From the Superintendent's Desk
The month of April signals spring time in Nebraska. I think. This April, Mother Nature seems especially confused about whether or not to let us out of her icy clutches and usher us into the season of green grass, sunshine, and moderate temperatures. The month of April also signals the impending end of the Unicameral’s Legislative Session. The last day of Nebraska’s 105thLegislative Session is currently scheduled to be April 18th. As the legislative session rockets towards a close, lawmakers are considering three bills that hold the promise of property tax relief for Nebraska residents. Those three bills are LB 640, LB 947, and LB 1103. Due to the short amount of time left in the legislative session and due to the extensive debate required to appropriately evaluate the potential of these three bills, there is also increasing discussion at the State Capitol about a special session being held to specifically address the property tax issue.
As discussed in previous editions of this newsletter, I encourage and support efforts by our lawmakers to increase the state’s revenue stream, in practical and manageable ways. Increasing the state’s revenues allows the state to offer significant and effective property tax relieve to Nebraska’s taxpayers. LB 1103 would alter several parts of the state’s tax code and could generate approximately $500 million in revenue for the purpose of property tax relief. The changes in the state’s tax code that would be created LB 1103 are:
·A one-cent increase in the state sales tax from 5.5 cents to 6.5 cents;
·A $1.50 increase in the state's cigarette tax (from 64 cents to $2.14 per pack);
·The creation of a new surcharge for those who make more than $500,000 in annual income. The surcharge applies a 2.5 percent tax on state income tax liability of those with adjusted gross income (AGI) between $500,000 and $1 million and a 5 percent tax on state income tax liability of those with AGI greater than $1 million;
·The reinstatement of the state's Alternative Minimum Tax - or AMT (repealed in 2013) -- which is intended to ensure that high-income taxpayers do not itemize so much that they don't pay taxes;
·A cap on the amount of property taxes a school district can collect. Under the cap, a school district would see decreased ability to collect property taxes if its state school aid increases. Conversely, a district's ability to collect property taxes would increase if its state school aid decreases. A district can exceed its cap if it receives approval from 75 percent of its local school board, a simple majority of the public via mail-in ballot or if a levy override is approved by voters prior to Jan. 1, 2019; and
·The repeal of the $10,000 personal property exemption passed in 2015.
The revenue generated by these tax code changes would be used to:
·Offer each public school district $500 of per pupil aid. This aid would be distributed to schools outside of the school funding formula, which ensures that it would go to schools regardless of whether they receive equalization aid;
·Increase the Allocated Income Tax portion of the school funding formula from about two percent to 30 percent of income taxes paid by residents of the district. Allocated Income Tax is state income tax revenue that is directed back to a taxpayer's local school district in the form of state school aid;
·Increase State Reimbursement for Special Education from the present level of 44.78 percent to 61.55 percent;
·Restore $43 million in state school aid that was cut by LB 409 in 2017;
·Increase the state's Earned Income Tax Credit from 10 percent to 15 percent of the federal credit. This would lead to an average $114 increase in the refundable credit for those who receive it; and
·Deposit any remaining dollars generated from the tax changes above into the state's Property Tax Credit Fund.
These changes in the tax code created by LB 1103 would allow the state to distribute more funding to public schools across the state. The amount of property taxes levied by a school district could be lowered in direct proportion to the amount of increased state aid receive by the school district. Preliminary models estimating the positive impact on local school districts’ levies created by LB 1103 predict that school district levies across the state would decrease, on average, by 17 cents.
So, just as there is hope that Mother Nature will soon release us from the bonds of winter, LB 1103 provides hope that Nebraska Senators are generating tangible, productive solutions to release us from the bonds of an overreliance on property tax to fund public education in the state of Nebraska.
Until next month, THINK SPRING!