The state should take a slower approach to big property tax cuts proposed by Gov. Jim Pillen, according to supporters of an alternative plan who spoke at the Legislature’s Revenue Committee Monday.
Sen. Jana Hughes said she began working on this alternative plan, LB9, as soon as the Legislature adjourned this spring without acting on property taxes.
“I started working on LB9 immediately after we adjourned, as I knew that Gov. Pillen was very serious about a special session to achieve property tax relief, and I knew that he would propose some ideas,” Hughes said. “I also knew that we needed to have some alternative plans in case the governor’s plan didn’t garner enough support. I have worked closely with Senators Brant, Conrad, Dorn and Walz on this, and they are all cosponsors.”
Hughes, Brandt and Dorn are registered Republicans in the officially nonpartisan Legislature; Conrad and Walz are Democrats.
LB9 would reduce how much schools could levy in property taxes. Instead of the current maximum of $1.05 per $100 of a property’s value, it would reduce the maximum levy to 65 cents next year, and 25 cents over time.
Hughes said those property tax cuts would require the state to pick up about $440 million of costs currently being paid for by local property taxes, compared to the billion-dollar plus required for Pillen’s plan.
Jason Richters, a farmer and president of the Seward-area Centennial School District in Hughes’ district, supported the plan while speaking to the Revenue Committee.
“As a farmer, I support this legislation because of the substantial property tax savings that can be achieved,” he said. “As a school board member, I support LB9 because it provides structure and assurances which will allow for district stability and long-term planning, while maintaining local control.”
Sen. Lou Ann Linehan wondered why people who are worried about a loss of local control under Pillen’s proposal to eliminate school property taxes are OK with the major cut envisioned in LB9.
Here’s a summary of the ideas contained in LB9
Here’s what supporters say LB9 would do to taxes in various districts
Jack Moles of the Nebraska Rural Community Schools Association responded that there needs to be local resources going to schools.
“There needs to be a little, we’ll say, ‘skin in the game’ locally,” he said. “We have to have some local resources going into our local schools.”
Speaking for the Nebraska Farm Bureau and eight other ag organizations, lobbyist Bruce Rieker supported the proposal. Rieker said the Farm Bureau used to want to hit a ‘”grand slam” to solve farm property tax problems all at once, but now, “We’d rather get base hits, doubles, triples and occasional home run and keep going that direction, rather than trying to get it all at one time.”
Bryan Slone, president of the Nebraska Chamber of Commerce and Industry, opposed both Pillen’s proposal and LB9. Slone complained that no one has defined the size of the property tax problem they’re trying to solve.
“I’m not saying there isn’t a property tax problem. But when we say we have to reduce property taxes by 40-50% to be competitive, that’s just not true,” Slone said.
Pillen has urged a 40-50% property tax cut, paid for largely by expanding the state sales tax to cover currently untaxed goods and services. LB9 does not say where the money to pay for it should come from. Hughes said that’s deliberate.
“I didn’t want to kill the bill by putting in a revenue source,” she said.
But Hughes said she’s confident the state could find the money, mentioning her own proposals for taxes on retail deliveries and raising taxes on vaping devices as examples.
And if all else fails, Sen. Myron Dorn said the legislation he’s sponsoring, LB9 contains a fallback – property taxes.
“When state revenue growth isn’t as strong, or (the) state doesn’t meet its financial commitment for school aid, the bill gives the schools ability to collect that difference through your local property taxes,” he said. “No one wants this to happen, but it is a failsafe mechanism.”
The special session continues Tuesday, with hearings on Gov. Pillen’s tax proposal, and his call for spending cuts.