Pillen decries increases in Nebraska school property taxes despite more state aid

Statewide, that amounts to a 3.34% net increase in school property taxes, prompting Gov. Jim Pillen on Monday to call the result “unacceptable” and to say the first year of his state aid plan “was not the success we wanted it to be.”

A key lawmaker accused the majority of Nebraska schools of passing “unreasonable” spending increases that take more money from taxpayers.

“The problem is the bad actors,” said State Sen. Lou Ann Linehan of the Omaha area, who chairs the Revenue Committee. “I was very skeptical a soft cap would work and I’m disappointed I was right.”

School aid legislation passed earlier this year nearly doubled the amount of state support for special education, and it guaranteed $1,500 in aid for every public school student. Together, the changes cost about $324 million, according to the state budget office.

The school aid increase was part of a $6 billion package of property and income tax cut bills proposed by Pillen and passed by lawmakers in May. Pillen said his goal had been to produce dollar-for-dollar property tax cuts with the increased aid. 

But data collected by the Nebraska Department of Education shows that 152 of the state’s 244 school districts increased the amount of property taxes they requested for the current year, compared to the year before. The remaining 92 districts cut property taxes or held them flat.

Whether individual property owners saw a reduction in school property taxes depended on which district they live in, the decisions their local leaders made, how overall property valuations changed in their district, and what happened with their own valuation.

Despite his disappointment in the outcome, Pillen said the new school aid law made a difference for taxpayers. 

“I think in the end, if we hadn’t had transformational education funding, property taxes would have gone up $400 million,” he said. Pillen vowed continue working on cutting property taxes next year and expressed confidence the state would ultimately succeed at that task. 

Colby Coash, with the Nebraska Association of School Boards, said the school property tax total reflects the decisions made by 244 local school boards responding to 244 different sets of needs and situations, at a time when schools are facing teacher and staff shortages and inflation. 

He said board members are accountable to their voters and taxpayers for their decisions and he noted that most districts decided not to use all of the property taxes that the new law would have allowed them. 

“This was new for districts,” he said. “They were trying to decide what’s best for now and for down the road.” 

Two districts featured at Pillen’s press conference Monday both reduced their property tax requests for the current school year. But neither cut taxes by as much as their state aid increased.

Elwood Superintendent Darin Hatch and Norris Superintendent Brian Maschmann said they used some of the aid to cover increased costs for staff salaries and benefits and for transporting students. Both districts also voted to override the revenue cap set by the new state law, although they did not use the additional taxing authority.

The new revenue cap limits the amount of property taxes that districts can collect. It includes a cost growth factor and allows local districts to authorize additional taxes with a supermajority vote of the board or of voters.

The cost growth factor provided for a 3% increase in a district’s combined state and local revenues for the 2022-23 school year, plus additional amounts for growth in student enrollment, English language learners and children in poverty. 

Even without overrides, the cost growth factor allowed districts to increase taxes by a net of $58.3 million — or 2.2% — statewide. But 188 districts, or 77% of the total, voted to approve additional taxing authority, leading to the larger increase in property taxes. 

Like Elwood and Norris, most of the districts that voted for the additional authority did not use the full amount authorized. In total, Nebraska schools did not use $123 million of their property tax authority. 

Pillen and Linehan decried districts that overrode the new cap, saying such action ran counter to the intent of the new law. But Pillen said he has confidence that such overrides will become less common as school officials develop confidence and trust that the state will meet its obligations to fund the new aid plan. 

Earlier this year, the governor tried to pressure school districts to hold the line on spending and their property tax requests. He delivered that message to superintendents via a Zoom call on Sept. 1.

Two weeks later, he sent a letter to school board members across the state. The letter asked them to consider whether their districts would collect more property taxes in the current school year than the previous one and whether they were opting for unneeded property taxing authority.

On Monday, he said he could have worked harder at getting out his message of financial conservatism. He said he hopes the situation will improve once the increased special education funding starts going out to schools. He said some districts were leery about whether the state would come through with the promised funding.

Even without an override, the new law allowed some districts to increase property tax requests. Most were districts that had been receiving the bulk of state school aid dollars previously and saw little change in aid this year.

Among them, Omaha Public Schools increased its total property tax request by $30.8 million, or just $166,409 short of the total allowed under the new state law. The district did not seek approval to collect additional dollars. 

In an earlier statement, district officials said: “When building a budget, Omaha Public Schools considers what resources are needed to deliver our best for students and families as efficiently as possible within statutory guidelines. An override request was not needed to achieve those outcomes in the 2023-24 budget.”