The 1992 Legislative Session

 

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


LB 245 - Accountability Commission LB 1063 - Personal Property Taxes
LB 719 - Formula Modifications LB 1001 - Retirement Legislation
LB 719A - Revisions to LB 1063  

 


LB 245 - Accountability Commission

Legislative Bill 245 was introduced in 1991 and carried over to the 1992 Session.  The bill ultimately had a dual purpose.  The first, and original purpose was the creation of the Nebraska Schools Accountability Commission, which consisted of eleven members.1  The Commission was required to identify standards for learner outcomes and develop a method of assessing student progress towards achieving the standards.2  The idea was to establish a reliable system of accountability for student performance in the public school system.  The commission would conclude its work on July 1, 1996 at which time the commission would automatically dissolve.3

The second purpose of LB 245 arose during Select File debate of the bill.  Senator Bob Wickersham, a lawyer from Harrison, was concerned about a Nebraska Supreme Court case, Zyburo v. Board of Education, and the admonishment to the Legislature contained within that decision.4  In the court's ruling, Justice D. Nick Caporale noted the unusual method by which LB 511 (1991) had evolved during the 1991.  LB 511 (1991) was essentially "shelled" or gutted late in the 1991 Session and the contents of LB 719 were amended into it.  In Zyburo, Justice Caporale alluded to a defect in LB 511 since, in his judgment, the bill, as substantially revised and amended, had not been before the Legislature for the requisite minimum of five legislative days.  Article III, Section 14 of the Nebraska Constitution states in part, "No vote upon the final passage of any bill shall be taken until five legislative days after its introduction nor until it has been on file for final reading and passage for at least one legislative day."5 Any legislation passing without compliance with this provision could be deemed unconstitutional.

Document Archive
LB 245: Created the Schools Accountability Commission; Repassage of elements under LB 511 (1991)
 
Bill Summary Statement of Intent
Chronology Hearing Transcripts
Com. Statement Exec. Session Votes
Slip Law  
 
Fiscal Notes:   Feb. 6, 1991
  Dec. 30, 1991
  Jan. 28, 1992
  Feb. 12, 1992
 
Floor Transcripts:    
General File   Jan. 9, 1992
Select File   Jan. 30, 1992
Final Reading   Apr. 1, 1992
  Apr. 9, 1992

In the case of LB 511, the adoption of the amendment that essentially shelled the bill and merged the contents of another bill occurred on June 3, 1991.  The bill was passed and the session adjourned sine die on June 5th.  Justice Caporale, therefore, felt the measure had not appeared before the body for the required minimum number of days.  For his part, Senator Wickersham said he did not necessarily agree with Justice Caporale's opinion since LB 719, on its own merit, had been before the body well beyond the required five days.  The contents of LB 511, after it was shelled on June 3rd, did not constitute new legislative material.  However, Wickersham said:

[LB] 511 was a very complex, very important piece of legislation.  And I simply do not wish to take any chances that it was adopted in a constitutionally unpermitted fashion.  The risk that we would run, if it was adopted in an unconstitutional fashion, is that none of the provisions in the bill could be used.6

Senator Wickersham suggested that the entire contents of LB 511 (1991) be re-passed under LB 245 in order to ensure proper handling of the legislation.  He introduced an amendment to carryout this suggestion, which was adopted on a 26-0 vote.7

Under the Wickersham amendment, sections 7 through 104 of the bill would contain all the provisions and amendments under LB 511 (1991).  LB 245 would also contain a "savings clause" to ensure that any actions taken in furtherance of LB 511 since its passage in 1991 would be considered "legalized, and validated if in compliance" with the law as passed.8 Senator Wickersham was particularly concerned, as were others, about the provisions in LB 511 relating to Class I districts and the extension of the date for affiliation.  If LB 511 had been ruled unconstitutional, it would have placed some Class I districts in a difficult situation.

LB 245 contained the E-clause and therefore required 33 affirmative votes to pass.  On the first vote on Final Reading, LB 245 failed to garner the necessary vote (30-13).9  After further discussion, a second vote was taken with a more positive result.  The bill passed with the emergency clause attached on a 33-10 vote.10

LB 1063 and LR 219CA - Personal Property Taxes
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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 as a short-term solution.  The legislation was meant to buy time in order to resolve the matter once and for all at a later date.  However, on September 20, 1991, anti-tax activist Ed Jaksha of Omaha filed a lawsuit alleging the unconstitutionality of LB 829 based on the uniformity clause of the Nebraska Constitution.  Jaksha claimed the exemptions under LB 829 violated the constitutional provision that requires all tangible property in the state to be taxed uniformly and proportionately.11 The uniformity clause, as alleged in the suit, applied not only among classes of personal property, but also between personal property and real property.

The situation was further compounded in June 1991 when Melvin Bahensky, a Grand Island businessman, filed a separate lawsuit.  Bahensky argued that the revenue to be generated from LB 829 to reimburse local governments for lost personal property tax revenue was also unconstitutional.12 LB 829 was designed to collect new tax revenue in order to replace the revenue lost by local governments due to the one-year personal property tax exemption.  One of the key components of the replacement revenue package was a state depreciation surcharge on personal property for purposes of the federal income tax.  It was this provision, in particular, that Bahensky challenged on the basis that it amounted to another personal property tax, which was supposed to be under the protection of the exemption established under LB 829.

