2000-2004: Review

In 2002, Nebraska economic crisis required almost every facet of state government to expect to take its lumps in order reduce state expenditures and then hope for better times. ;nbsp;The three largest pools of expenditures were, and still are, Medicaid, the University, and public education, and at least two of these major pools would be prime targets for budget reductions during the 2002 Session. ;nbsp;The question was less if but how state aid would be reduced to help balance the state's biennium budget.

The Education Committee reviewed a number of proposals introduced in the 2002 Session designed to reduce the state's financial burden by somehow shifting more burden to the local level, at least temporarily. ;nbsp;Ultimately, the vehicle of choice would be LB 898 (2002). ;nbsp;The original version of LB 898, as introduced by Speaker Doug Kristensen, would have increased the local effort rate and thereby reduced the amount of state aid necessary to fund the school finance formula. ;nbsp;As advanced from committee, LB 898 would accomplish a decrease in state aid by use of a "Temporary Aid Adjustment Factor," which would reduce calculated needs, allocated income taxes and net option funding to local systems by 1.25%. ;nbsp;The reduction would be in place for three years and would result in a decrease of state appropriations of about $22 million each year.

During second-round debate, the Legislature would amend the legislation in order to permit school districts to exceed the levy limitation by an amount equal the amount of state aid lost by virtue of the Temporary Aid Adjustment Factor. ;nbsp;The bill required NDE to certify the amount by which the levy can be exceeded for each local system. ;nbsp;The additional levy authority could only be accessed by a super majority (three-fourths) vote of a local school board.

If LB 898 had landed on the Governor's desk without the additional levy authority, he apparently would have signed the bill into law. ;nbsp;This was not the case, and on April 10, 2002, the same day the Legislature voted to pass the bill by a 46-3 vote, Governor Johanns vetoed LB 898. ;nbsp;Lead by Speaker Kristensen, the Legislature would take immediate action to override the veto. ;nbsp;The majority of the body believing that it would be inappropriate to preclude some form of remedy to local school districts.

One year later, in 2003, the economic situation in Nebraska had not improved. ;nbsp;The Legislature was once again searching for alternatives to address the state's revenue shortfall. ;nbsp;It was then the unthinkable became a legitimate item of discussion: ;nbsp;increase the maximum school levy limitation, at least for temporary purposes. ;nbsp;The result would be a decrease in state appropriations to fund the state aid formula, a reduction in the state's budget deficit, and a shift of funding responsibility to local school districts.

The bill was LB 540, introduced by Senator Ron Raikes. ;nbsp;As advanced from the Education Committee, and ultimately passed by the Legislature, the bill provided what were intended to be temporary adjustments to the school finance formula. ;nbsp;LB 540 would leave in place the Temporary Aid Adjustment Factor and the accompanying levy exclusion, both of which were incorporated into the formula the year before. ;nbsp;The heart of the bill was to raise the maximum levy for schools from $1.00 to $1.05 beginning with the 2003-04 school year. ;nbsp;It also increased the Local Effort Rate (LER) from 90¢ to 95¢ in order account for the higher maximum levy. ;nbsp;But there was a catch.

LB 540 also proposed to lower the base spending lid for schools from 2.5% to 0% for both 2003-04 and 2004-05. ;nbsp;In exchange, the lid range was increased from 2% to 3%. ;nbsp;This meant that instead of the existing 2.5% to 4.5% spending lid range, schools would be subject to a 0% to 3% lid range for two consecutive fiscal years. ;nbsp;The idea was that if the Legislature planned to offer additional levy authority to schools, then there had to be a tighter control on local spending. ;nbsp;(The bill retained a local school board's authority to exceed its growth rate by an additional 1% by a three-fourths vote of the board.)

As a virtual repeat from the year before, the Legislature would pass LB 540 only to have it returned and stamped with a gubernatorial veto. ;nbsp;The Legislature once again voted to override the veto, this time by a unanimous vote.

The Legislature had proposed and passed legislation within two consecutive sessions to implement a mechanism for across-the-board reductions in formula need calculations, provide a relief valve through a levy exclusion, and increase the maximum levy for schools up from $1.00 to $1.05, and reduce the schools' spending authority. ;nbsp;The efforts were met, for one reason or another, with vetoes and subsequent veto overrides. ;nbsp;All this would change in the 2004 Session.

By 2004 there were some positive signs of economic recovery, but there were still pressing state budget issues to address. ;nbsp;The Legislature once again set out to reduce costs to the state through a variety of means. ;nbsp;But the general feeling was that public schools had already contributed sufficiently to the cause so as to avoid any new reductions and funding shifts. ;nbsp;That is not to say, however, that existing reductions and shifts could not be extended. ;nbsp;And, in fact, this is what the Legislature chose to do.

The Legislature passed LB 1093 (2004) to extend the existence of the $1.05 levy (and the 95¢ LER) through the 2007-08 school year. ;nbsp;After 2007-08, presumably, the maximum levy would return to $1.00. ;nbsp;In addition to the levy provision, the legislation would maintain the Temporary Aid Adjustment Factor and the corresponding levy exclusion through the 2007-08 school year. ;nbsp;However, the 0% base spending lid, imposed under LB 540 (2003), would be allowed to expire after the 2004-05 school year. ;nbsp;Unless the Legislature takes further action in the 2005 Session, school districts would return to the 2.5% to 4.5% spending lid range beginning with the 2005-06 school year.

LB 1093 did not propose anything new. ;nbsp;It extended the life of existing provisions for a formula need reduction, maximum levy authority, and levy exclusion. ;nbsp;And yet this time, the Governor would sign into law rather than veto the proposal.