Sen. Mike Groene and supporters in two committees are busy trying to find out a way to reduce property taxes after rolling out their plan for property tax relief Tuesday in the Legislature.
The complex bill — LB 289 — was debated for three hours with no real progress. Now, supporters have to count heads and find 33 yes votes to bring it back to the floor for more debate, which may require changing some of the provisions.
During debate, Groene said extensive tax reform is the reason why he ran for a seat in the legislature. He said the bill would reduce property taxes and reset the state’s school aid formula well into the future.
The bill would raise the state sales tax by a half-cent and levy sales taxes on about 20 items that are currently exempt, including snacks and pop.
It would also limit increases in school spending to the rate of inflation, with exceptions for real growth, Groene said.
Sen. Lou Ann Linehan of Elkhorn introduced the bill after it was approved by the Revenue Committee that she chairs. Groene chairs the Education Committee.
She and Groene worked on the bill during the summer along with a half-dozen or so other senators, aiming to re-balance the state’s school funding, which is over-reliant on property taxes. On average, public schools only receive a small share of state sales and income tax revenue. The rest of the burden falls on property owners.
Farmers and ranchers say the tax burden is crushing them.
To correct that, the bill would award state aid to each student, instead of to about 20 school districts. The total per student would equate to 25% of state sales and income tax revenue. It is called “foundation aid.”
That would mean a fair share state revenues would return to schools throughout the state, Groene said. The vast majority of the state’s 244 school districts rely on property taxes, which have soared in the last 10 years.
Foundation aid would give an economic boost to rural Nebraska, Groene said, relieving property taxes and sending more state aid to rural schools.
“It fixes a lot of problems and it treats every child equally,” he said.
A working group of educators and farmers also brought more ideas to the table last fall, including the sales tax hike.
Some eastern senators objected to the bill during debate Tuesday, fearing it would hurt public schools in Omaha and Lincoln, which currently receive the lion’s share of state aid.
In response, Groene said voters in schools districts could still vote to override state limits, and schools would continue to receive extra money if students have special needs, such students who live in poverty, students who don’t speak English, and students who have to travel longer distances than normal.
More specifically, the proposal would impose sales tax on bottled water, candy, soft drinks and ice and increase the tax on a package of cigarettes from 64 cents to $1.
The amendment also would impose sales taxes on approximately 20 services that are now exempt, including motor vehicle maintenance and repair; maintenance, painting and repair of single-family homes; commercial lawn care; dry cleaning; beauty and personal care services; wedding planning; personal training; and storage, moving, plumbing, HVAC and certain veterinary services, the Unicameral Update reported.
Under the plan, eight schools in Lincoln County and the surrounding area would receive considerably more state aid next year — about $10 million in all.
Here are those projected additional amounts for 2019-20, according to the Nebraska Department of Education:
North Platte – $3,962,992
Maxwell – 343,635
Brady — $876,400
Hershey — 1,131,000
Sutherland — 1,146,331
Wallace — 812,562
Stapleton – 767,321
McPherson Co. — 785,707