Document Archive
LB 1063: Personal property taxes
 
Bill Summary Statement of Intent
Chronology Hearing Transcripts
Slip Law  
 
Fiscal Notes:   Jan. 30, 1992
  Mar. 11, 1992
 
Floor Transcripts:    
General File   Feb. 26, 1992
  Mar. 3, 1992
  Mar. 4, 1992
  Mar. 5, 1992
Select File   Mar. 9, 1992
  Mar. 10, 1992
Final Reading   Mar. 12, 1992

These lawsuits were very much on the minds of policymakers and other state officials as the Legislature convened on January 8, 1992.  The Legislature had fully intended to once again address the personal property tax crisis in 1992, but, if LB 829 were to be struck down as unconstitutional, their problems would be multiplied dramatically.  Not the least of these problems was the possibility that certain citizens would owe back taxes and/or local governments would suffer a loss of revenue if LB 829 were ruled unconstitutional.

Something had to be done to correct the problem even if it consumed the entire 1992 Session to make it happen.  In his State of the State address on January 10, 1992, Governor Ben Nelson warned legislators, "Nebraska is darkened by a cloud of an unprecedented property tax crisis."13  He requested two separate measures to put the issue to rest and asked Senator Jerome Warner to introduce the legislation on his behalf.  At least that was the official story.  "I always looked upon it as the Governor joining me," he would later recall to his biographer.14 Warner, at the time, was a member of the Revenue Committee and Chairman of the Legislature's Executive Board.  Warner was highly respected among legislators as both a statesman and tax policy strategist.

Senator Warner was also a member of the Revenue, Restructuring, and Revitalization ("3-R") Committee, a special panel created and appointed by Governor Nelson to tackle the personal property tax crisis and other revenue issues.  As the leader of the 3-R Committee, Warner was instrumental in shaping the legislative measures Nelson would later embrace as the solution to the personal property tax issue.  Naturally, there was not unanimity among the members of the 3-R Committee, nor would there be unanimity among members of the Revenue Committee, which would have jurisdiction over the legislation.  And there certainly would not be unanimity among members of the Legislature when the proposals eventually arrived for floor debate.

The first of the two measures was LB 1063 (1992).15  This legislation contained two alternative approaches to the personal property tax issue, but only one would be implemented depending upon the outcome of the second piece of legislation.  The second measure amounted to the "trigger" that would either be used or not, depending upon the whim of the electorate.  The second measure was LR 219CA (1992), a constitutional amendment that would, if passed by the Legislature, appear before the voters in the 1992 Primary Election.16  The two measures would require extraordinary votes to pass the Legislature.  LB 1063, with the E-clause attached, would require 33 affirmative votes.  LR 219CA, designed to appear on the Primary Election ballot, would require 40 affirmative votes.17 At the outset of the 1992 Session, considering the wide range and very vocal opinions on how to resolve the tax crisis, the odds of both measures passing were slim at best.

As introduced, LB 1063 proposed to create a tax on depreciated tangible personal property at its cost minus depreciation expenses claimed for federal income tax purposes (net book).18  This was, in fact, the first choice of both the 3-R Committee and of the Governor.  But this alternative would also require voter approval of the companion piece, the constitutional amendment proposed under LR 219CA.  The constitutional amendment would eliminate the application of the Uniformity Clause to personal property, allow a net book value approach to assessing personal property, and create a special class for federally protected property.19 The passage of the constitutional amendment, it was believed, would legitimize and legalize the existing personal property tax policies that tax some classes of personal property while exempting others.  If the voters did not approve the constitutional amendment, LB 1063 would automatically institute language and procedures to tax all personal property with the exception of certain types of industrial and agricultural equipment.  This would serve as the fall back system if voters did not approve LR 219CA.

The outcome of LB 1063 and LR 219CA would have a far-reaching impact on local governments, including school districts.  For instance, the original version of LB 1063 would have applied the same resource lid, based upon restricted funds, for school districts as was, and still is, applied to all other political subdivisions.20  The bill would have lowered the allowable reserve percentages for school districts, changed the rapid student growth provision, and eliminated several lid exclusions (pertaining to special education student growth and CIR orders).21  All such provisions would normally cause an up-roar from school representatives and education groups across the state.  Therefore, the fact that no major education group testified at the public hearing for LB 1063 should come as a surprise, unless such groups had already made their positions clear before the hearing.  And this was likely the case as evidenced during Select File debate when Senator Withem alluded to meetings between the "school community" and the Governor's office.22

The first of the two bills to emerge from committee was LR 219CA.  The Revenue Committee advanced the constitutional amendment on February 12, 1992.23  The advancement of LB 1063 would be an entirely different matter.  The Revenue Committee became deadlocked on LB 1063 and instead advanced LB 1120 (1992), a measure addressing the same issue but in a different way.24  LB 1120 was introduced by Senator Tim Hall, Chairman of the Revenue Committee, and took the approach of exempting nearly all personal property and imposed new and expanded taxes to make up lost revenue to local governments.25

The majority of the Legislature still preferred the proposal contained in LB 1063 as suggested by Senator Warner, the Governor, and at least a few members of the 3-R Committee.  On February 26, 1992, the Legislature entertained Senator Dennis Baack's floor motion to advance LB 1063 from the deadlocked Revenue Committee.  Baack said his intention was not to prevent discussion on LB 1120 but rather to give the Legislature all available alternatives to address the personal property tax issue.  After a lengthy, sometimes contentious debate, the body voted 33-13 to "pull" the bill from committee and place it on General File as originally introduced.26

