Late night sessions have begun here in the Legislature and next week we start debate on the budget. The Nebraska Constitution requires us to balance the budget. We’ll have to reach a consensus on both spending and revenue in order to make that happen. The past two years we operated with a budget surplus. Now we are striving to fill a projected budget shortfall. On top of the questions of how we fill the shortfall, I hear regularly from constituents who wish for the Legislature to deliver additional property tax relief.
As a reminder, the state itself does not levy any property taxes. This practice was ended in 1967 after voters passed a constitutional amendment to prohibit the state from taxing property. Since that time all property taxes are levied, collected, and spent locally. Despite this fact, the Legislature over the past two years has adopted several measures to direct state sales and income tax revenue toward local property tax relief. Notably, in 2023, we passed legislation to take over funding for Nebraska’s 13 community colleges, resulting in more than $300 million in savings a year to property taxpayers. Last year we also increased the amount going into the property tax credit that shows up on your annual property tax statement.
The net result of these measures and others that have passed during the past two years was recently reported in the Department of Revenue Property Tax Assessment Division’s 2024 Annual Report. For the first time in 26 years, the total property taxes in Nebraska collected decreased last year. The state-wide average property tax rate also decreased for the second straight year to the lowest average level since 1967. Keeping in mind that the total property taxes collected and the state-wide average rate are both aggregated numbers and don’t necessarily mean that the amount paid by every property tax owner went down. However, this trendline signals that the efforts passed by the Legislature have had a net positive effect.
As I mentioned, property taxes are not something that the Legislature has direct control over. The most significant mechanism, aside from property tax credits, for the Legislature to provide property tax relief is to increase state aid to public schools while lowering the maximum cap that schools use to levy property taxes. I introduced LB303 this year to do exactly that. LB303 was well received and is supported by school boards, agricultural groups, the teachers’ union, and school districts, with the exception of Omaha Public, and many others. To impact property taxes, LB303 has to secure limited state dollars to afford to reduce the maximum levy cap and replace property tax dollars going with state funds. It’s too early to tell whether LB303 has an opportunity to advance as we have not yet addressed the state budget on the floor. We’ll know more in the coming weeks.
At the end of the day, the ability of the Legislature to continue to provide property tax relief for a tax we don’t control will be limited by the amount of state funds we have to do so. Additionally, future efforts to provide property tax relief in the Legislature will involve difficult conversations of where state government ends and local control begins. Many of the initiatives debated and/or adopted by the Legislature over the years have involved the state placing limits on the ability of local governments to tax and spend property tax dollars. Schools are capped overall with the maximum levy and have additional caps on how much they can increase local property taxes on an annual basis up to that maximum levy cap. School districts also have restrictions on how much they can increase what they spend on an annual basis. Meanwhile, other local property taxing authorities like Natural Resource Districts (NRDs) and Ag Societies have no such restrictions. NRDs and Ag Societies can ride valuation increases while keeping their levy the same, resulting in an increase in a property owner’s tax bill.
Over the years the Legislature has also passed many unfunded mandates that end up compelling counties, cities, schools, and other local subdivisions to spend property taxes in order to comply with. I believe that all these mandates need to be reviewed and, if possible, eliminated if they are mandated but not funded by the state.
In summary, we’ve done some good things. That being said, we need to do a lot more, and most of what we need to do isn’t glamorous or even all that exciting. However, if done correctly and collectively, these changes can reduce property taxes. Ultimately, each local subdivision of government and its decisions can have a far greater impact on property taxes.
As always, if I can be of assistance to you in any way, please do not hesitate to contact my office. My staff members – Matt and Katie – are available to assist you with your needs and they pass along messages, so if you’d like a call back, please let them know!
Email: jhughes@leg.ne.gov
Phone: 402-471-2756
Facebook: Senator Jana Hughes
