Property taxes were, as they have been for years, the hot topic button for the Legislature.
Led by Nebraska Governor Jim Pillen, the goal was to reduce property taxes for Nebraskans.
One of the proposals included a $30 million budget to be dispersed to schools, so that school districts would not have to rely so heavily on property taxes, especially those in rural communities.
While local schools in Clay County fully support the idea of lowering reliance on property taxes, they wonder where that extra money will come from.
Harvard Public School Superintendent Michael Derr said he completely agrees that they [the school] are over reliant on property taxes, especially when compared to other states, “but when you try to fix that, that money has to come from somewhere.”
Sandy Creek Superintendent Stephen Grizzle agreed, noting how they [schools] want property tax restructuring too.
“The schools rely too heavily on property taxes, but we do that because we have to,” he said, adding, “that’s the way the structure is right now... we 100 percent agree we need to do something to get away from relying on property taxes.”
Sutton Public School Superintendent Brad Best had the same notion about where will the money come from, saying that there is income tax, property tax, and sales tax—the three sources of revenue that states can generate funds from in order to pay bills and other expenses.
“Nebraska is really heavy on the property tax leg of it, and not so much the sales tax or income tax side of it. So we’re a little bit out of balance that way,” Best said. “In order to make it more balanced, you’re going to have to increase income tax or sales tax, and lower property taxes.”
However, that kind of tax shift isn’t something people are often willing to agree with, and it can cause more hardship for those who aren’t making a hefty salary each year.
Derr mentioned how Pillen discussed getting down to zero property tax, which he’s not against, but that’s a lot of money to go from where the state is at to zero.
“Then we also have to look at the state’s economy, and it seems pretty good, but if we shift a lot of certain things, is it going to hurt our economy? If you put more taxes on businesses, are we going to lose business? I know it goes both ways and it’s a tough balancing act.”
Grizzle said the latest idea from Pillen is taking over school funding.
“Obviously that makes those in the education community nervous because there’s not a lot of trust there,” Grizzle said.
Each of the three county public schools receives state aid, each determined by the number of students at each school.
Derr said Harvard gets about $336,000 in state aid—last year they received $100,000—and a reimbursement for special education, which recently went up.
In previous years, the state was paying 40-45 percent in SPEC reimbursements, but has been trying to pay 80 percent.
“So that’s helped a lot of districts,” he said.
Additionally, in order to help lower the reliance on property tax, HPS received Foundation Aid, which is $1,500 per kid and started in 2023.
Until a few years ago, HPS also received Equalization Aid, which is when the state looks at a school’s needs and resources, and if the needs are greater than the resources, then the school qualifies to receive this aid.
However, after land value in the area went up 40 percent in a year, HPS stopped receiving that aid because the state deemed the school could afford to pay for things.
The school’s budget for this year is $6.8 million, with this being the sixth year in a row of lowering how much money they ask for, as the levy is set at .82 cents.
There is a maximum amount HPS can ask for in taxes. Derr explained HPS can go up to 7 percent but the board has to approve that. If approved, that request amount carries over into the next school year.
This year, Derr asked the board to approve up to 7 percent, but they are not using any of it; it’s basically protecting the request authority in future years, in case HPS needs it.
As Sandy Creek and Lawrence-Nelson are in the process of de-unification, going from South Central Unified District to their own entities, they were still awarded state funds as the SCUD.
This year they received $1,069,861— $715,344 for Sandy Creek and $385,000 for Lawrence-Nelson.
Both of those numbers are markedly larger than in past years, as last year the SCUD received $100,000 in state aid.
Grizzle explained that last year’s state aid was so low because the property values were so high.
Due to this, the state determined the school could generate all the money they’d need through the property values.
“So that, in turn, put more pressure on property owners,” he said.
This year, Sandy Creek requested $6,965,437 in property tax request, which is still the bulk of their revenue.
“Each year in the past, it’s been about 80 percent of the revenue, but we’ve dropped it down to having it only be 42 percent of the revenue, so it’s dropped in half and that’s pretty good. It’s still high though,” Grizzle explained.
Sutton’s general fund budget for this year is $6,998,440, with the overall tax levy in the 1.37 range, which Best said is very conservative given the cost of everything.
Compared to last year’s valuations, that’s a 7 percent drop in the tax rate.
Best said the rhetoric from the state for the last several years is that schools spend too much, and need to find a way to reduce spending.
What doesn’t get talked about often enough, though, is how a schools’ average increase in spending is always lower than what the state increase in spending is, Best said.
“The state will spend 3 percent or more almost every single year, while the schools are locked into 2 percent, plus growth, so we always spend less,” he added.
No two schools are alike in their needs or their spending. Best gave the example of how a larger school that might have three teachers in one classroom has the opportunity to decrease staff, while a small school with only one classroom teacher doesn’t have that option.
“There is a disparity and a lot of it has to do with efficiency, and the other piece of it is the property tax base,” Best said, adding how Omaha has more base given its industry and businesses, so they don’t have to rely on agriculture land. Rural schools are often the opposite.
“What can schools do more to reduce spending? I don’t know what schools like Sutton could do to reduce its spending more than we already have,” Best said.
Along the same lines, Grizzle said if the state takes over all funding, how are they going to determine how much Sandy Creek gets versus Lincoln Public Schools or Crawford, whose needs are drastically different than SC’s needs.
“How are they going to determine who gets what? We’re not all the same; everybody’s different,” he said.
With the constant changes and mandates, schools never know what’s coming next from the state, making it hard to plan for the future.
In his 16th year as a superintendent, Derr said he should be able to sit down and budget everything out fairly easy, but every year he feels like he’s on his toes because he and the board are making decisions now that are going to affect the future, but they don’t even know what next year’s going to look like, so it’s hard to plan.
Best said that what some schools are doing, most likely out of fear for the future, is budgeting every cent the state funds them, instead of budgeting only for what they need and allowing the extra funds to roll over, in case of unexpected costs.
“If a school looks at everything they needed to pay in a school year and find they only need $6.5 million under what the state could budget, then the school is going to budget that amount and allow the $500,000 to be carried over for the next school year. Which is great to soften the blow of increased costs and things like that,” Best explained. “With all of the changes of rules, schools are nervous that the option to have that money rollover is going to go away...if they [schools] don’t budget for all of it, the state may say ’guess you don’t need it,’ and they won’t let the school carry it over anymore.”
Grizzle believes property taxes will continue to be on the top of the state’s priority list come the next Legislative session, but how can they fix the over-reliance on property taxes?
The three superintendents aren’t entirely sure of a foolproof plan.
“I know there have been a lot of proposals out there for several years, and they all seem like they have good components, but from my perspective, one thing that’s tough is figuring out where the money will come from,” Derr said.
Grizzle added how he thinks a big reason why it’s been so hard for the Legislature to come up with a plan is because of the many factors going into the issue.
