LINCOLN — Representatives of local governments slammed on Wednesday proposals to put a new lid on spending of much-hated property taxes, saying the measures could backfire, harming local education and other services.
For the Millard and Gretna school districts, a legislative committee was told that those fast-growing districts would see overall revenue decreases of 5% and .5% respectively, instead of being allowed spending growth of 3% a year as the proposals would permit.
“We’re trying to find a one-size-fits-all approach for a really complicated issue,” said Renee Fry of the Lincoln-based think tank, the Open Sky Policy Institute, which provided the estimates.
“What works in Ansley doesn’t always work out for Omaha,” said Christy Abraham of the League of Nebraska Municipalities.
The comments came after Gov. Pete Ricketts and others testified in favor of two proposals to further restrict the spending of local property taxes in Nebraska, a state that ranks in the top 10 nationally for its property taxes and where complaints about property taxes are as common as cornfields.
The governor has proposed a constitutional amendment, which, if approved by voters, would restrict annual increases in property tax spending by local schools, cities, counties and other taxing entities to no more than 3% a year.
State Sen. Tom Briese of Albion offered a similar proposal as a legislative bill, which wouldn’t require voter approval, but would provide more flexibility, allowing the Legislature to alter the 3% restriction if conditions warranted (rather than requiring a vote of the people to amend the State Constitution).
“Concern about ever-increasing property taxes is the No. 1 concern on Nebraskans’ minds,” said Elkhorn Sen. Lou Ann Linehan, who introduced Legislative Resolution 22CA on behalf of the governor.
Linehan said the state has passed levy limits and spending caps in the past, and is pumping more and more money into credits for taxpayers to defray the expense of property taxes. But, she said, there is no guarantee that tax bills will actually fall without putting a tighter limit on spending.
“I am convinced the only limit that will work is on tax taking,” Linehan said. “All other efforts, in the long run, have failed.”
Ricketts said Nebraskans are “mad” about high property taxes. He estimated that his proposal, if it had been in place over the past decade, would have allowed for a 34% increase in property taxes, much less than the actual 52% increase. That compares to income growth in the state of 18% over the past 10 years, he said.
“You can’t outstrip the ability of Nebraska families to pay these taxes,” the governor said. “We need to take the next step — controlling what we take from people in property taxes.”
Briese offered Legislative Bill 408, which would impose the same limits but in a state law, which he said could be more easily changed if circumstances warranted it. Changing a provision in the State Constitution, by comparison, would require a statewide vote.
The two proposals won support from several taxpayer, farm and business groups during a day-long public hearing before the Legislature’s Revenue Committee.
But representatives of the Nebraska Farm Bureau and the Omaha-based think tank, the Platte Institute, said that while new spending limits were a step forward, what’s really needed is comprehensive reform of the state’s tax system. That might include broadening the sales tax base to tax more services or eliminating some tax exemptions.
But the new spending limits drew opposition from a long line of representatives of K-12 schools, cities, counties, community colleges and others.
They pointed to statistics that show that since 2011, spending growth by K-12 schools has averaged 3% a year, while spending increases by the state have been slightly higher, at 3.17% a year. The real problem, they said, is a lack of state aid to K-12 schools, which consumes the most property tax revenue. Nebraska ranks 49th among all states in state support to schools.
“Please dismiss this bill and fund the schools properly,” said Robert Post, a Banner County commissioner.
Opponents to the two spending limit proposals also said that local governing boards have a better grasp on local spending needs than state senators, and that limits on property taxes could just mean increases in other taxes.
Fry testified that the way the state formula for aid to schools works, fast-growing districts like Millard and Gretna would see decreases in revenue, not just a limit in growth.
Norfolk Sen. Mike Flood was among the senators on the Revenue Committee who expressed frustration with testimony that spending by local entities couldn’t be curbed.
“We seem to be the only ones in the room dealing with the real question, how do we slow down property taxes,” Flood said.