Bill would tweak school funding now, allow bigger changes later

By Fred Knapp , Senior Reporter/Producer Nebraska Public Media

Feb. 10, 2025, 5 p.m. ·

Nebraska Capitol (Photo by Fred Knapp, Nebraska Public Media News)

Listen To This Story

The way Nebraska pays for schools would be tweaked, while a new commission would study and recommend bigger changes for future years, under proposals heard by the Legislature’s Education Committee Monday.

And a proposal to keep better track of certain educational records sparked a discussion about the state’s use of consultants.

Last year, Gov. Jim Pillen and state senators proposed big changes in how the state pays for schools. They included a much larger share coming from state sources like sales taxes on more goods and services, to enable a smaller share to come from property taxes. But those sweeping proposals ran into a wall of opposition from groups whose taxes would be raised, as well as from school districts worried about a loss of local control.

The proposals discussed Monday are much more modest: One bill, which Sen. Jana Hughes introduced for Pillen, would lower the top property tax rate schools can charge from $1.05 per hundred dollars of valuation to $1.02.5 cents. That could save the owner of a $200,000 house about $50 on their property taxes, assuming their valuation didn’t rise.

Hughes described the proposal, LB303, as a little bite off a big problem, which is that as property valuations rise, the school aid formula means schools get less state aid.

“LB303 will provide just over $62 million more in state aid to schools. While this doesn't fully compensate for the loss due to rising valuations, it will lessen the impact on property taxpayers next year. Without the increased funds to schools provided by LB303 the entire loss in state aid to these districts will fall to the (property) taxpayer,” Hughes said.

Lowering the top property tax rate would tend to help taxpayers in larger, more urban districts. The bill also increases the per pupil foundation aid from $1,500 to $1,590 per year, which would help taxpayers in smaller, more rural districts.

While supporting the bill in the hearing, Bruce Rieker of the Nebraska Farm Bureau pointed out that the additional state funds being considered to offset property taxes for the next two years would not put much of a dent in the problem.

“Even if 100% of this new money goes to property tax relief, our state's net property tax burden will still increase by somewhere close to $475 million, or 9%,” Rieker said.

The bill also proposes setting up a new School Finance Reform Commission to study the state aid formula and recommend further changes. Its first report would be due this December.

Sen. Wendy DeBoer, who has been proposing such a commission for years, said that changing the state aid formula, known as TEEOSA, without having a commission to follow how the changes are working is just inviting future problems.

“We could fix TEEOSA. We could create a whole new funding structure, call it SCMEEOSA… And if we don't have somebody minding the store, especially in an era of term limits, who's going to watch the long term trajectory of our school finance to say, ‘Hey, we've got an outlier in land valuations for ag land, or residential, or commercial’ or whatever it is, and watches those things and gives recommendations, we're going to get back here again,” DeBoer said.

DeBoer has her own proposal for a commission with a slightly different membership that that proposed by Hughes. Hughes said she’s open to adding members, but doesn’t want the group to get so large as to be ineffective.

Also Monday, improving how the state handles educational records for children in the foster care and juvenile court systems produced a discussion of how the state uses and pays for consultants.

Sen. Danielle Conrad supported the changes proposed in the bill by Sen. John Arch. But she lamented that the three agencies involved had not been able to solve the problem on their own.

“We've got the Department of Health and Human Services with a $5 billion budget and 4,800 FTEs. (Full-time equivalent employees). We've got the Department of Ed with a $2.3 billion budget and 557 FTEs. We've got the Supreme Court with a $250 million budget and 1,500 FTEs...Then we have to hire a consultant and expend more taxpayer resources to figure out how to address this issue,” Conrad said.

Arch agreed with the criticism, and made fun of the way the process of hiring a consultant works, when state has appropriated a certain maximum amount for a contract.

“They go out and they search for the consultant, and the consultant says, ‘Well, that'll cost you $500,000’ and you say, ‘Well, we only have $400,000 budgeted.’ And the response is, ‘Well, I can do it for 400,000’… or I've had the experience where it was actually like, ‘Well, that'll cost $500,000’ it was like, ‘Well, we only have $250,000 budgeted.’ ‘I can do it for 250,000.’ Remarkable!” Arch said.

Arch added that the system should be improved:

“If there is a way that we can improve the process on the hiring of consultants, recognizing that there's value in the hiring of consultants, but how we can improve that process, that's a very worthwhile discussion to be had,” he said.