1991-1994: Review


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




Between 1991 and 1994, the Legislature grappled with many of the details of school finance that tend to lull policymakers to sleep.  This was a period of fine-tuning for the TEEOSA, but there were also some major issues sprinkled in the mix.  Among the major topics was the final piece to the common levy issue and the implementation of adjusted valuation under the school finance formula.  In addition, the formula had to evolve to a certain degree with the ongoing and tedious constitutional problems with Nebraska's personal property tax system.  In fact, the personal property tax issue would dominate much of the Legislature's time in the early 1990s.  Lawmakers found themselves reacting to several key court cases on this subject.

Legislative Bill 511 (1991) was the first comprehensive technical cleanup bill after the passage of LB 1059 (1990) a year earlier.  The bill contained both technical and substantive changes to a wide array of education-related, and some non-education-related statutes.  The major change with regard to affiliation concerned the extension of the deadline for Class I districts to affiliate from February 1, 1992 to February 1, 1993.  This change was meant to give Class I districts more time to complete the affiliation process set out in LB 259 (1990).  LB 511 also changed the method of financing for the enrollment option program.  Beginning in the 1992-93 school year, the program would be funded through the state aid formula, as opposed to a separate fund and distribution system.  The payment amounts to school districts would be phased-in during the 1992-93 and 1993-94 school years.  In the 1994-95 school year, districts would receive tiered cost per student for option students served in the 1992-93 school year since state aid was calculated based on data two years in arrears.  LB 511 marked the first direct connection between option students and the new formula, although the original formula did include option payments as other actual receipts.  Option payments to districts would continue to be an issue as the formula evolved in later years.

In 1991, the Legislature passed LB 829 (1991) and served as the first salvo fired by the Legislature in response to a Nebraska Supreme Court opinion relevant to personal property taxes and taxable property.  The Legislature chose to use LB 829 to exempt all personal property with the exception of motor vehicles for the 1991 tax year only.  One of the consequences of such a mass exemption, of course, was the loss of revenue to local governments that count upon all property tax receipts.  School districts would certainly be among the losers.  It was decided, therefore, that the Legislature would "reimburse" local governments by a variety of revenue generating measures designed to offset the lost revenue.  It was estimated that the total loss of revenue to local governments by the one-time, one-year personal property tax exemption would be $97 million.

In February 1992 the Nebraska Tax Research Council (NTRC) issued a report on the effectiveness of LB 1059 in meeting its stated goals.  The report issued by the NTRC in 1992 represented the first formal effort to evaluate the new state aid formula and how, or if, it was meeting the goals established by the Legislature, particularly as they relate to taxation.  On the whole, the report provided relatively good news for supporters of LB 1059.  It reported that the tax base had in fact been broadened.  The report indicated that statewide property tax relief had, in fact, been achieved.  The report also stated that the property tax burden had been made more equitable.

The continuing saga concerning the personal property tax crisis had not dissipated with the passage of LB 829 during the 1991 Session.  LB 829 was intended to exempt all personal property from taxation for 1991 only as a short-term solution to the tax crisis.  The legislation was meant to buy time in order to resolve the matter once and for all at a later date.  In 1992 the Legislature passed LB 1063 (1992) to attempt to resolve the issue.  In relation to the school finance formula, LB 1063 extended the duration of the zero percent growth in spending without a three-fourths vote of the local school board (in order to access the normal spending limitations).  The zero percent restriction was imposed under LB 829 (1991) and essentially created an initial hurdle over which school boards must leap before it may access the spending limitations originally imposed by LB 1059.  Under LB 1063, the zero growth provision would be extended through the 1994-95 school year.

LB 1063 eliminated two of the five existing spending lid exceptions.  Both the lid exception relating to special education enrollment growth and the lid exception relating to collective bargaining agreements were eliminated by the legislation.  LB 1063 also eliminated the separate spending limitation for special education costs to school districts.  LB 1059 (1990) had originally created one spending limit for general fund expenditures and one for special education expenditures.  LB 1063 provided that the budget authority for special education would be the actual anticipated expenditures for special education subject to the approval of the state board.

In the 1992 Session, the Legislature passed LB 719 (1992) to:  (1) extend the hold harmless clause of the state aid formula; (2) change provisions related to land transfers between districts; and (3) provide for rapid growth of students in the formula.  Also in 1992, the Legislature passed LB 1001 (1992), which expanded the usage of an authorized tax levy by school districts.  The legislation authorized school districts to levy up to 5.2¢ per $100 valuation for purposes of accessibility barrier elimination projects and environmental hazard abatement projects.  The bill also allowed parents under the option enrollment program to appeal rejections of students made by resident school districts.

In 1993, the Legislature passed LB 310 (1993) to provide a procedure for schools to levy a property tax for purposes of reimbursing personal property taxes to taxpayers as required by a final order of a court or the Board of Equalization from which no appeal was taken.  Also passed was LB 348 (1993), which provided that, for Class I districts having more than one general fund levy, the minimum effort calculation would be based on a derived general fund levy for the district.  The derived general fund levy would be calculated by adding the general fund property tax yield for all portions of the district and dividing the result by the total assessed valuation of the district.  LB 348 also required NDE to provide data to the Governor by December 1st of each year in order for the Governor to prepare necessary legislation for the upcoming session.  The Legislature passed LB 839 (1993) to provide for a common levy for Class I - Class VI school systems, effective for the 1995-96 school year.  LB 839 also provided a mechanism for releasing apportionment and in-lieu-of-tax funds from state school lands, based on an appraisal rate of 80% for apportionment.

In 1994, the Legislature passed LB 1290 (1994) providing that state aid would be calculated using the adjusted valuation for the property tax year ending during the school year in which the aid is to be paid beginning in 1994-95.  The measure also provided for the use of prior year student information rather than data two years in arrears.  Beginning in 1994, the Department of Revenue was required to provide the Department of Education with adjusted property valuation by school district based upon adjustment factors for each class of property.  The adjusted valuations would be used to compute state aid beginning in school year 1994-95, which did not leave any one concerned much time to prepare (state agencies and school districts alike).  The bill provided a mechanism for school districts to file objections to adjusted valuations with the Tax Commissioner who must then hold hearings on the objections.


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