LB 1120 would be debated by the Legislature, but ultimately bracketed.27  LB 1063 would become the bill of choice for the Legislature, but would also sustain considerable debate and modification before it arrived on Final Reading.  LB 1063 would become the single most debated bill of the 1992 Session and would create bitter feelings among various members of the Legislature.  As amended, LB 1063 would still provide a dual approach to the personal property tax situation.  If voters approved the constitutional amendment (LR 219CA), LB 1063 would implement a system to tax depreciated tangible personal property at its cost less a 150% declining balance depreciation schedule (net book).28  If voters did not approve the constitutional amendment, LB 1063 would institute language and procedures to tax all personal property except "LB 775 personal property."29

In relation to the school finance formula, LB 1063 amended the system to extend 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).30  The zero percent restriction was imposed under LB 829 (1991) and essentially created an initial hurdle over which a school board 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.31

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.32  LB 1063 also changed the lid exception relating to student growth.  LB 1063 imposed a threshold of student growth before the lid exception would be applicable.33 The effect of the change would permit fewer districts to access the student growth lid exception.

LB 1063 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 established that the budget authority for special education would be "the actual anticipated expenditures for special education subject to the approval of the state board."34 In essence, this provision gave the State Board of Education the authority to regulate special education expenditures by school districts.

The legislation also produced a 5% across-the-board reduction in the schedule for allowable reserves of general fund budget of expenditures.35  The reserve funds include contingency funds, depreciation funds, and general fund cash reserves.  The effect of the change would be to reduce the potential amount districts could set aside in reserve status.

Table 29.  Summary of Modifications to TEEOSA
as per LB 1063 (1992)

Click to view file


Source:  Legislative Bill 1063, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), §§ 202-205, pp. 123-126 (1408-11).

LB 719 - Formula Modifications
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Legislative Bill 719 (1992) was the source of controversy late in the 1991 Session.  The bill was originally introduced as a technical and substantive cleanup bill, but it carried only a committee priority designation, which left it without much hope for passage in the year it was introduced.  Senators Withem and Lamb agreed to an unusual move by which the contents of LB 719 were switched via amendment to LB 511, which was Senator Lamb's priority bill.  LB 511 was passed by the Legislature in 1991 leaving LB 719 as an available, empty vehicle on Select File, although the idea behind the deal was that the bill would belong to Senator Lamb and the original contents of LB 511.  The original version of LB 511 concerned the designation of protected streams and rivers.

Document Archive
LB 719: Technical and substantive changes to TEEOSA
 
Bill Summary Statement of Intent
Chronology Hearing Transcripts
Com. Statement Exec. Session Votes
Introduced Bill Slip Law
 
Fiscal Notes:   Mar. 5, 1991
  May 10, 1991
  Dec. 20, 1991
  Apr. 10, 1992
 
Floor Transcripts:    
Select File   Apr. 2, 1992
  Apr. 8, 1992
Final Reading   Apr. 14, 1992

In the 1992 Session, Senator Lamb would find another vehicle for his scenic river legislation, which meant that LB 719 was once again left without a purpose yet still available on Select File.  The purpose would eventually be found, and the purpose would revert the bill back to its original classification as an education-related bill.  On April 2, 1992, LB 719 came to life as Senator Lamb's proposed vehicle 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.36 Senator Lamb had filed a motion, requiring 30 votes, to suspend the rules and permit the attachment of his multi-purpose amendment to LB 719.  However, the amendment would not be without controversy or debate.

The first part of the amendment related to the hold harmless clause, which was set to terminate at the end of the 1992-93 school year.  Senator Lamb proposed to merge the contents of LB 1238 (1992), which was originally introduced to extend the hold harmless provision for another two years (through school year 1994-95).37  The bill was referred to the Education Committee and later advanced to General File on March 3, 1992.38 The bill was introduced and prioritized by Senator Lamb, who, with the 1992 Session quickly nearing an end, needed a way to advance his priority bill.  LB 1238 had been advanced to General File by a unanimous vote of the Education Committee, but a jam-packed legislative agenda precluded a chance for the bill to advance further.  LB 719, already on Select File, would present Senator Lamb a "leg up" on the legislative process.

For Senator Lamb the hold harmless provision was one of two truly important provisions of his amendment.  The other important provision, at least to Senator Lamb, was the part of the amendment related to land transfers between districts.  The Lamb amendment essentially evened the playing field among all classes of school districts relevant to the process of land transfers by simply requiring the transfer to be approved by 65% of the school board of each school district involved.  This provision also was the subject of a separately introduced bill, LB 1194 (1992), which had been advanced by the Education Committee on a unanimous vote.39  Lamb admitted that the intent behind this particular provision was to assist a Class I district within his legislative district to change boundaries with a Class VI district (involving the city of Valentine, Nebraska).40

The third part of the Lamb amendment, relating to rapid growth of student population, was much less important to him personally or perhaps to his own legislative district, but it was important to other school districts across the state.  The third part of the Lamb amendment was likely the "throw in" provision to gain the support of such key legislators as Senator Withem and a few other urban senators.

In truth, members of the body, such as Senator Withem, had nothing to gain politically by supporting a continuation of the hold harmless clause, for instance, without some form of trade-off.  In this case, the trade-off between Lamb and various urban-based senators was a provision in the Lamb amendment to account for rapid growth of student populations within school districts.  As Lamb explained:

And then the third part of the amendment has to do with school districts which are experiencing much growth.  And this really is not for any of the school districts in my legislative district.  I think a couple of districts that are primarily affected are Lexington and Lincoln, and there may be others.  But currently a school district must wait two years before it receives state aid in response to rapid student growth.41

Specifically, the Lamb amendment permitted districts having a growth in enrollment of more than 25 student and of more than 1% of the district's average daily membership to have state aid computed on the basis of students from the current year rather than the most recently available complete data year (i.e., current year data versus data two years in arrears).42 The change in the formula would increase state aid received by the majority of school districts experiencing accelerated student growth.  The additional state aid would assist such districts in hiring teachers, purchasing textbooks, and other costs associated with expanded student population.

