Nebraska Governor Mike Johanns (R) delivered his State of the State address on January 15. While he recommended no increase in state taxes, Johanns opened the door wide for higher property taxes. The Senate Education Committee considered such a plan at a January 27 hearing.
“We begin with a budget deficit that must be addressed,” Johanns noted. “The budget I submit to you provides balance with no tax increases. It includes funding for several priorities that demand our attention and resources.”
According to a January 27 news report on WOWT Channel 6, property taxes in the state could increase by as much as $54 million under a plan supported by Johanns. The governor, school groups, and others say the proposal is needed “given the state’s current financial condition.”
Not enacting the property tax increase would force “sizable sales or income tax increases, dramatic cuts to state programs, or a revenue miracle,” said Sen. Ron Raikes (Lincoln), chairman of the Senate Education Committee, who introduced the proposal as LB 1093 on behalf of the governor. He added, “Schools should first do all they can to save money before resorting to raising taxes.”
Johanns’ proposal would lift a property tax cap imposed by the state legislature in 1998. That year, the cap was set at $1.10 per $100 of assessed value. In 2001, the cap fell to $1.00 per $100 of assessed value. In 2003, the state legislature adopted a plan that would give schools an additional nickle in levy authority in 2003 and 2004, raising the cap to $1.05, after which it would fall again to $1.00, which would become the permanent cap. Johanns wants to make the cap permanent at $1.05 per $100 of assessed value.
By making permanent the higher property tax cap and tweaking the school aid formula, the state would spend $168 million less in aid to schools over the next two years. The burden to cover additional funding for schools would fall on property taxpayers.
Johanns has denied that allowing schools to tax more will automatically translate into property tax increases. The decision whether to raise taxes “rests with schools,” he has said.
The Nebraska Farm Bureau opposes Johanns’ two-part plan. “Our members do not like property taxes,” said Jay Rempe, a spokesperson for the group, at the January hearing. While he understands the state faces a budget shortfall, Rempe said if the levy is going to be kept higher it should be temporary and not permanent as is proposed.
After the hearing, the Senate Education Committee went into executive session. Three of the five members present said they, too, wanted the $1.05 tax cap to be temporary. “That would make taxpayers feel better,” said Sen. Elaine Stuhr (Bradshaw).
The committee took no action on the bill.
John Skorburg is managing editor of Budget & Tax News. His email address is [email protected].