LINCOLN, Neb. (Nebraska Examiner) – Gov. Jim Pillen is formally asking Nebraska lawmakers to address “inconsistencies” in the state’s primary school aid formula in the 2025 legislative session.

Pillen, in a press release on Friday, pointed to a the new report from his policy research office which compiled property tax data for new state senators. The governor noted that newly elected senators — with 16 new faces set to join the body in January — may not fully understand the state’s funding formula or the impact of recent legislation.

The report includes data from Nebraska’s 244 school districts in the previous school year and shows how declining state aid led to higher property taxes.

“This document helps illustrate the impact of these changes and hopefully (will) inform discussions as we head into the next legislative session and resume efforts to provide additional property tax relief for Nebraskans,” Pillen said in a statement .

TEEOSA breakdown

The conversation revolves around Tax Equity and Supporting Educational Opportunity Actbetter known as TEEOSA, which has been continuously updated since its adoption in 1990.

TEEOSA, also known as the “equalizing aid” formula, determines the funding aid on the basis difference of about 18 “needs” minus six “resources” for each public school district. If “resources” exceed “needs,” the district does not receive aid and is classified as “unmatched.”

“Needs” include student growth, poverty and English as a second language. “Resources” include net option enrollment, income tax earmarked funds, and basic per student aid.

Another “resource” is based on possible property tax collections, assuming a hypothetical tax rate of $1 in each school district. This is the amount the state assumes a district could raise if it had a tax rate that high, based on annual assessments.

This means that when assessments go up, a district’s equalization aid automatically decreases, possibly to the point where they are “unequalized” and lose additional funding.

Finding stability

For example, Lincoln Public Schools, the state’s second largest district, is likely to be unmatched in the coming years. LPS lost $31.85 million in state aid this year, a 30.4 percent decrease, and raised property taxes by $31.57 million in response, a 9.6 percent increase.

Three other school districts — Millard Public Schools, Papillion-La Vista Public Schools and Gretna Public Schools — also saw “dramatic decreases in state aid.” Combined with LPS, the four districts lost $56.27 million in state aid and increased property taxes by $62.25 million. That represents 82 percent of the total increase in statewide property taxes for that period.

Kenny Zoeller, director of the governor’s policy research office, said state aid has decreased for 111 school districts for the 2024-25 school year.

“We need to find a way to help districts budget for the aid they receive, thereby creating some predictability and hopefully further reducing what Nebraskans end up paying in property taxes from year to year,” he Zoeller said in a statement.

Pillen and Zoeller do not explain how to provide more stability. However, they say initial research points to new “caps” placed on how much school districts can raise property taxes, total increases slowed to 2.5 percent, or about $75.82 million.

This is the smallest annual increase since 2018 and the smallest percentage increase this century.

“I’m on needles”

Several state lawmakers have proposed addressing TEEOSA in Pillen’s special session on property taxes this summer, including state Sens. Lou Ann Linehan of Elkhorn and Jana Hughes of Seward.

Linehan, the outgoing chairman of the Legislature’s Revenue Committee, asked eliminating the “resources” side of the funding formulato better calculate the needs of each district. Later, she proposed to use TEEOSA for distributes increased sales and “sin” tax revenue. to districts for property tax exemption. Linehan is term limited and won’t be back next year.

Hughes, a former Seward school board member, worked with a bipartisan group of lawmakers on a proposal to reform TEEOSA for a period of 10 yearsor sooner if possible. Her proposal would have reduced maximum school property tax rates gradually over 10 years.

Pillen had proposed to have the state takes almost all local operating property taxeswhich accounts for an average of 60% of Nebraskans’ property tax bills. However, when Linehan presented Pillen’s basic proposal, it did not include that component.

Hughes said he agrees TEEOSA needs to be focused, but thinks it will take time and a thorough look, like what happened when TEEOSA was first created, with the Revenue and Education Committees collaborating on the proposal and based on years of research. and design.

“I get this feeling from the schools right now, every year, they’re on the fence about what’s going to change or what’s the legislature going to do?” Hughes said.

“The formula is inconsistent”

In 2023, the Legislature helped increase aid to schools by doubling special education reimbursements from 40 percent of spending to 80 percent and set a benchmark “base aid” of about $1,500 per student in each public school district.

Hughes said some school districts are “hanging on” and asking residents to invest through property taxes to prevent budget cuts or react to uncertainty about whether future funds will be available.

“It’s just a little vicious cycle when ratings go up,” Hughes said.

State Sen. Brad von Gillern of Elkhorn, vice chairman of the Legislature’s Revenue Committee, said he had not yet digested the report but agreed with its main findings. He said he is aware of people encouraging a reconsideration of TEEOSA and “supports a careful and patient process that includes all stakeholders to improve the calculation of state funding.”

Hughes said she and a team of lawmakers would come back with a proposal for 2025 that would be smaller but would “do a little bit” of TEEOSA reform.

Pillen called on lawmakers to consider similar legislation.

“The formula is inconsistent and hits taxpayers hard,” the policy research bureau’s report said. “It’s not fair to them or the schools. Providing certainty to school districts will allow Nebraska to have property tax abatements for the first time in history.”

Nebraska Examiner is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. The Nebraska Examiner maintains its editorial independence. Contact editor Cate Folsom with questions: [email protected]. Follow the Nebraska Examiner on Facebook and X.

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