California-style prop tax limits proposed, revenue estimates up

By Fred Knapp , Senior Reporter/Producer Nebraska Public Media

28 de Febrero de 2025 a las 17:00 ·

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

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A proposal that would limit taxes on properties until they are sold was heard Friday by the Legislature’s Revenue Committee. And an economic forecasting board raised its estimate of state revenues, giving senators a little more breathing room on budget decisions.

The Legislature’s Revenue Committee held a public hearing on a proposal by Sen. Kathleen Kauth to limit property tax increases. Kauth said her proposed constitutional amendment was modelled after California’s Proposition 13, which limits how much properties can be taxed as a percentage of their market value, and also limits how much their assessments can grow each year.

In Kauth’s version, taxes would be limited to 1.5% of value, and assessments could rise by 2 percent a year. Kauth said she wants to avoid the financial pressure being created for her constituents by the rise in assessed value of their homes.

“I've talked to people who are losing their homes because their valuations have gone up so fast and by so much, and all of a sudden they are expected to come up with 1,000s of dollars more for their property tax," she said. "And most people in my area simply don't have the funds. They're not budgeting, and they don't know how to plan for something that is so unpredictable. So LR12CA is based on finding a way to be very predictable about what it is we are paying."

Sen. George Dungan said that California’s approach had produced its own set of problems.

“One of the things I know that has been a major issue with Prop 13 is the fact that it essentially caused a lot of local political subdivisions almost immediately to be in budget deficits, and then that subsequently required the state to do bailouts, essentially where the state was then spending money on local political subdivisions who couldn't meet all their obligations,” he said.

And Dungan said Prop 13 also shifted the tax burden among people who lived in similar houses, depending on how long they’d lived there.

“The effect that ultimately ended up having, at least in California, is folks who have been in their home for a long time pay a much smaller proportion of the property taxes than new homeowners," he said. "And so if you're a new homeowner -- which we want to encourage, and that's been a stated goal of this Legislature, is to get people to buy homes and buy property -- then it feels like this places an undue burden on the new homeowners who are going to, in some circumstances, have an astronomically higher property tax payment than folks who have stayed in their home for a long time."

Opposing the bill for the Omaha, Lincoln and state chambers of Commerce, Stacy Watson said the approach had produced other problems in California.

“Most people don't want to build a home there. There's no incentive to do so, and so now they have an income tax rate in California of 13%, because they're trying to make up extra property tax revenue,” she said.

Kauth suggested there were other explanations for California’s problems that Watson described.

“They're not building homes, not because of Prop 13, but because they put so many onerous restrictions, whether it's environmental, whether it's, you know…their restrictions are nuts for building homes. That's why they're not building new homes. It has very, very little to do with Prop 13,” she said.

Kauth acknowledged her proposal may not be the approach the Legislature chooses, but said she wanted to have it be part of the discussion.

Also Friday, the state’s Economic Forecasting Advisory Board raised its estimate of state revenues for the current and next two fiscal years by $165 million.

Previous projections had shown the state would finish the next two-year budget cycle $432 million short of its required 3% reserve between expenditures and revenues.

The Appropriations Committee’s preliminary budget cut that shortfall to $261 million. And Friday’s new projections will drive that lower still, says Appropriations Chairman Sen. Rob Clements.

“Our preliminary shortfall was $261 million. They have increased the forecast by at least 160 million, which means that we’ll still be 100 million short. We're still having to do some modifications to budget spending or revenue increases, so there's still more work to do, but I'm pleased with the amount of increase we have in the forecast today,” he said.

Those modifications will be the subject of ongoing conversations about how to balance the budget before the committee presents its final proposal to the full Legislature in late April.