It takes 33 votes to break a filibuster in the Nebraska Legislature. For several property tax relief bills during the 2018 Unicameral, votes counted up to 25, 26, 27 — but still didn’t meet the threshold needed.

“The closer you get to 33, it’s an even steeper challenge,” says Bruce Rieker, vice president of governmental relations at Nebraska Farm Bureau. “Why weren’t there 33 votes on any proposal? Critics thought some proposals didn’t provide enough relief soon enough. Some of the hesitancy from certain stakeholders was based on the thought that a tax shift, or expanding the tax base to reduce property taxes, would result in a tax hike on somebody else.”

For Nebraskans, property taxes and public education funding are a recurring thread. WalletHub.com recently ranked Nebraska seventh for among the states with the highest property taxes, and it’s often cited that property taxes on Nebraska ag land have increased by 162% over the last 10 years.

To provide property tax relief or reform, several bills were introduced this legislative session. However, most of those bills were postponed indefinitely and never made it to the governor’s desk for approval.

This included two bills that would have established a refundable income tax credit:

• LB947, introduced by state Sen. Jim Smith with Gov. Pete Ricketts’ endorsement, would have taken future growth in state revenue to create a refundable income tax credit for residential and ag property owners. The bill would have been phased in, starting at 2% of property taxes paid on ag land and 1% on residential property, and growing over 10 years until reaching 20%. This bill would have maintained the current Property Tax Credit Relief Fund. It stalled on the floor near the session’s end.

“One of the major difference between LB829 and LB947 was timing,” says Rieker. “The governor’s bill, LB947, created a refundable income tax credit like LB829. It would have started at a small amount, but would have built toward a 20% refundable income tax credit on the property taxes you pay.”

• LB829, introduced by state Sen. Steve Erdman, similarly, would have provided a 50% refundable income tax credit for property taxes paid for K-12 education. For most property owners, this would have reduced property taxes by about 30%.

Both LB947 and LB829 would have created a refundable income tax credit, putting pressure on the state to find new revenue to fund education, says Rieker.

“A little less than $2.4 billion that funds K-12 education comes from property taxes,” he explains. “If you get a 50% refundable income tax credit for the property taxes you paid for schools, it creates a $1.2 billion hole, which puts the state in a position that they have to either make cuts in certain areas or find a new source of revenue, expanding the tax base.”

There were also several bills that would provide new revenue for school funding:

• LB44, introduced by state Sen. Dan Watermeier, would have required retailers without a physical presence in Nebraska to collect and remit sales and use tax. This bill stalled in the final round of the session. One of the hurdles in generating enough votes to pass LB44 is the ongoing Supreme Court case, South Dakota vs. Wayfair Inc., regarding the constitutionality of collecting sales tax from internet sales.

“If the Supreme Court rules the way we hope they do [in South Dakota vs. Wayfair Inc.], then we would be able to collect those taxes immediately,” says Rieker. “There are estimates that those taxes could be worth $40 [million] to $60 million per year.”

• LB1103, introduced by state Sen. Curt Friesen, would have ensured state aid would fund at least 25% of a school’s basic education funding needs — thereby reducing the property tax burden and providing equalization aid to non-equalized schools.

The bill was introduced without a means of new revenue to pay for the additional state aid to go to schools. This is where LB1084 would have come in.

• LB1084, introduced by state Sen. Tom Briese as an amendment to LB1103, would have reformed state aid to schools and provided new revenue to replace the funds provided by property taxes. This includes raising the state sales and cigarette tax, and putting a surtax on top income earners. It would have put a two-year property tax asking cap on local school districts — and called for a study on how schools are funded.

“A revised fiscal note Sen. Briese introduced showed by 2021 to 2022, LB1084 would have brought well over $600 million in new revenue. That doesn’t completely fill the [$1.2 billion] hole that LB829 would have created, but it goes a long way,” says Rieker.

The next step
So, what happens now? Until late April, the Yes to Property Tax Relief Committee was collecting signatures for a ballot initiative that, like LB829, would have provided $1 billion in property tax relief by creating a 50% refundable income tax credit for property taxes paid for K-12 education. However, the group recently announced it was abandoning its petition drive for the initiative, and would instead focus on another avenue for property tax relief — one option being a constitutional amendment.

The concern, according to Trent Fellers, executive director of Reform for Nebraska’s Future and the ballot initiative’s spokesman, was that the Nebraska Legislature wouldn’t effectively implement property tax relief as proposed through the ballot initiative, even if enacted by voters.

“We were right on track with gathering signatures. However, down the line, the Legislature could still amend or overrule the initiative,” Fellers says. “We thought it would be better to take a step back and move toward something that would have more staying power, like a constitutional amendment. We’re not yet sure what that will look like.”

With the possibility a constitutional amendment two years away, Rieker says there is still time for interests to work together towards a legislative solution.

"The opportunity for people to work together to find a solution that can generate 33 votes is there. That would be the immediate goal," Rieker says.