Paul Hammel
LINCOLN — Gov. Jim Pillen expressed disappointment Monday that despite an influx of $324 million in additional state aid to K-12 schools, property taxes for local education statewide still increased by $85 million.
“It’s unacceptable. … Year one is not where we want to be,” said Pillen, referring to the impact of his state aid plan, passed earlier this year, to lower local property taxes.
During his first year in office, the Republican governor was able to get a package of what he called “transformative” changes in funding of K-12 schools passed by the Nebraska Legislature.
Those changes included establishing a $1 billion “Education Future Fund” that will provide, for the first time, yearly foundation aid of $1,500 per K-12 student. In addition, the state increased funding of special education costs.
All told, Pillen said, the state increased aid to local schools by $324 million, which allowed 92 of the state’s 244 school districts to lower their collection of property taxes or keep them flat.
Most districts overrode cap
But 188 of the 244 districts voted to override the 3% revenue cap that was imposed as part of Legislative Bill 583, which helped lead to the overall increase in property taxes. (Some districts did both, so the two numbers don’t add up to 244.)
“The intent … was that overriding the 3% would be the exception to the rule,” Pillen said.
“We have to stop spending money,” he added later.
The 3% so-called “soft” cap on additional revenue, Pillen said, was a figure superintendents told him was a reasonable cap that school districts could handle.
The head of a Lincoln think tank that tracks state policies, however, said the “one-size-fits-all funding mechanism” promoted by Pillen is the wrong approach in meeting the educational needs of students across Nebraska at a time of rising costs.
“Locally elected school board members are best positioned to determine what resources are needed to provide the learning environment and support from teachers to prepare students for a bright future,” said Rebecca Firestone of the OpenSky Policy Institute.
Whether or not Pillen will seek a “harder” cap on revenue in the 2024 session — as at least one other think tank has called for — was unclear Monday.
When asked, he said it wasn’t his intent to seek a tougher cap during the next session, but later Pillen said he planned to work with senators during the 2024 session to further reduce property taxes.
Property taxes reduced, but not dollar for dollar
Joining Pillen at Monday’s press conference were superintendents of the Elwood and Norris school districts, which were able to reduce property taxes due to the influx of new state money. The purpose of the event was to thank them for reducing taxes, as Pillen’s plan intended.
But both superintendents, while thanking the governor for the influx of funding, said they were unable to produce a “dollar-for-dollar” decrease in property taxes as Pillen hoped because of the need to increase staff salaries and deal with inflated costs of fuel and other materials.
At Norris, the state delivered an additional $2.1 million in aid, while the decrease in property taxes was about $626,000.
Superintendent Brian Maschmann said the district needed to increase salaries and benefits, deal with enrollment growth and finance 30 bus routes that travel the sprawling district that covers nine communities south of Lincoln.
“There’s a lot of inflation that school districts have to take care of,” Maschmann said.
Yet, he said, the added state aid allowed his district to reduce its property tax rate from $1.15 per $100 of valuation to 93 cents.
When asked what he’d tell the 188 school districts that overrode the 3% rate, Maschmann said every school district is different financially, with different needs.
“I think we can live within the cap,” he said, adding that he couldn’t speak for other districts.
Must cut ‘significant dollars’
Pillen said LB 583 was a good first step, “but we need to do more.”
“We have to cut significant dollars from our property tax payments,” he said. “We’re committed to doing it. We’ll work day and night to get it done. We’ll work very, very hard with our partners in the Legislature to get that done this session.”
Pillen said property taxes are “so out of whack” that something needs to be done. He adding that repeal of the state’s inheritance tax — which he called “a slush fund” — is on his wish list.
“We have to become more fiscally responsible everywhere,” he added. “We can’t say ‘yes’ to everything.”
Pillen and his state budget director, Lee Will, both said they disagreed with a projection made last week that the Education Future Fund would be depleted faster than anticipated. The governor said school superintendents need to trust that the state will continue to provide the increased aid.
Last week, the Legislative Fiscal Office released a projection that the $1 billion fund would diminish to near $500 million as soon as the 2025-26 fiscal year, about four years earlier that the Governor’s Office anticipated.
Will said Monday that the projection failed to take into account investment income from the fund, which he said will easily sustain the fund, as originally expected.
Firestone, of OpenSky, said there are serious questions about the sustainability of the Education Future Fund and whether the additional state aid it promises will continue into the future.
“Ultimately, the sustainability of state aid for K-12 education is critical not just to addressing property tax reform but to ensuring that school funding is sufficient to improve student outcomes,” she said.