Paul Hammel
LINCOLN — In an unusual move, a state legislative committee pulled back and then voted to re-advance a bill Tuesday calling for a hike in state sales taxes to facilitate a shift away from local property taxes.
Legislative Bill 388 — the major property tax relief proposal from Gov. Jim Pillen — was voted out of the Legislature’s Revenue Committee on Thursday.
But objections were raised saying the vote violated a legislative rule that requires an actual draft of an amendment or bill to be present before it could be voted out to the full Legislature for debate.
State Sen. John Cavanaugh of Omaha, who raised the objection, said that voting without having an actual draft of a bill or amendment available to a committee “is not a good way to adopt major tax policy.”
On Thursday, Sen. Lou Ann Linehan, who chairs the Revenue Committee, had laid out the concepts that the Governor’s Office had agreed to and told her fellow committee members that the Legislature’s bill drafters would craft an amendment this week containing those ideas in what’s been called a “make-it-so” amendment.
Bolstering K-12 funding
The Governor’s Office, in a memo distributed Tuesday, estimated that LB 388 would address a long-held gripe that the state doesn’t adequately contribute to K-12 education, thus leaving the burden of funding to local property taxes.
The Pillen administration projected that per-pupil state support of local schooling would rise from $4,925 in 2022 — when Nebraska ranked 46th in the country — to $11,181, which would place the state at No. 8.
Local property taxes would fall by “over 30%” when coupled with other recent property tax relief bills, according to the Governor’s Office, which is short of the 40% reduction Gov. Jim Pillen had sought.
The tradeoff would be an increase of up to 1-cent in the state sales tax, plus increased taxes on cigarettes, vaping products, skill games and cannabis edibles. Tax exemptions on several items would be eliminated, including soda pop and candy, storage facilities, dry cleaning, non-livestock veterinary services and some advertising.
Revenue Committee members voted 7-0 last week to advance the conceptual bill with one member, Lincoln Sen. George Dungan, absent (he later filed a “no” vote).
To fend off any rules challenges to LB 388, the committee pulled back the bill and the voted 7-1 to advance it, along with a 62-page amendment unveiled Tuesday.
The new amendment corrected some errors in the proposal that committee members said happened during the bill-drafting process.
LB 388 — which would shift funding of K-12 education onto state sales taxes to lower local property taxes — could come up for floor debate Wednesday, which is Day 51 of the 60-day session.
Some school groups, including the Omaha Public Schools, told the Examiner they are still digesting what’s in LB 388, which boosts per-pupil foundation aid to $3,000 from the current $1,500 and imposes a harder cap on spending increases by school districts.
Liz Standish, an associate superintendent of Lincoln Public Schools, said Tuesday it appears that the newest version of LB 388 addresses concerns about the new revenue cap being too restrictive.
“But it’s something we’ll be keeping a close eye on,” Standish said.
Dave Welsch, a school board member from Milford, said that while the bill has made “a good first step” on property tax relief, the boost in foundation aid doesn’t correct an inequity between school districts in property taxes.
The property tax levy in the Milford School District, Welsch said, is twice as high as the neighboring Centennial School District, which translates into much higher property taxes in Milford on property with identical valuations.
Welsch has been among rural school officials who have touted another solution, known as the “Nebraska Plan,” which would direct more property tax relief to school districts with the highest tax levies.
He said he did support the portion of the bill that would “front-load” tax credits offered for a portion of property tax payments. Lee Will, the governor’s budget chief, said large percentages of taxpayers were not taking the tax credits, which must be claimed on income tax filings.
LB 388 is expected to draw opposition from both ends of the political spectrum, with progressives in the Legislature opposing “regressive” higher taxes on low-income Nebraskans, and some conservative senators opposing an increase in taxes as not delivering “tax relief” but instead creating a tax shift.