In his opening remarks, Senator Lamb referred to his amendment as "a very simple amendment," which, for any veteran lawmaker, usually meant the opposite case.43 Senator Lamb suspected his amendment would have opposition and, perhaps to his disappointment, his suspicion was correct.  The real focus of the opposition concerned the extension of the hold harmless provision for another two years, and, to a lesser extent, the provision related to rapid growth of students.

The extension of the hold harmless clause was not expected to have a fiscal impact, nor would the inclusion of a rapid student growth provision.  It really amounted to a slight redistribution of existing state aid funds, in the case of the student growth provision, and a continued withholding of equalization aid in the case of the hold harmless clause.  Without the two-year extension of the hold harmless provision, an additional $3.66 million of state aid funds per year would be available for distribution among qualifying school districts through the equalization portion of the state aid formula.44  With the extension of the hold harmless provision, it was anticipated that 225 K-12 districts would continue to be deprived of some of the equalization aid they would otherwise receive without the provision.45  Similarly, the rapid student growth provision also would cause a slight redistribution of state aid.  It was anticipated that the change would increase state aid received by the majority of school districts experiencing accelerated student growth, with a corresponding decrease in state aid for those districts not experiencing rapid growth.46

Following a successful motion to suspend the rules and permit consideration of the amendment, Senator Lamb found himself defending the two-year extension of the hold harmless clause.  The complaints expressed by various members of the body focused on essentially two policy concerns.  The first argument was that an extension of the clause was tantamount to a continued suspension of the new state aid formula as it was designed to operate.  As stated by Senator Dave Landis, a vocal critic of the two-year extension:

The difficulty of hold harmless is that it makes you maintain both systems at the same time.  It expands the amount of money necessary to do the deal.  Unfortunately, what it means is, look, we had an old system that we decided we needed to change because we felt we could do better, and we felt we could do it more fairly, but to get to the new system, which we believe is more fair, there will be some people that will have some kind of alteration. ... It is how the federal government gets its budget expanded, by never injuring anyone, never taking a dollar away, never reallocating even though you have a new system that you think is fairer, more sensible, and, in this case, voted on by the people of the State of Nebraska.47

Joining Senator Landis were other urban-based legislators, including Omaha Senators Lynch and Hall.  Their combined argument was that the hold harmless provision was never meant to be an entitlement, and the continuation of the provision prevented the full and complete implementation of the new formula.  State aid was being used to perpetuate the old, repealed state aid formula and thereby depriving other school districts of sorely needed equalization aid.  They asserted that the extension of the hold harmless clause represented bad public policy.

Senator Withem agreed that hold harmless clauses were, in general, contrary to good policy.  Nevertheless, he offered his support for the Lamb amendment based on two arguments.  First, the extension was for two years only, not a permanent entitlement.  Second, there was still a "state of chaos" with regard to the system of property valuation under which state aid was supposed to be computed.48  LB 1059 (1990) established a system whereby state aid would be based upon adjusted valuation.  The Department of Revenue was to establish adjustment factors for use in the computation of state aid, but, for a variety of reasons, this had not yet occurred.  In fact, a provision in LB 829 (1991) delayed the use of adjusted valuation until 1994.49  "Once that is straightened out somewhat, I will be returned to my proper role, and that being an opponent of hold harmless," Withem said.50

A likely third reason for Withem's support of the hold harmless extension, and that of other members of the body, was the attachment of the student growth provision in the Lamb amendment.  Withem, among other legislators, strongly supported the revised state aid calculation for growing districts.  However, in order for the student growth provision to move forward, so must the hold harmless extension.  LB 719 was, after all, on Select File, and time was of the essence at that stage of the legislative session (just seven session days from the end of the session).  But the student growth provision was by no means an easy sell to the Legislature.

One of the main arguments used against the student growth provision was what some perceived as arbitrary factors used to determine student growth.  The Lamb amendment required an increase of 25 students and 1% of the district's average daily membership from the most recent available complete data year.51  Withem defended the factors used in the amendment, saying:

Twenty-five students is basically a classroom unit, and if you get...and you can argue, if you get one, or two, or three additional students, you can find places for them in your existing school.  If you get 25 students additional, that basically constitutes a classroom unit, you are probably going to have to hire another teacher.  You are probably are going to have to have a room to put that student in.52

Withem argued that textbooks and other supplies would also have to be purchased to account for the increased student population of a school district.

The second argument used against the student growth provision was more procedural in nature.  While both the hold harmless provision and the land transfer provision were based upon previously introduced bills, the student growth concept had not been introduced as a bill at the beginning of the session.  And this, according to Senator Tim Hall, was not proper procedure:

[T]his is totally new subject matter.  It's something that hasn't been before the body.  It hasn't had a public hearing.  It hasn't...it's a total shift in policy with regard to the issue of calculating state aid to be paid, when it's paid, what triggers it and how it's to be handled.53

Hall further complained that the concept came late in the session, with just seven session days remaining, and as a "Select File amendment," meaning that the body was not even given the opportunity to have three full stages of debate on the matter.54

Senator Withem admitted the concept did not have the benefit of a public hearing, nor was there any official notification to the public that such a concept was being contemplated.  However, he argued that the idea was indeed incorporated into the Education Committee's technical cleanup bill, LB 1125, before the bill was advanced from committee.55  LB 1125 was designated a committee priority, but had moved no further than General File.56 In any event, Withem said, the rapid growth provision made good sense and would make the formula more sensitive to current enrollment trends in various districts.  A prime example, he said, involved Lexington Public Schools, which had experienced incredible student growth due to the IBP plant located within the city.  No matter how the concept arrived before the body, Withem argued, the student growth provision represented sound public policy.

