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Nebraska school aid changes would shift burden to state, save $715 million in property taxes

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Take a look at the number of Nebraska students enrolled in home-school for the 2021-22 school year and how it compares to previous years.

LINCOLN — A trio of Nebraska education leaders unveiled a plan Thursday aimed at revamping the state’s school aid formula and saving property taxpayers $715 million a year.

The plan would require an infusion of about the same amount in state dollars, amounting to a 68% boost in state support for K-12 education. For the current year, it would have meant $1.762 billion for state school aid instead of the $1.047 billion currently budgeted.

Lynne Walz mug (copy) (copy)


State Sen. Lynne Walz of Fremont, who chairs the Legislature’s Education Committee, announced at a press conference that she would introduce the proposal as a bill during the upcoming legislative session.

She described the idea as “not just a school funding plan” but also a local economic development plan. Money saved by property owners would be available to boost communities.

“We recognize that education is the cornerstone to economic development and a strong workforce,” Walz said. “Education is a priority for every Nebraskan. We need to be responsive and assure that the funding and resources are available not only today but well into the future.”

She worked with Columbus Public Schools Superintendent Troy Loeffelholz and the district’s finance director, Chip Kay, to develop the proposal. The three have spent the last four months talking with school officials, education groups and lawmakers to refine the proposal and build support.

But Walz acknowledged that Education Committee members have not signed off on the plan so far. Other key groups are still studying the issue, including the Greater Nebraska Schools Association, which represents the state’s largest school districts.

The plan will likely be among several property tax relief proposals introduced in the legislative session, which starts Jan. 5. School property taxes account for almost 60% of the total property tax bill statewide, and lawmakers have historically sought to boost state aid to schools as a way to ease property taxes.

But in recent years, lawmakers have opted for property tax credit programs that provide money directly to property owners to offset their tax bills. The state will provide close to $1 billion for those programs in the coming year.

Under Walz’s proposal, all school districts would receive a certain amount of money for each student, called education stabilization base aid. The per-student payments would equal the amount of revenue from a 1-cent sales tax, divided by the number of students statewide. If the plan had been in place this year, total base aid would have been $352 million, and per-student payments would have been almost $1,100.

The current version of the plan does not call for changing the sales tax. Kay said it would be up to lawmakers to decide where to get money for the base aid, as well as the second key part of the plan.

“The reality is, for property tax relief, we’ve got to find other funding sources,” he said, adding that savings could be found in a lot of places across state government.

The second part of the plan would boost the share of income tax revenue going to school districts. Nebraska’s first school aid formula called for returning to schools 20% of the income taxes paid by district residents. Over time, that percentage has been whittled down. Districts now receive 2.23% of resident income tax revenue.

The new plan would again return 20% of resident income taxes. For the current year, that would mean a $403 million shift from state coffers to school districts, Kay said.

The plan would cap property tax levies at 95 cents, down from $1.05. It would also reduce the amount of funding that schools would be expected to collect from property taxes.

Reducing those expectations means that more schools would qualify for state equalization aid, which is intended to fill in the gap between what schools need to educate students and the amount of money they receive from property taxes and other sources. Currently, 87 of the state’s 244 school districts qualify for equalization aid. Under the new plan, 148 districts would have qualified this year.

“In my mind, it’s a simpler funding formula than what we have today,” Loeffelholz said. “The proposed model has an estimated 50/50 split between local property tax and state funding as a total of funding for the entire state.”

Kay said his calculations show that the new plan would result in increased state funding for 238 districts. The remaining six, all smaller, rural districts, would be protected by a “hold harmless” provision for the first year or two.

But he acknowledged that the plan has no new lids or other mechanisms to force school districts to reduce property taxes by the same amount that their aid increases. He said it would be up to lawmakers to add that type of provision.

Gov. Pete Ricketts has called for a cap on school spending growth as a means to control property taxes.

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Martha Stoddard keeps legislators honest from The World-Herald's Lincoln bureau, where she covers news from the State Capitol. Follow her on Twitter @StoddardOWH. Phone: 402-670-2402

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