1985-1987: Introduction


The Complete History of the Nebraska Tax Equity
and Educational Opportunities Support Act (TEEOSA)
Policy History Navigation



The issues of education funding and taxation have always been closely intertwined.  It is the circumstances that surround the dual issues that have often serve as the catalyst for a resolution between them.  This is particularly evident when one examines the circumstances facing the Nebraska Legislature in both the 1960s and the 1990s.  One of the catalysts that helped launch school finance reform in 1990 was a pending lawsuit that, if successful, could have forced legislative reaction.  Some lawmakers sought to change the school finance system before any judicial action would otherwise require the state to do so.  The catalyst in the mid-1960s was of a very different sort, a constitutional crisis that could have left the state without any substantial financial means to operate.  The crisis not only produced the most wide sweeping changes in taxation in the history of Nebraska, but also produced a new school finance system.

The property tax was established as the sole means to fund public schools under the Common Schools Act, which was passed by the Nebraska Territorial Legislature in 1855.1 The long-standing debate on property taxes and education funding was established even before Nebraska became a state.  What many may not realize is that for a long period of Nebraska's history property taxes were levied at both the local and state levels.  In fact, the principal means of financing state government derived from a state general property tax until the mid-1960s.  State income taxes and sales taxes were often the subject of legislative consideration in Nebraska, but nothing was ever passed.

Then, in the 1954 General Election, voters approved the so called "Duis Amendment," which stated that upon the passage of a state income tax and/or a sales tax system, the state general property tax would be automatically eliminated.2 While the people voted in favor of the ballot issue, the Legislature failed to take action for eleven additional years.  Finally, in 1965, history would be made and a constitutional, if not financial, crisis would begin.

As an interesting side note, it was not until 1971 that the Nebraska Unicameral Legislature met in annual sessions.  The Legislature met every other year until that point in time.  Therefore, when the Legislature convened in 1965 there had been no opportunity to address the issue of taxation since two years before, and nothing had been accomplished in the 1963 session.  In 1965, Governor Frank Morrison was serving his third and final term in office and a recently elected Jerome Warner of Waverly was serving his second term as a state senator.  Senator Warner was among those who advocated an income tax and/or a sales tax over property tax as the general source of revenue for the state.  In 1965, the Legislature took action to create the first state income tax, thereby triggering the 1954 Duis Amendment and automatically eliminating the state property tax.  Morrison declined to take action on the bill, which became law without his signature.

Opponents of the income tax law, mostly from the business community, quickly took action to form a referendum petition movement to repeal the law at the 1966 General Election.  At the same time, however, the Nebraska Farm Bureau was circulating an initiative petition to permanently eliminate the state general property tax provision from the Constitution.  If both the referendum and initiative measures passed, the state would be left with no substantial means of revenue.  And that is exactly what happened.

On November 8, 1966, the voters overwhelmingly approved the referendum to repeal the income tax law by a wide margin (133,594 or 30% in favor of retention of the law and 310,681 or 70% against retention).3  The voters simultaneously approved, although just barely, the initiative measure that threw out the state general property tax provision within the Constitution (223,969 or 50.89% in favor, 216,093 or 49.11% against).4 At least a strong minority of the voters understood that the adoption of both amendments would mean no revenue system for the state.  But the majority spoke and the state, particularly the Legislature, had an emergency on its hands by virtue of the election results.  The 1967 Legislature simply had no choice but to produce a solution to the state's revenue situation, and ultimately it did.  The dire situation would also serve as a catalyst for change in the arena of school finance.

In 1967, the 100th anniversary of statehood, the Legislature once again convened and once again addressed the issue of taxation.  This would be a very focused legislative session.  In his biography, Senator Warner recalled that, "The whole session was oriented toward writing a good tax law."5  Indeed, the Legislature passed and Governor Norbert Tiemann signed into law a revenue package that included the first-ever Nebraska income tax and sales tax, or at least the first of such taxes that would ultimately remain in law (the initial sales tax rate was set at 2.5%).  Along with the passage of the Nebraska Revenue Act of 1967, the Legislature also addressed and ultimately passed a comprehensive school finance reform measure.  And it was Senator Warner who helped to lead the charge.

1 1855 Neb. Laws, Joint Resolutions and Memorials, 212-221.
2 Neb. Blue Book, 2002-03 ed., 258.
3 Id., 270.
4 Id.
5 Charlyne Berens, Leaving Your Mark: The Political Career of Nebraska State Senator Jerome Warner (Seward, NE: Nebraska Times, 1997), 51.


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