Property Tax, School Finance, Corporate Tax Incentives Debated as Lawmakers Await Fiscal Forecast

July 22, 2020, 5:21 p.m. ·

Sen. Lou Ann Linehan debating Wednesday (NET screenshot)

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The Nebraska Legislature Wednesday took up major issues facing state lawmakers this year – property taxes, school financing, and corporate tax incentives – in a debate that highlighted potential gridlock on those issues.

The first bill debated Wednesday was a property tax/school finance bill. Sen. Lou Ann Linehan, chair of the Revenue Committee, led off.

“We have a crisis in Nebraska, because our K-12 education depends on an overreliance on property taxes,” Linehan said.

Linehan said Nebraska ranks 22nd among the states in spending per student, but 49th in state financial support for schools. The bill she supports would lower property taxes by lowering tax valuations, limiting school spending, and making up for the loss of revenue to schools by increasing state aid.

Critics fear state aid would be cut when the state runs into a budget crunch, and schools wouldn’t be able to make up the difference. Among those expressing concern was Sen. Wendy DeBoer.

“I care about property tax relief. But I’m not going to do it on the backs of our students,” DeBoer said.

The bill envisions increasing state school aid by more than $500 million over the next three years. Sen. John Stinner, chair of the Appropriations Committee, said before the pandemic, he thought that was doable. But now he said state tax revenues could decline 5-6 percent, at the same time as the state could be required to make up for property tax cuts called for by the bill.

“It automatically lowers, on a yearly basis for three years… the assessed valuation, forcing the Legislature to come up with money. Otherwise the schools are short… which means now we have to make choices. And I’m not sure the revenue’s going to be there to support all the services that provides for the well-being of our citizens,” Stinner said.

But Sen. Andrew LaGrone said if anything, the pandemic makes legislation to lower property taxes more necessary.

“There are thousands of Nebraskans who have lost jobs because of the pandemic. And when you lose a job, that property tax bill still comes due,” LaGrone said.

Sen. Bruce Bostelman said lowering property taxes is important to stem the brain drain from rural Nebraska,

“They’re not moving to cities. They’re moving to Missouri. They’re moving to Iowa, to South Dakota. They’re leaving the state. So what does that do? That just leaves large corporations, foreign corporations (to) come in and buy up the land. We’re losing our population because people can’t afford to live here. People can’t afford to pay their taxes,” Bostelman said.

But Sen. Matt Hansen said property taxes aren’t the only issue lawmakers have to consider..

“When a lot of you put property taxes top and center on your campaign, I put supporting our schools top and center on our campaign. That’s the commitment I made to my constituents, and that’s the commitment I have to balance out,” Hansen said.

Senators used up the time allotted for debate on the bill without reaching a vote, and so they moved on to discuss corporate tax incentives. Nebraska’s existing incentives, called the Nebraska Advantage, expire this year, and Sen. Matt Williams said they need to be replaced.

“The bottom line is we can’t grow our state without a strong incentive package. Nebraska Advantage sunsets at the end of this year, and if we hang out the ‘We are not open for business’ sign, that will hurt us immensely. And growing our state is clearly part of reducing our property taxes and our tax burden in our state,” Williams said.

But Sen. Curt Friesen cast doubt on the value of incentives.

“Whenever I’ve looked at any of the studies that have (been) done on incentives – you can go to any number of universities across the country, and they’ve analyzed different states’ incentive programs -- and there’s not one of them yet that I think pays for itself. They do not bring in more revenue than they spend. All we’re doing is trying to steal companies from each other,” Friesen said.

As with the property tax bill, time allotted for debate ran out before senators reached a vote. But in a way, Wednesday’s debates were just a staking out of positions prior to a decisive point Thursday, when the state’s Economic Forecasting Advisory Board is scheduled to set its projection of state revenues for the next two years.

That forecast will then be used to determine how much is available for property tax relief, corporate tax incentives, and other items in the state budget, as the Legislature sorts through priorities in the 14 remaining business days in its 2020 session.