The third argument used against the student growth provision would become a common practice in later school finance debates.  What may be called "printout politics," policymakers request printouts or models from the Department of Education concerning a bill or an amendment to a bill along with the impact it would have on each school district.  Legislators may then scan the printout to determine how schools within their own legislative districts might be affected by the legislative proposal.  LB 719 was one of the first instances, since the inception of LB 1059 (1990), where such data was made available to legislators as they debated the merits of a proposal.

Along with printout politics arose the inevitable discussion of winners and losers, referring to districts that are advantaged or disadvantaged by a given proposal.  Throughout the debate on the student growth provision, various senators would refer to the printouts and to districts that either win or lose by virtue of the student growth provision.  The basic concern was that, without growth in total state aid funding, some districts would have to lose state aid in order for others to receive more state aid due to increased growth in students.

The debate over the student growth provision would span two separate legislative days, and, before it was over, some legislators may have had a better understanding of the formula than they did prior to the debate.  But it was Senator Jerome Warner, helping Senator Lamb during the closing comments, who perhaps sealed the victory.  Warner noticed that his colleagues were "looking at the sheets that were handed out, whether you gain or lose."57  He said, however, the real issue is not whether districts win or lose, but whether the goals of LB 1059 (1990) were being served by the student growth provision.  "LB 1059 was based on need," Warner said.58 Therefore, in order to accurately calculate need, as it relates to accelerated growth, the most recent enrollment data would work better than two-year-old data (as stipulated in the amendment).

The "simple amendment," as Senator Lamb originally suggested, had resulted in a late session rehash of old arguments for and against the new formula.  In the final analysis, all three components of the Lamb amendment were adopted by separate votes over a two-day period (the amendment had been divided into three component parts for purposes of debate).59  The least controversial section, relating to land transfers, was adopted by a 26-0 vote without debate or discussion.60  The extension of the hold harmless provision, one of the two controversial sections, was adopted by a 25-6 vote.61  The student growth provision, the second and perhaps most controversial section, was adopted by a 28-13 vote.62 But the Legislature was not yet finished with LB 719, as additional amendments would be offered and debated.

Besides one technical amendment by Senator Lindsay, the only amendment of substance to be added to LB 719 was offered by Senator Dan Lynch of Omaha.63 The Lynch amendment would provide for two scenarios in which a district may exceed its applicable allowable growth rate.  In the first scenario a school district would be permitted to exceed its allowable growth rate, if necessary, in cases involving an order by the Commission of Industrial Relations (CIR) on a settled contract dispute.  The second scenario involved an exemption to the spending lid for districts demonstrating that payment of a judgment from a contested, but settled, contract dispute, claim, uninsured risk or final judgment of a court would require the district to exceed its growth rate.

The Lynch amendment was based upon a bill originally introduced by Senator Doug Kristensen of Minden (LB 551), which had been advanced to General File earlier in the session.64  Perhaps owing to a tired and debate-weary body, the Legislature adopted the Lynch amendment with very little discussion on a 26-1 vote.65  LB 719 would ultimately advance to Final Reading where it was passed by the Legislature by a 40-9 vote on April 14th, the last day of the 1992 Session.66

Table 30.  Summary of Modifications to TEEOSA
as per LB 719 (1992)

Click to view file


Source:  Legislative Bill 719, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), §§ 2-4, pp. 2-7.

LB 1001 - Retirement Legislation
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Legislative Bill 1001 (1992) represents a good example of a last minute "pile-on" bill during a legislative session.  The bill was introduced by Senator Tom Horgan of Omaha, and originally related solely to changes in the retirement system for the Omaha Public School District (OPS).67  The bill would eventually become the personal priority bill for Senator Carol McBride Pirsch of Omaha.68

Document Archive
LB 1001: Retirement legislation; technical/substantive changes to TEEOSA
 
Bill Summary Statement of Intent
Chronology Hearing Transcripts
Com. Statement Exec. Session Votes
Slip Law  
 
Fiscal Notes:   Jan. 24, 1992
  Apr. 9, 1992
 
Floor Transcripts:    
General File   Apr. 6, 1992
Select File   Apr. 9, 1992
Final Reading   Apr. 14, 1992

As introduced, LB 1001 would provide several benefit enhancements to the OPS retirement system, including a limited cost-of-living increase for certain plan members, an annuity factor increase, and an automatic pre-retirement joint and survivor annuity for qualified plan members.69 The bill would be advanced from committee relatively early in the session, but due to a busy legislative agenda, primarily consumed by debate on personal property tax issues, the bill would not be heard on General File until early April.  In fact, the bill was taken up for first-round debate just a few days before final adjournment of the Legislature.  Perhaps the only reason it did have a chance, in the final analysis, was the priority designation afforded by Senator Pirsch earlier in the session.

On April 6, 1992, the Legislature was attempting to finish as much business as possible before the session ended.  In such circumstances, the body is often much more forgiving about issues such as whether a given amendment is germane to the original subject of a given bill.  Under typical circumstances, for example, an amendment relating to the option enrollment program is not germane to a bill relating to a public employees retirement system.  Unless, of course, no one challenges the matter, which was exactly what happened on April 6, 1992 concerning LB 1001.

