Maintaining Local Control

By Governor Pete Ricketts

Nebraska has 529 cities and villages, 245 K-12 school districts, 93 counties, 23 natural resource districts, 17 educational service units, and six community colleges.  These are just some of the hundreds of local governments responsible for levying property taxes in Nebraska.  Property tax revenues fund local government, not state government.  The state, however, is responsible for setting the rules for how property taxes are levied.  This means the state can put measures in place to encourage local governments to control spending over the long term.  When taxpayers are demanding structural property tax relief, it is incumbent upon us as state leaders to take action.

Slowing the growth of local government spending is the focus of the property tax relief plan I proposed with Senator Kate Sullivan, Chairwoman of the Education Committee, and Senator Mike Gloor, Chairman of the Revenue Committee.  Last week, I detailed LB958 in the Revenue Committee, a bill aimed at encouraging fiscal restraint and accountability by political subdivisions like cities, counties, and natural resource districts.

This week I want to focus on LB959 in the Education Committee.  Like the companion bill in the Revenue Committee, LB959 sets benchmarks for measured growth in spending for school districts, community colleges, and educational service units.  This is accomplished through four major reforms.

First, a change in the budgeting process to simplify school district budget growth to 2.5 percent plus expected student growth.  It also moves predictable annual retirement expenses into the budget base.  Right now, schools are able to grow their budgets above this limit without taxpayer approval.  In the event of sudden or unforeseen circumstances, schools can still increase their budget with a vote of the people.

Second, LB959 limits the percentage schools can put into their reserves annually and limits the unused budget authority a district may carry forward.  To maintain flexibility, school districts are still allowed to put money away for rainy days and to carry forward a limited amount of budget authority.

Third, it makes a revision to a provision in the state school funding formula called needs stabilization.  Previously, the average school district needs in the formula could grow by 12 percent, and fast growing districts had no limits.  With LB959, each district’s target funding level is limited to five percent plus student growth in the formula.  Additionally, if a school district is shrinking, it allows the target funding level to decrease by up to two percent each year.  This means needs stabilization can increase or decrease within a range of 98 to 105 percent plus student growth.

Finally, the bill removes exceptions which previously allowed school districts and community colleges to unilaterally approve capital projects.  If LB959 is enacted, schools and community colleges will need to seek voter approval for qualified capital construction projects.

The taxpayers of Nebraska have made incredible financial commitments to our children and our schools.  Over the past 15 years, Nebraska’s student enrollment has grown about .33 percent annually for a total of five percent, while education spending in our state has grown at a compounding rate of 6.39 percent annually or 138 percent during the same timeframe.  LB959 does not remove any tools to maintain or grow this commitment, it simply limits the growth of spending annually, and provides for voter approval on additional spending. This proposal delivers structural property tax relief and still provides adequate resources to Nebraska schools to educate our students to be the leaders of tomorrow.

Some argue that not enough of Nebraska’s state budget is spent on education.  Forty-six percent of our current general fund budget is dedicated to K-12 and higher education.  Additionally, Nebraska ranks 21st in Elementary-Secondary Revenue (federal, state, and local sources) per pupil and 18th in Elementary-Secondary Spending per pupil overall.

Nebraskans, rural and urban, are demanding property tax relief, and I’ve prioritized it for this year.  I need you to help me get it done by contacting your state senator and voicing your support.  Lobbyists are paid by special interests to spend taxpayer money, and they are already trying to oppose property tax relief.  Please visit www.NebraskaLegislature.gov for information on who your senator is and how to contact them.

Governor Pete Ricketts