget authority to the consumer price index or between 0% and 2.5%.

Ricketts voices opposition

Nebraska Gov. Pete Ricketts has voiced opposition to the bill, calling it "the largest tax increase in Nebraska history." Earlier this week, Ricketts called on the Legislature scrap the bill, noting the bill would take funds from additional sales tax and put it into more government spending. He also pointed out LB289 involves taking funds from the Property Tax Credit Relief Fund.

"What's worse is this plan will not work," he said. "How do we know it's going to fail? Because it's been tried many times in the past, and it's always failed in the past."

Ricketts outlined LB1059, passed by the Legislature in 1990. At the time, about $253 million in state aid was going to K-12 schools, and about $682 million in property taxes was going toward funding public schools.

When LB1059 was passed, it created the Tax Equity and Educational Opportunities Support Act (TEEOSA) school aid formula, raising sales and income taxes to fund school aid.

"Over the next three years, the state more than doubled its state aid for education to $524 million," Ricketts said. "Property taxes dropped for two years, and then went right back up to where they were in 1990. It did not work. Total school spending went up 40%, but we got no property tax relief."

Ricketts has been an outspoken critic of plans that involve reducing taxes on one group of taxpayers by raising taxes on another. Real property tax relief comes from controlling government spending, and providing direct relief, such as through the Property Tax Credit Relief Fund, he said.

"Working with the Legislature, we've increased the Property Tax Credit Relief Fund by over 60%,” Ricketts said. “That is direct, dollar-for-dollar tax relief from the state to all property owners in the state.”

“This year I'm proposing increasing that again by another 23%, or $51 million [each year]. That would take it up to a total of $275 million. Because we've been controlling spending at the state level, that $275 million represents nearly a doubling of what our property tax relief is," he said, adding that doubling is because of controlled spending. "That's the way real property tax relief works."

Relief needed

Several producers and representatives from ag organizations echoed Nelson's support for LB289, emphasizing that property tax relief is critical in this time of low commodity prices.

This included Robert Johnston, Nebraska Soybean Association president, who farms near Clearwater.

"The state clearly has a responsibility to help all of our students, no matter where they live, or the school they attend. LB289 would help achieve that," Johnston said. "A large number of schools in our state are unequalized, meaning they get little to no funding through the TEEOSA formula. I happen to be in a school district that gets zero TEEOSA funding. My question has always been: Why aren't the students in my school district deemed just as important as students in other school districts?"

"Ten years ago, my property taxes right here on this parcel where I'm sitting in my house right now, versus the property taxes that we just paid a few days ago, it's exactly double [today compared with 10 years ago]," he added. "On May 7, 2009, 10 years ago today, Chicago Board of Trade soybeans opened at $11.32 a bushel. On May 7, 2019, a few minutes ago, the closest delivery point for me up the road, my local elevator, was bidding $7.25."