In the span of approximately one hour, the Legislature unanimously adopted eight separate amendments, mostly unrelated amendments, at least unrelated to the original topic of the bill.  One of these amendments, offered by Senator Cap Dierks, would merge the bulk of the annual technical cleanup bill offered on behalf of the Department of Education.70 The technical cleanup bill, LB 1125 (1992), had been advanced by the Education Committee early in the session, but was simply one of those bills that lacked the priority status to be addressed during the busy session.  Senator Dierks offered the lengthy amendment in his capacity as vice chair of the Education Committee.

The Dierks amendment to LB 1001 contained four modifications to the school finance formula.  One of the changes related to the Indian Land factor, which was a part of the original LB 1059 (1990).  Prior to LB 1001, the Indian Land factor provided that districts where more than 75% of the students enrolled were residents on Indian land, the tiered cost per student for each grade level would be increased by a factor of 25%.  The provision in LB 1001 harmonized state law with federal regulations to require that the tiered cost per student, for each grade level would be increased by a factor "equal to the result of multiplying the ratio of average daily attendance of students who reside on Indian land to the total average daily attendance of the district" multiplied by 25%.71 The change in law was intended to increase, slightly, the spending authority and the state aid received by qualified districts.

Another provision of the Dierks amendment to LB 1001 changed several items under the other actual receipts section of the state aid formula.  These receipts were to be considered a part of a district's formula resources for purposes of calculating state aid.  The Dierks amendment changed the "miscellaneous receipts" subsection to exclude revenues from what is commonly called the textbook loan program.72  Under this program, public schools were obliged, if possible, to loan textbooks to children enrolled in private schools upon individual request.73  The amendment also added a new accountable receipt for pre-school "Part H" special education funds from the Medicare Catastrophic Coverage Act of 1988 but only to the extent of the amount the district would have otherwise received under the Nebraska Special Education Act.74

The third modification to the school finance formula concerned the annual requirement for school districts to submit budget documents to the State Auditor or make corrections of errors in such documents in a timely fashion.  The existing law required the Commissioner of Education to withhold state aid to such districts failing to comply with this provision.75  The existing law also required the commissioner to notify the county superintendent who must then direct the county treasurer to withhold all school money belonging to the school district until the matter is resolved.76  The Dierks amendment clarified perhaps what was taken for granted, and that was for the county treasurer to actually obey the request and withhold the money.  The amendment required the county treasurer to obey the request of the county superintendent and withhold the funds until otherwise instructed.77

The fourth change to the school finance formula concerned the dates by which Class I districts and all other classes of districts must submit annual financial reports to their respective county superintendent and the Commissioner of Education.  Class I districts were to submit such reports by October 15th of each year (changed from the previous October 1st date) and all other districts were to submit reports by November 1st of each year.78  The financial reports include the amount of money received from all sources during the year and the amount of money expended by the school district during the year, among other statistics.  The Dierks amendment was adopted by a 26-0 vote.79

As amended, LB 1001 also 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.80  This provision would allow school districts to increase tax levies to fund the cost of accessibility barrier elimination projects if their levies were not currently at the maximum to fund environmental hazard abatement projects.81  The bill enabled school districts to accept state interest-free or low interest loans and allows schools to borrow money in any fund.82  The bill also allowed parents under the option enrollment program to appeal rejections of students made by resident school districts.83

Having assumed the fast track on General File, LB 1001 sustained no further amendments on Select File and passed easily on Final Reading by a 44-0 vote.84

Table 31.  Summary of Modifications to TEEOSA
as per LB 1001 (1992)

Click to view file


Source:  Legislative Bill 1001, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), §§ 41-44, pp. 48-54.

LB 719A - Revisions to LB 1063
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An appropriation ("A") bill is typically considered to be a funding mechanism for the legislative bill of the same sequential number (e.g., LB 100A for LB 100).  There are very few exceptions to this rule.  In fact, the Rules of the Legislature prohibit an "A" bill from non-germane, substantive provisions.85 Accordingly, the rules would first need to be suspended in order to consider non-germane amendments.

Document Archive
LB 719A: Personal property taxes
 
Bill Summary Chronology
Slip Law  
 
Fiscal Note:   Apr. 7, 1992
 
Floor Transcripts:    
Select File   Apr. 3, 1992
  Apr. 6, 1992
Final Reading   Apr. 13, 1992 (1)
  Apr. 13, 1992 (2)

LB 719A (1992) was first introduced in 1991 as a funding bill to LB 719.86  However, much of the contents of LB 719 were amended into LB 511 during the 1991 Session.  LB 511, as amended, made several technical and substantive changes to the school finance formula.  This left LB 719 available as a shell billduring the 1992 Session, and was, in fact, used as a vehicle to incorporate other education-related provisions.  However, none of the provisions of LB 719, as passed, required an appropriation.  This left LB 719A on Select File with absolutely no purpose, which made it destined to be automatically killed (indefinitely postponed) at the conclusion of the 1992 Session.  But there would be a purpose, as events unfolded late in the 1992 Session.

