The Legislature and Gov. Jim Pillen, at last, took action to address one of Nebraska’s most vexing issues — property taxes driven by ever-higher agricultural land valuations, which largely go to support public schools.
The solution, which came out of a Pillen-appointed committee to study the issue, boils down to an increase of some $305 million annually in state aid to schools, with a guarantee that every district would receive $1,500 in “foundation aid” for each student.
The money for the additional aid, which would also double state aid for special education, would come from the newly established Education Future Fund, which will receive $1.25 billion during the next two fiscal years ending June 30, 2025, with plans to add $250 million to the fund in each successive year.
That funding will unquestionably increase Nebraska’s ranking among states in terms of state funding for education, where it now ranks 49th, next to last, for state funding of K-12 education. Overall, including local funding from property taxes, Nebraska is in the top half of states in funding education.
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The biggest property tax impact, provided that school boards do the responsible thing and reduce levies to cut taxes at the level of the state aid received, would be felt by the 160 of the state’s 244 districts that do not currently receive equalization aid.
Those tend to be rural districts with lower property tax levies — lots of land and fewer students. Larger schools, including Lincoln Public Schools, receive the bulk of the equalization aid under the state’s current formula and those districts have tax levies close to the maximum allowed by law.
That has created animosity from rural interests, who claimed incorrectly that the state was picking “winners and losers” in its aid distribution, when, in fact, the formula functioned exactly as intended with the number of equalized districts shrinking because steep increases in ag land values allowed more districts to meet their needs with property taxes.
The new plan would eliminate the disparity between districts receiving aid and should be a large first step to cutting property taxes, especially in rural areas.
The plan, which was incorporated in multiple bills approved by the Legislature, isn’t perfect.
A 3% cap on school revenue growth, which could very easily become a de facto “lid,” could hurt schools, particularly in growing urban areas. The plan does nothing to address the needs of schools with large numbers of students in poverty and does not address the need to make school lunches and breakfasts more widely available.
Projected decreases in funding to now-equalized districts in future years could trigger property tax increases in the primarily urban districts that will see those dollars cut.
Those issues and the need to value agricultural land on a production basis can and should be addressed in next year’s legislative session.
For now, however, the passage of the educational funding plan, and what should be resultant property tax relief, is a long-needed step forward for both school funding and the state’s taxpayers.