Legislature passes slimmed-down property tax relief package and ends Nebraska special session • Nebraska Examiner
LINCOLN – Nebraska taxpayers will likely see a small increase in property tax relief on their tax returns next year, but much less relief than Gov. Jim Pillen requested.
Bill No. 34which has passed 40-3 on the final day of the Legislature’s special session on Tuesday, provides $185 million in new tax relief, about 3.5% more than the $5.3 billion in local property taxes that will be collected in 2023. Some Nebraskans could see their first relief if LB 34 repurposes the existing earned income tax credit for property taxes paid so that it appears on property tax returns instead of requiring property owners to file for a refund later.
“A lasting impact”
Lawmakers called the package an “absolute minimum” and a “stripped-down” version of a proposal that originally sought to lower school tax rates for grades K-12 by increasing the sales tax.
Pillen wanted to cut property taxes by 50 percent overall, including all relief programs. He and several lawmakers said the total relief available would be about 20 percent.
I think it would be a mistake to be able to call another meeting on property tax now, before the end of the year, before Christmas.
– Governor of Nebraska, Jim Pillen
LB2 And LB3Two budget-related bills were also passed on Tuesday. With budget cuts, cash transfers and increased fees, these bills provide about $139 million to fund the new property tax relief. The remaining $46 million is to be paid from the state’s cash reserves.
State Senator Brad von Gillern of Elkhorn, vice chairman of the Finance Committee, said he agreed with some senators that the amount of relief passed by the Legislature was “pathetic” and “one-tenth” of what he wanted to achieve.
But he also referred to upper limits for the additional property tax revenue that municipalities and districts can achieve compared to the previous year. LB 34 sets this upper limit at the higher value: the consumer price index for inflation or 0%, as a lower limit in times of deflation.
“Make no mistake, we would not do anything here today,” von Gillern told his colleagues. “Parts of LB 34 will have lasting effects on property taxpayers in Nebraska.”
State Senator Lou Ann Linehan of Elkhorn, chair of the Finance Committee, agreed that LB 34 was not enough but praised the changes in how the aid was delivered in her final year as a lawmaker.
“The fourth quarter”
State Sen. Justin Wayne of Omaha urged his colleagues to pass two similar amendments that would reinstate sales tax on a handful of items and exempt residential electricity from sales tax, saying the vote could “break the dam” and lead to consideration of other proposals.
“It’s the fourth quarter. It’s time for a timeout,” Wayne said. “Give us the opportunity to play the set piece we need to play to score. That changes the dynamic of the game, and it starts with that coordination.”
Both amendments were defeated. Wayne later proposed that the legislature adjourn until November 18 before resuming its work, but that proposal was also defeated.
State Senator Tom Brandt of Plymouth said lawmakers should not “quit halfway” and if they have to come back another day, “so be it.”
“Press the reset button”
State Sen. Mike Moser of Columbus disagreed, saying it was more like the Huskers were playing Oklahoma but trailing 42-7.
“Let’s go home and play against them again next year,” Moser said.
Moser said the process had “many flaws” from the start, including too few senators being invited to participate in the 17-member “task force” that met this summer to discuss pills.
“I think we should hit the reset button,” Moser said. “If your computer gets all messed up and nothing works, turn it off, turn it back on and start over.”
State Senator Steve Erdman of Bayard, who was part of the working group, said there were too many senators involved, not too few, and the group never really reached a consensus.
State Senators Mike McDonnell of Omaha, Erdman and Wayne, all of whom are term-limited, urged their colleagues to keep working, but there was little interest across the House.
Home Valuations
For example, Brandt Legislative Resolution 2CA this session, which would have given voters the opportunity to decide whether owner-occupied residential property could be valued below 100% of market value. All properties except agricultural land are valued at or near that 100% level; agricultural land is valued at 75%.
State Senator Mike Jacobson of North Platte remained opposed to LR 2CA, and Brandt fell short of the necessary 33 votes to end debate on his measure. It failed 26-16.
Erdman, who had called the changes to Nebraska’s tax law “madness” because they were trying the same tactics but expecting a different result, said Tuesday that it was like communism.
“They say communism hasn’t worked because no one has ever done it right,” Erdman said.
He applied the same reasoning to the state’s “three-legged stool” of taxes, which consists of sales, income and property taxes. These have been adjusted constantly over the past 60 years, but LB 34 was a “reduction in the increase” that is not enough to offset next year’s tax increase, Erdman said.
Linehan said she was willing to stay, but everyone needs to take a break, whether permanent or temporary, and go home to recover.
She was one of 15 senators who voted against ending the session or adjournment indefinitely, including Senators Wayne, Erdman, McDonnell, Steve Halloran of Hastings and Tom Brewer of north-central Nebraska from her district. The motion to adjourn passed by a vote of 29 to 15.
No more special sessions
Pillen confirmed to the Nebraska Examiner on Tuesday that he will not call any more special meetings on property taxes this year. He had previously said that if he did not get the relief he wanted, he would call the meetings “by Christmas.”
“I think I understand the math, and I understand the power of who draws the lines, that’s crystal clear,” Pillen said at an afternoon press conference where he signed the bill. “I think it would be a mistake to be able to call another meeting on property taxes now, before the end of the year, before Christmas.”
The 17-day special session is the second longest in the history of the unicameral system, surpassed only by one session in 1963 and is probably the most expensive.
LB 4, also passed on Tuesday, provided $126,860 for session costs. A “very, very rough estimate” from the Legislature’s auditor general puts the total cost at $178,350.
The actual amount will not be finalized for several months, as several variables remain, such as the final per diems of the senators, staff overtime and printing costs.
The legislation was passed in this special session
The Legislature’s property tax package took many forms this special session, starting with LB 1, moving on to LB 9 and finally LB 34. While LB 1 and LB 9 proposed directly addressing school tax rates for grades K-12, LB 34, as passed, did not.
The final LB 34:
- Provides $185 million in new property tax relief.
- “Frontloads,” or repurposing of existing income tax credits for property taxes paid, to appear on annual property tax returns. Taxpayers must currently claim this refund, which would now be automatic.
- Limits local and county tax revenues to the amount of property taxes collected in the previous year, equal to either the rate of inflation or 0% (during times of deflation). Exceptions would be made for public safety services (as well as public defenders and district attorneys), emergencies, referendums, and economic growth.
Law LB 34 was passed without new sales taxes on goods and services – a draft bill earlier this summer had sought up to 120 exemptions – and also without increased “sin taxes” as Pillen and lawmakers had originally proposed.
To fund the actions in LB 34, LBs 2 and 3 were approved. LB 2 included $117 million in budget cuts and LB 3 included $22 million in cash transfers and fee increases. An additional $46 million would be provided from state cash reserves to fund LB 34.
LB 34 passed 40-3. LB 2 passed 33-11. LB 3 passed 36-9. Governor Jim Pillen signed the individual measures on Tuesday afternoon, so they will take effect on Wednesday.
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