The 1992 Session will be remembered for the long and drawn out debate concerning the personal property tax crisis.  LB 1063 (1992) and LR 219CA (1992) were passed with the intention to make headway in fixing the adjudged unconstitutional language within state statute.  In 1991, the Nebraska Supreme Court held that state law providing exemptions for certain classes of personal property (e.g., agricultural equipment, business inventory, farm inventory, livestock, and railroad rolling stock) violated Article VIII, section 1, of the Nebraska Constitution (i.e., the "Uniformity Clause").87  At the time, this clause provided that "taxes shall be levied by valuation uniformly and proportionately upon all tangible property and franchises."88

The problem encountered during the 1992 Session was that LB 1063 had already been passed by the Legislature on March 12, 1992 (the 42nd day of the 60-day session).89 Within a few weeks it became necessary to further amend LB 1063 during the same legislative session.  LB 719A became the chosen vehicle to handle these late session amendments.

In essence, LB 719A became a last minute Christmas tree bill with most of the ornaments in relation to technical and substantive changes to LB 1063.  The rules were suspended and a number of amendments were adopted to incorporate various provisions.  As passed, LB 719A spanned 160 pages with several modifications to education-related statutes, but only one change to the school finance formula itself.

The change to the school finance formula under LB 719A related to the existing section of law concerning the use of adjusted valuation for purposes of calculating state aid.  One of the principles behind LB 1059 (1990) was to bring about a more equitable property tax assessment system so that school districts would not be unfairly treated under the school finance formula.  It was determined that adjusted rather than assessed valuation would be used for purposes of calculating state aid.  The problem faced by the Legislature in 1990 was that a system to implement adjusted valuation required additional time to implement.  In fact, it was not until 1994 that a system was put into place to begin utilizing adjusted valuation of property.  In the meantime, use of adjusted valuation was simply a goal of the Legislature as outlined in the Nebraska Tax Equity and Educational Opportunities Support Act.

In 1992, the section of the formula concerning adjusted valuation merely stated that the Department of Revenue would compute and certify adjusted valuation for each school district beginning in 1994.90  LB 719A clarified that the valuation of property for each district must reflect, as nearly as possible, "taxable value" as required by law and the Constitution of Nebraska.91  Taxable value essentially means assessed value for real property and net book value for tangible personal property, other than motor vehicles.  Prior to LB 719A, the applicable section of the formula used the term "actual value," which carries a different meaning than taxable value.

Table 32.  Summary of Modifications to TEEOSA
as per LB 719A (1992)

Click to view file


Source:  Legislative Bill 719A, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), § 198, p. 148.



