Property tax bills introduced in legislature

This past week, the legislature gave first-round approval to two bills offering tax relief for Nebraskans. Further debate on the two proposals will wait until we are further along in the session and have a better idea of projected revenues and expenses.

LB825 accelerates the phase-out of the taxation of social security benefits. Under the proposal, all social security benefits will no longer be subject to the income tax, beginning in 2025.

LB723 guarantees a higher level of property tax relief for taxpayers. When senators passed the Property Tax Incentive Act two years ago, it called for a significant hike in funding for the income tax credit, from $125 million the first year to $375 million the fourth year. The formula used to calculate the annual increase in funding considered whether the cash reserve was adequately funded and included excess revenue growth above 3.5%. Due to the postponement of income tax filings because of the pandemic, and the influx of federal pandemic relief dollars, it pushed the formula to an unpredicted $548 million this year, which represents about 25% of property taxes paid to school districts (the largest recipient of property taxes). LB723 will guarantee that the $548 million in funding is not reduced to $375 million, as specified as the funding level for the fourth year in the original legislation. This amount will be allowed to grow annually by the increase in the total assessed value of real property from year to year. An amendment was added to ensure the funding is sustainable in future years.

LR14 authorizes the legislature to apply to Congress, under the provisions of Article V of the U.S. Constitution, to call a convention of states limited to proposing amendments to the Constitution that impose fiscal restraints on the federal government, limit the power and jurisdiction of the federal government and to prescribe term limits for members of Congress. LR14 was passed by the legislature on Friday, Jan. 28, with a 32-11 vote, after successfully overcoming a filibuster. LR14 won’t take effect until the Legislatures in 33 other states make application on the same subject.

A revamped funding formula for school districts was proposed in LB890 and LB891. The proposed plan would increase state support for almost every school, which would in turn provide property tax relief. A public hearing was held on LB890 this past week before the Education Committee and on LB891 before the Revenue Committee. The Education Committee selected LB890 as one of their two committee priority bills. The proposal would implement a district-specific maximum levy calculated for each school district, not to exceed $0.95. The new formula is projected to result in $715 million in property tax relief. It would repurpose the Property Tax Incentive Act and dedicate one-half of one cent of the sales tax to the state aid formula, which would be matched by the state. A new component of the formula is the Education Stabilization Base Aid.

guaranteeing a certain amount of state funding (approximately $1,100) for every student. The allocated income tax returned to school districts would increase from 2.23% to 20%, which was the original intent when the current state aid formula was enacted. More school districts would qualify for equalization aid under LB 890 and LB 891. Currently only 87 of the state’s 244 school districts qualify, but under this plan 148 districts would receive equalization aid. The increased state funding would result in the state paying approximately 58% of the cost of schools, with local property taxes funding 42%. Although some question whether significant property tax relief is guaranteed under this proposal, I believe it warrants discussion.

The Crime and Justice Institute worked with the Nebraska Criminal Justice Reinvestment Working Group (made up of criminal justice leaders from across the state, the chair of the Judiciary Committee, the Governor, and the Chief Justice) to develop a report that evaluated Nebraska’s criminal justice system. Senator Steve Lathrop, the chair of the Judiciary Committee, introduced LB 920 as a result. The reforms proposed attempt to reduce prison overcrowding and recidivism. Nebraska has the most overcrowded prison system in the nation. Discussion has centered on whether we can build our way out of this, if we need to enact reforms, or both. Data has shown that while the prison population increased over the last decade, admissions decreased, reflecting the consequences of mandatory minimum sentences and increasing sentence lengths. The Governor has proposed building a new 1,500 bed prison to replace the Nebraska State Penitentiary. However, if reform isn’t enacted, projections show that even with the new prison, our system would be overcrowded again by 2030.

Again, I encourage you to inform me of your thoughts on the bills before the legislature. I can be reached at [email protected]. My mailing address is District #40, P.O. Box 94604, State Capitol, Lincoln, NE 68509 and my telephone number is (402) 471-2801.