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Chief Financial Officer Shane Rhian presented to our Board two separate packages of legislative bills that would impact school funding and tax reform.
- Three legislative bills identified as school finance reform by the Governor.
- Eight legislative bills identified as tax reform by the Governor.
- Seven of the bills have a direct impact on school finance.
- One bill has an indirect impact on school finance.
The bills must be analyzed collectively for their overall impact on school funding.
Here is a listing of the legislative bills introduced and a short overview:
School Funding Legislation
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LB 583 – Provide for foundation aid and special education supplemental aid under the Tax Equity and Educational Opportunities Support Act
- Establishes a statewide foundation aid of $1,500 per public school student
- Offsets equalization aid through TEEOSA
- No “new” funding for Omaha Public Schools
- Increases special education reimbursement
- Currently, a proportionate allocation of a fixed appropriation, approximately 40% for Omaha Public Schools
- Increases reimbursement to school districts to 80% of allowable expenses from state and federal dollars
- Increase is “outside” the TEEOSA formula and would result in “new” funding for Omaha Public Schools
- LB 589 – Adopt the School District Property Tax Limitation Act
- Establishes a 3% cap on total revenue growth
- Allows for two methods to override the cap
- Up to 4% with the approval of 75% of the Board, seven members
- Special election with the approval of 60% of voters, could be more than 4%
- There are already spending limits in statue
- Calculated by the Nebraska Department of Education
- Average 2.6% annually over the last five years for Omaha Public Schools
- Further limits local control
- The projected impact on Omaha Public Schools with a 3 or 4% revenue cap would create a substantial reduction in revenue. The reduction is projected to be $17.2 million at a 3% revenue cap and $10.9 million at a 4% revenue cap, based on 2022-23 school year data.
- LB 681 – Change provisions relating to a fund and provide for transfers under the Tax Equity and Educational Opportunities Support Act
- Creates new fund with a $1 billion transfer
- Intent language for transfers of an additional $250 million annually
- Allowable expenditures from the fund
- Foundation aid
- Increased special education reimbursement
- Increased school funding with dollar-for-dollar property tax relief
- Grant programs for:
- Teacher retention
- Career and technical educational opportunities
- Student mentoring
Tax Legislation
The following are legislative bills introduced that impact tax reform. They are individually listed first. Below they are grouped to show their overall impact.
- LB 641 – Change provisions relating to the taxation of social security benefits
- LB 750 – Change provisions relating to the valuation of agricultural land and horticultural land
- LB 804 – Change corporate income tax rates
- LB 806 – Change individual income tax rates
- LB 753 – Adopt the Opportunity Scholarships Act and provide tax credits
- LB 754 – Reduce individual and corporate income tax rates
- LB 783 – Eliminate the levy authority of community college areas
- Shift community colleges from property taxes to state funding
- $250 million tax shift based on 2021 property taxes
- Would grow to $282.5 million in 2026 per Governor's estimate
- LB 820 – Adopt the Agricultural Valuation Fairness Act
LBs 641, 804, 806, 753, and 754 – Income Tax Relief
- All bills provide income tax relief
- Reduces allocated income tax aid to school districts
- Currently, 2.23% of all income tax collected in school districts
- Equalization aid would offset the reduction for Omaha Public Schools
- Governor’s estimates project $840.5 million in reduced state tax receipts when fully implemented
- LB 753 also creates tax credits for donations to organizations that provide scholarships to private and parochial schools
LBs 750 and 820 – Agricultural Land Property Tax Relief
- Intent is to change from a market-based valuation method to a production-based valuation method
- Could reduce ag land valuations by 50% to 75% based on valuations in surrounding states
- Could add 70 to 124 additional equalized school districts
- No significant property tax relief to Omaha Public Schools
The Impact on School Districts and Omaha Public Schools
It is important to understand the impact of these bills collectively. The impact of these bills, if passed, would become effective for the 2023-24 school year. The projected cost to the state is $1.47 billion to $1.61 billion. The total impact across all school districts would be a revenue decrease of $78.7 million to $98.8 million, with Omaha Public Schools decreasing $17.2 million.
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