Special legislative session underway

As expected, the governor called the legislature into special session on Wednesday, July 24 to enact legislation relating to property tax relief and school funding. The legislature convened on Thursday, July 25. Deviating from the preannounced schedule, Speaker Arch chose to not bring the legislature back into session on Saturday to allow the Revisor of Statutes’ Office more time to prepare new drafts of bills and constitutional amendments.

The governor’s package is composed of three bills: LB1, LB2 and LB3. LB1 would serve as the main vehicle to deliver property tax relief. The proposal contains roughly $900 million in new revenue from the elimination of sales tax exemptions and increase of existing sin taxes. The bill would also reduce maximum school-tax rates to 15 cents in year one and 7.5 cents in year two before the state assumes the total 80% chunk of all local school district property taxes in year three. It would be up to a future legislature to figure out how to fully fund the remaining 20% of school district budgets. Additionally, the property tax relief program created by LB1107 in 2022, the Nebraska Property Tax Incentive Act credit on income tax statements, would be reworked so that relief would be frontloaded. These changes mean Nebraskans would have about $1 billion less in property taxes when comparing Fiscal Year 2022-2023 to Fiscal Year 2026-2027. The property tax savings in LB1 would be maintained by tax collection caps which would allow for increases by real growth plus 0% or Consumer Price Index, whichever is greater.

LB2 and LB3 are appropriations bills intended to cut the state budget by about $200 million in statutory costs by leveraging existing cash funds, cutting costs and finding efficiencies to serve the public. The cuts made by LB2 and LB3 represent a bit under 5% of our state government's cash totals. The savings from these cuts are intended to be directed to property tax relief.

Additional proposals include:

LB9 by Senator Hughes, which would gradually lower the maximum general fund property tax rates for local K-12 school districts to 25 cents per $100 of taxable valuation over the course of 10 years. In the first year, maximum tax rates would fall from $1.05 per $100 of taxable valuation to 65 cents. The state would provide additional aid dollars to schools to cover the gap left over due to schools’ lower property tax levying authority.

LB13 by Senator Bostar, which would provide a framework to legalize online sports gambling and use such tax revenue to deliver property tax relief.

LB16 by Senator Erdman, which would adopt a framework to eliminate incomes, sales and property taxes and replace them with consumption and excise taxes.

LB17 by Senator John Cavanaugh, which would terminate the Perkins County Canal Project and free up over $500 million which could be used for property tax relief.

LB35 by Senator Brewer, which would annually adjust the nameplate capacity tax received from renewable energy projects based on changes with inflation.

As we move forward in the special session, I anticipate everything will be a bit of a moving target and subject to change. I again want to reiterate that it is likely that all sides will need to come together and compromise and that may mean each side may need to give up some things to get meaningful statewide property tax relief. The main objective should be that any proposal enacted in the current special session needs to result in a net tax decrease for as many people as possible.

I welcome your thoughts and opinions regarding the ongoing special session. My Capitol office telephone number is 402-471-2801 while my email is [email protected]. My mailing address is: Senator Barry DeKay, District #40, P.O. Box 94604, State Capitol, Lincoln, NE 68509.