Pillen will again propose state takeover of school operating costs

Gov. Jim Pillen signaled Wednesday he will once again propose the state take over paying to run schools in Nebraska in an effort to reduce property taxes.

Pillen discussed the school funding takeover in an interview with Nebraska Public Media News about his priorities for the upcoming legislative session. Pillen said local school districts would still use property taxes to pay for the cost of buildings, but under his plan, “We, the state, pay for educating the children. Pay for the operations. That would take a little over a billion dollars, maybe $1.2 billion.”

Pillen said he would get the money by broadening the sales tax base, and by using those funds to offset property taxes, the net result would be a tax decrease. He said his team was still working on what changes to the sales tax he would propose. He added the sales tax currently brings in about $2.3 billion per year, but if all exemptions were removed, it would bring in $7 billion.

Pillen has previously proposed similar tax shifts. But they have been blocked by opponents who claim they would increase taxes on middle-income Nebraskans and erode local control of schools.

Pillen has called high property taxes a “crisis” that is driving people out of their homes. And he denied that having the state pay 100% of schools operating costs would erode local control, saying no one is complaining about the state taking over funding of community colleges.

Asked who would determine school budgets, he said the existing school aid formula, known as TEEOSA , would continue to be used to calculate needs. And he said school superintendents agree with him that a 3% limit on annual budget increases is reasonable. If a district wanted an increase above that, he said, it could seek permission from voters, and pay for the difference with property taxes.

Asked what has changed to reduce opposition to what he would like to see happen, Pillen pointed to turnover in the Legislature and more knowledge among senators about the drawbacks of sales tax exemptions.

Reacting to news of the governor’s renewed push for changes to school funding, Sen. Jana Hughes, vice chair of the Legislature’s Education Committee, said she appreciates Pillen’s record of increasing state support for schools, which has risen from 38% six years ago to 53% last year, according to a report by the School Financing Review Commission.

But Hughes said it would be “really hard” to get the state to pay 100% of operating costs, adding that she would prefer local districts to have some “skin in the game,” perhaps by providing one-third of the funding.

Hughes was the lead introducer of legislation earlier this year that created the commission, which is supposed to recommend changes to how the state pays for schools. Those recommendations had not been expected until next November, more than six months after the 2026 Legislature is scheduled to adjourn.

However on Wednesday, School Finance Review Commission Chair Brian Maher said the commission "will look into the possibility of funding school aid through sales tax if that is what the Governor would like us to do.”

Editor's note: By way of full disclosure, Brian Maher is a commissioner on Nebraska Public Media's governing board, the Nebraska Educational Telecommunications Commission.