Prioritizing Taxpayers

By Governor Pete Ricketts

Each week, I have the privilege of traveling Nebraska.  Over the past several months, I conducted 20 town halls, held 10 community visits recently following my State of the State address, and just this week I was in Chadron meeting with farmers and ranchers as well as community and business leaders.  The number one concern I hear from Nebraskans, urban and rural, is that our property tax burden is too high.  Property taxes on agricultural land have increased 66 percent in the last five years.  Property taxes on residential and commercial properties have also increased.  This is why Nebraskans are demanding relief.

My approach to property tax relief, and taxes in general, is anchored in a few foundational principles.  First, state tax dollars are your hard-earned dollars.  Second, the only way to deliver sustainable tax relief is by exercising fiscal restraint with your taxpayer dollars.  Third, we must be transparent and accountable to our constituents.  Fourth and finally, local control is good governance.

State government in Nebraska does not levy property taxes.  The state, however, is responsible for setting the rules for how local governments levy property taxes including levy limits, bonding authority, reserve levels, and budget authority among others.

This year, I’m focused on delivering structural, long-term property tax relief by incentivizing fiscal restraint and accountability in the rules governing how local government collects property taxes.  To this end, I have joined forces with Senator Kate Sullivan, Chairwoman of the Education Committee, and Senator Mike Gloor, Chairman of the Revenue Committee, to bring a property tax reform package that encourages local governments to restrain growth in spending to the same target rate as the state—around three percent.

Our property tax relief package consists of two bills, one in the Education Committee and one in the Revenue Committee.  In this column, I will share with you a little bit about LB958, which is the Revenue Committee bill.  LB958 encourages fiscal restraint and accountability by political subdivisions like cities, counties, and natural resource districts.  Additionally, it limits the increase in statewide agricultural and horticultural land valuations.

It does this in three ways.  First, it limits the budgeted growth of restricted funds.  Restricted funds are essentially property taxes, local sales taxes, motor vehicle taxes, surpluses from user fees, county occupation taxes, etc.  To do this, the bill eliminates exclusions to the spending limits including capital improvements, sinking funds for equipment purchases, and expenditures in support of interlocal agreements.

Second, the bill reduces the number of exclusions to the property tax levy limit and imposes a new requirement for bonds issued after July 1, 2016.  These bonds would now need to be approved by the voters to be excluded from the levy limits.  The bill also requires that votes to exceed the levy limits must be made by a vote of the people.  LB958 would repeal the power some local governments currently have to exceed the levy limits with a vote at a town hall meeting that may be attended by as few as ten percent of the registered voters.  By requiring voter approval more frequently, this bill increases transparency and voter involvement in local spending decisions.

Finally, LB958 limits the statewide increase in agricultural and horticultural land valuation to an aggregate of three percent.  If the statewide aggregate increase exceeds three percent, the Property Tax Administrator will determine the factor needed to uniformly and proportionately reduce the value of every parcel of agricultural and horticultural land so the statewide aggregate does not exceed three percent.  This is an aggregate adjustment factor of three percent, not a hard cap, meaning that adjustments to individual tax bills will vary across the state.  Ag land will still see valuation increases with this adjustment factor, but future valuation increases will be moderated.

This tax relief package maintains local control and preserves existing funding mechanisms for local government.  Under this package, our cities, counties, and other local governments can still ask for a vote of the people if they need additional budget authority.  For example, if your city wants to build a new gym, they can seek voter approval to use restricted funds.

While Nebraskans like you desperately want property tax relief, special interest groups and their lobbyists are blocking reform.  Last year, the Legislature and I successfully delivered $408 million in direct dollar-for-dollar property tax relief to all property owners across the state.  This year, we are looking to make structural changes that will encourage fiscal restraint among local governments, increase accountability to taxpayers, and limit ag land valuations in aggregate across the state to three percent annually.  If you believe in property tax relief, your senators need to hear from you about why delivering property tax relief is critical to your family budget this year.  You can be assured they will hear from special interest lobbyists.  You can find information on how to contact your senator atwww.NebraskaLegislature.gov.

Governor Pete Ricketts