1 Legislative Bill 245, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), § 2, p. 2.
2 Id., § 1(2), p. 2.
3 Id., § 5, p. 3.
4Zyburo v. Board of Education, 239 Neb. 162, 474 N.W.2d 671 (1991).
5 Neb. Const. art. III, § 14.
6 Legislative Records Historian, Floor Transcripts, LB 245 (1992), prepared by the Legislative Transcribers' Office, Nebraska Legislature, 92nd Leg., 2nd Sess., 30 January 1992, 8389.
7 Neb. Legis. Journal, Wickersham AM2410, 30 January 1992, 569.
8 LB 245, Session Laws, 1992, § 96, p. 68.
9 Neb. Legis. Journal, 9 April 1992, 2186.
10 Id., 2187.
11 Henry J. Cordes, "Lawsuit Seeks Property Tax Refund for All," Omaha World-Herald, 20 September 1991, 15.
12 "DeCamp Files Supreme Court Suit to Stop Surtax," Omaha World-Herald, 26 June 1991, 20.
13 Jason Gertzen, "Nelson: Brake Spending Just in Case," Omaha World-Herald, 11 January 1992, 1.
14 Berens, 231.
15 Legislative Bill 1063, Change provisions relating to revenue and taxation, sponsored by Sen. Jerome Warner, Nebraska Legislature, 92nd Leg., 2nd Sess., 1992, title first read 13 January 1992.
16 Legislative Resolution 219CA, Constitutional amendment to allow Legislature to provide for taxation of tangible property, sponsored by Sen. Jerome Warner, Nebraska Legislature, 92nd Leg., 2nd Sess., 1992, title first read 13 January 1992.
17 Rules of the Neb. Leg., Rule 6, § 15.
18 Senator Jerome Warner, Introducer's Statement of Intent, LB 1063 (1992), Nebraska Legislature, 92nd Leg., 2nd Sess., 31 January 1992, 1.
19 Nebraska Legislative Research Division, "A Review: Ninety-Second Legislature, Second Session and Second Special Session, 1992," October 1992, 52.
20 LB 1063 (1992), §§ 175-180, 182-194, pp. 188-209.
21 Id.
22 Legislative Records Historian, Floor Transcripts, LB 1063 (1992), prepared by the Legislative Transcribers' Office, Nebraska Legislature, 92nd Leg., 2nd Sess., 9 March 1992, 10054-56.  Senator Withem spoke against an amendment to re-establish some of the lid provisions on which he believed the school community had "negotiated" with the Governor's office.  It was his belief that some school representatives were trying to back away from previously made agreements.  The trade-off between the Governor and local government officials was likely the Governor's willingness not to pursue a zero percent spending/resource lid in exchange for cooperation of local governments to concede other lid provisions, such as lid exclusions.
23 Neb. Legis. Journal, 12 February 1992, 815.
24 Legislative Bill 1120, Change and eliminate property tax exemptions, sponsored by Sen. Tim Hall, Nebraska Legislature, 92nd Leg., 2nd Sess., 1992, title first read 15 January 1992.  Neb. Legis. Journal, 19 February 1992, 891.
25 Henry J. Cordes, "Tax Puzzle On the Floor For Debate Rural-Urban Split Dominates Issue," Omaha World-Herald, 20 February 1992, 1.
26 Neb. Legis. Journal, 26 February 1992, 1005-06.
27 Id., 5 March 1992, 1166.
28 LB 1063 (1992), § 197, p. 211.
29 Nebraska Legislative Fiscal Office, Fiscal Impact Statement, LB 1063 (1992), prepared by Eric Byrd, 92nd Leg., 2nd Sess., 1992. 11 March 1992, 1.
30 Legislative Bill 1063, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), § 202, p. 123 (1408).
31 Id., § 202, p. 123 (1408).
32 Id., § 205, pp. 125-126 (1410-11).
33 Id.
34 Id., § 203, pp. 123-124 (1408-09).
35 Id., § 204, pp. 124-125 (1409-10).
36 Neb. Legis. Journal, Lamb AM3762, 1 April 1992, 1788-94.
37 Legislative Bill 1238, Change a provision for a limit on changes in state aid to schools, sponsored by Sen. Howard Lamb, Nebraska Legislature, 92nd Leg., 2nd Sess., 1992, title first read 22 January 1992.
38 Neb. Legis. Journal, 3 March 1992, 1087.
39 Id., 4 February 1992, 643.
40 Legislative Records Historian, Floor Transcripts, LB 719 (1992), prepared by the Legislative Transcribers' Office, Nebraska Legislature, 92nd Leg., 2nd Sess., 2 April 1992, 12004-05.
41 Id., 12005.
42 Neb. Legis. Journal, Lamb AM3762, 1 April 1992, 1788-94.
43Floor Transcripts, LB 719 (1992), 2 April 1992, 12004.
44 Nebraska Legislative Fiscal Office, Fiscal Impact Statement, LB 719 (1992), prepared by Sandy Sostad, 92nd Leg., 2nd Sess., 1992, 10 April 1992, 1.
45 Jason Gertzen, "Legislators Vote to Give Schools 2-Year Reprieve on Aid Changes," Omaha World-Herald, 3 April 1992, 13sf.
46Fiscal Impact Statement, LB 719 (1992), 10 April 1992, 1-2.
47Floor Transcripts, LB 719 (1992), 2 April 1992, 12016.
48 Id., 12021.
49 LB 829, Session Laws, 1991, § 32, pp. 41-42 (2269-70).
50Floor Transcripts, LB 719 (1992), 2 April 1992, 12021.
51 Neb. Legis. Journal, Lamb AM3762, 1 April 1992, 1793.
52Floor Transcripts, LB 719 (1992), 2 April 1992, 12021.
53 Id., 12046.
54 Id.
55 Legislative Bill 1125, Change provisions relating to schools, sponsored by Sen. Ron Withem, Nebraska Legislature, 92nd Leg., 2nd Sess., 1992, title first read 16 January 1992.  Neb. Legis. Journal, 4 March 1992, 1125.
56 Neb. Legis. Journal, 20 February 1992, 916.
57Floor Transcripts, LB 719 (1992), 8 April 1992, 12821.
58 Id.
59 Neb. Legis. Journal, 2, 7-8 April 1992, passim.
60 Id., 2 April 1992, 1866.
61 Id., 1863.
62 Id., 8 April 1992, 2078.
63 Id., Lynch AM3712, 8 April 1992, 2018-20.
64 Legislative Bill 551, Change provisions for orders of the Commission of Industrial Relations, sponsored by Sen. Doug Kristensen, Nebraska Legislature, 92nd Leg., 1st Sess., 1991, title first read 22 January 1991.
65 Neb. Legis. Journal, 8 April 1992, 2096.
66 Id., 14 April 1992, 2249-50.
67 Legislative Bill 1001, Change provisions for Class V school district retirement systems, sponsored by Sen. Tom Horgan, Nebraska Legislature, 92nd Leg., 2nd Sess., 1992, title first read 9 January 1992.
68 Neb. Legis. Journal, 19 February 1992, 908.
69 Senator Tom Horgan, Introducer's Statement of Intent, LB 1001 (1992), Nebraska Legislature, 92nd Leg., 2nd Sess., 28 January 1992, 1.
70 Neb. Legis. Journal, Dierks AM4066, 6 April 1992, 1974.
71 Id.
72 Id.
73 Neb. Rev. Stat. § 79-4,118 (current version at § 79-734).
74 Neb. Legis. Journal, Dierks AM4066, 6 April 1992, 1974.
75 Neb. Rev. Stat. § 79-3815 (Cum. Supp. 1991).
76 Id.
77 Neb. Legis. Journal, Dierks AM4066, 6 April 1992, 1974.
78 Id.
79 Id.
80 Legislative Bill 1001, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), §§ 3-9, pp. 2-11 (942-51).
81 Id., §§ 7-9, pp. 9-11 (949-51).
82 Id., § 31, pp. 36-37 (976-77).
83 Id., § 38, p. 46 (986).
84 Neb. Legis. Journal, 14 April 1992, 2256-57.
85 Rules of the Neb. Leg., Rule 7, § 3(d).
86 Legislative Bill 719A, Appropriation Bill, sponsored by Sen. Ron Withem, Nebraska Legislature, 92nd Leg., 1st Sess., 1991, title first read 14 May 1991.
87Natural Gas Pipeline Co. of America v. State Bd. of _Equalization, 237 Neb. 357, 466 N.W.2d 461 (1991).
88 Neb. Const. art. VIII, § 1.
89 Neb. Legis. Journal, 12 March 1992, 1310.
90 Neb. Rev. Stat. § 79-3809 (Cum. Supp. 1991).
91 Legislative Bill 719A, in Laws of Nebraska, Ninety-Second Legislature, Second Session, 1992, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Allen J. Beermann, Secretary of State), § 198, p. 148.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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