LINCOLN — A much-anticipated debate over a proposal to reduce Nebraska’s traditionally high property taxes ended quietly and with a big question mark on Tuesday.
After three hours of mostly philosophical debate about the urgent need for such relief, state senators moved on to other issues without taking a vote on Legislative Bill 289.
Left in limbo is what’s next for one of the top issues for the 2019 session of the Nebraska Legislature.
The main sponsor of the proposal, which would raise sales taxes to lower property taxes and pump an additional $500 million into state aid to K-12 schools, said she plans to regroup, consider new amendments, and see if she can show support of 33 of the one-house Legislature’s 49 senators necessary to bring the bill back up for debate.
“This is a hard decision (for senators),” said State Sen. Lou Ann Linehan of Elkhorn. “But I’m an optimist.”
Already, a small group of lawmakers were talking about pushing an alternative property tax relief plan, and Gov. Pete Ricketts’ more simple solution — increasing the state’s property tax credit program by $51 million — is sure to get another look.
One option Linehan and several other senators don’t want to see is doing nothing. That might open the way, they said, for voter approval of a tax-cut initiative that a rural grassroots group hopes to place on the 2020 ballot, an initiative that could lead to $1 billion in state budget cuts.
Albion Sen. Tom Briese, one of the main proponents of the increases in sales taxes to offset high property taxes, urged colleagues to keep trying.
“We’re either going to stand for tax relief or stand in the way,” he said. “The public’s getting really tired of waiting on us.”
Tuesday’s lack of a vote to advance LB 289 was not unexpected. Under a rule adopted by the Speaker of the Legislature, Norfolk Sen. Jim Scheer, to give every bill a debate during first-round consideration, discussion on a proposal must end after three hours if a vote to advance the bill hasn’t been taken by then. The only way such a bill gets back on the agenda is if a senator can demonstrate the support of 33 senators, which is enough to overcome a filibuster.
During debate Tuesday, it appeared that several senators were in a listening mode over a complex proposal that wasn’t finalized until late last week. Others, though, were waiting to see if a better bill might be coming.
“I don’t think we’ve seen the last version of LB 289,” said Omaha Sen. Steve Lathrop. “We’ll see what’s coming. I’m still listening.”
LB 289 not only shifts support of K-12 education away from property taxes and onto state aid, but also reworks the complicated formula for delivering state funds to the state’s 244 school districts.
While the state’s small and midsize school districts generally support the bill and will see big boosts in state aid, Omaha, Lincoln and the rest of the state’s largest school districts remain wary. They’re concerned about long-term negative impacts on their budgets from a new lid on property tax revenue. There’s also worry about whether future state lawmakers will honor the bill’s commitment to dramatically increase state support of local schools from about $1 billion a year to about $1.5 billion.
Right now, Nebraska lags at about 47th in the nation in state support for public education; LB 289 is projected to raise that to about 20th.
“This is the time to step forward and be a ‘state’ senator and do what’s best for the state,” said North Platte Sen. Mike Groene, who drafted the state aid changes in the proposal. “What’s best for Nebraska is LB 289.”
Sales tax exemptions on the chopping block in Nebraska
To raise new revenue for a property tax relief plan, a legislative bill proposes to do away with about 20 sales tax exemptions. Here are some of the goods and services that would be taxed under Legislative Bill 289, and the amount of revenue those taxes generate.
Groene said the big school districts oppose the bill because they’re doing fine under the current state aid formula. Who isn’t doing well are about 170 small school districts that get very little state aid, he and others said, and LB 289 solves that by providing a minimum of $3,400 in state aid for every student and covering at least 33% of a school district’s overall costs. All school districts benefit, Groene maintained.
It appeared that LB 289 was far short of having 33 supporters, though Linehan said she thinks she has at least 25. During the debate Tuesday, nine senators were clear supporters of the bill, with only three expressing clear opposition.
Only a couple of Omaha senators spoke, with Sen. Ernie Chambers lambasting the ½-cent sales tax hike in the bill as damaging to poor people, who sometimes “count their pennies” to see if they can afford a loaf of bread. Chambers, as expected, announced that he would filibuster the bill, drafting several amendments to LB 289 to complicate its passage.
But other Omaha senators mostly sat and listened. First-year Sens. Machaela Cavanaugh and Wendy DeBoer said they both had concerns about the proposal and chose to hear what other lawmakers were saying.
Rural senators backed the bill, saying that farmers and ranchers face a “property tax crisis” that has left them noncompetitive with agriculture producers in neighboring states.
Henderson Sen. Curt Friesen said that statewide, property taxes on farmers had risen 149% over the last decade, compared to a 13% increase for homeowners. He said he supported LB 289 as a “path forward,” but lamented that it would cut property tax bills by only 9% overall, far short of significant relief.
Omaha Sen. John McCollister said that an alternative “three-lever” plan advanced by Milford school board member Dave Welsch was simpler to understand and could be adjusted if state revenues fell short.
Groene admitted that LB 289 was “a hard sell” and “a lot to absorb,” but he remained convinced that if his colleagues dug into the proposal, they’d see the benefits.
“Some guys would rather stick their heads in the sand, but we’ve got to do something,” he said.
Meet the Nebraska state senators
Here are the 49 state senators of Nebraska's 106th Legislature. You can click here to find your state senator.