Nebraska lawmakers back property tax relief package worth more than $3 billion

LINCOLN — Gov. Jim Pillen’s school aid and tax cut plan kept on rolling Monday as lawmakers gave a strong thumbs up to a package of property tax changes worth more than $3 billion over the next six years.

Legislative Bill 243 cleared the first round of consideration on a 41-1 vote, with seven abstentions. The bill, introduced by Sen. Tom Briese of Albion, would increase Nebraska’s two property tax credit programs, cap school property tax growth and eliminate almost all community college property taxes.

The package represents the second piece of Pillen’s plan to advance. The first piece, which would cut the state’s top income tax rate by one-third and make other income tax changes, cleared first-round consideration Thursday.

Lawmakers began debate later Monday on a proposal to boost state support for K-12 schools by $305 million annually, with the bulk of the increase going to districts that have the heaviest reliance on property taxes.

Briese said the property tax package would provide “substantial property tax relief for everyday Nebraskans” and encouraged colleagues to “be on the right side of this” when they cast their vote.

“It’s a good place to be, supporting the taxpayers of Nebraska,” he said.

He said LB 243 would provide about the same amount of property tax relief as the income tax package is expected to reduce that tax. He and Sen. Lou Ann Linehan of the Omaha area, who chairs the Revenue Committee, have pledged to continue seeking equivalent tax relief.

Supporters of the package rejected all amendments Monday, including one proposal to direct property tax relief to low-income property owners and another to control the growth of property tax credit programs.

Sen. Carol Blood of Bellevue offered the amendment to create a “circuit-breaker” program, in which tax relief would be triggered when property taxes reached a certain percentage of a property owner’s or renter’s income. She said the program would help those who most need the help. The amendment was similar to a bill Blood introduced, which remains in committee.

Sen. Wendy DeBoer of Bennington introduced an amendment to cap automatic increases in the amount of state dollars directed into a property tax credit program. Her amendment would allow the program to grow as property valuations grow, up to 5%, which is current law. She argued that the cap would provide some fiscal stability for the state.

Under LB 243, the cap would be removed on what is often referred to as the LB 1107 program, named for the bill that created it. It provides income tax credits to offset a portion of school property taxes paid.

Briese opposed the amendment, saying that the value of property tax relief would go backward if the 1107 program does not grow along with assessed valuations. He said valuations have averaged 5.3% growth over the past decade, ranging from 1.64% to 11.83% growth.

As advanced, the property tax package also would ratchet up the size of Nebraska’s long-standing property tax credit program, which uses state money to offset a portion of property owners’ bills.

The bill would gradually increase the program from $313 million this year to $560 million by tax year 2029, after which the credit program would grow by the same percentage as the assessed valuation of property statewide.

In addition, the package would limit the growth of school revenues to 3%, with some exceptions, with the goal of forcing schools to reduce property taxes when they get more state aid. Pillen has proposed boosting state school aid by providing $1,500 for every student and paying more to cover special education costs.

Finally, LB 243 would end community colleges’ ability to levy property taxes, except for building needs, starting in 2024. The bill would replace those tax revenues with state aid. State aid to the colleges would increase by 3.5% annually, with additional money available based on enrollment growth. Community colleges could levy property taxes to fill the gap if the state does not meet its funding obligations.