The 1998 Legislative Session

For school districts, LB 989 could have been far worse if it had passed as introduced.  The grassroots lobbying effort yielded some improvements to the bill.  One might speculate whether the bill would have been introduced at all if Governor Nelson had not decided to do so.  Would a state senator have introduced the bill on his or her own initiative, or would the Legislature have allowed the pre-LB 299 spending lids to be reinstated?  If the intent was not to allow the old lids to return, why did the Legislature leave these provisions in place, effectively suspending but not eliminating the old law?  These questions relate back to what Lynn Rex of the League of Nebraska Municipalities had said during the public hearing for LB 989 when she referred to the bill as an unfair change in plans.  In the final analysis, one cannot help but lend some credibility to the words spoken by Senator Landis on General File when he referred to the bill as the Governor's own political agenda.  And it may have been the Governor's agenda, but the vast majority of legislators bought into that agenda.

There is, however, another perspective on the genesis of LB 989 that should not be overlooked, and this perspective requires an inward look at the activities of local governments and their representative organizations.  Since the passage of the property tax relief package in 1996, it was widely believed that groups adversely affected by the levy and spending limits would attempt to improve their circumstances even before the levy limits took effect.  LB 306, introduced in 1997, was a prime example of the effort to create more levying authority for schools (in this case for school building construction).  The result of these efforts was a heightened awareness and resistance among certain lawmakers and the administration to carefully guard the underlying goal for real and lasting property tax relief.  This guardianship would be encountered time after time, particularly within the Revenue Committee, when proposals to carve more room within the levy limits were systematically turned away.

As passed and signed into law, LB 989 implemented a permanent budget lid on expenditures for schools and on restricted funds for all other political subdivisions effective for 1998-99 and beyond.  For school districts, the new law lowered the basic allowable growth rate for general fund expenditures (other than special education) to 2.5%, with a growth range up to 4.5%.  The new law required NDE to determine and certify the applicable allowable growth percentage for each local system by December 1st of each year rather than July 1st.  LB 989 required the Revenue Committee to annually review the base limitation to determine whether changes in prices of services and products warrant an adjustment to the base limitation.  The Revenue Committee was required to hold a public hearing on or before January 15th of each year to receive and consider testimony, evidence, and reports.

LB 989 returned the student growth allowance provided under law prior to the implementation of LB 299 (1996).  It allowed a school board of a Class II-VI school district to exceed the basic allowable growth rate by up to an additional 1% with the affirmative vote of at least 75% of the board.  While existing law already permitted a district to exceed the lid by submitting the issue to the voters within the district, LB 989 inserted new language to state that the issue may be approved on the same ballot as a vote to exceed the levy limits.  LB 989 permitted unused budget authority to carry forward.

1. Interlocal Agreement - expenditures in support of a service which is the subject of an interlocal cooperation agreement or a modification of an existing agreement whether operated by one of the parties to the agreement or an independent joint entity;
   
   
2. Disaster Emergency - expenditures to pay for repairs to infrastructure damaged by a natural disaster which is declared a disaster emergency pursuant to the Emergency Management Act;
   
   
3. Judgments - expenditures to pay for judgments, except CIR orders, obtained against a school district which require or obligate a school district to pay such judgment, to the extent such judgment is not paid by liability insurance coverage of a school district;
   
   
4. Early Retirement - expenditures to pay for sums agreed to be paid by a school district to certificated employees in exchange for a voluntary termination of employment, or
   
   
5. Certain Lease Purchases - expenditures to pay for lease-purchase contracts approved on or after July 1, 1997, and before July 1, 1998, to the extent the lease payments are not budgeted expenditures for fiscal year 1997-98.

LB 306 was one of the last bills sponsored by Senator Jerome Warner.  The bill was introduced in the 1997 Session and carried over to the 1998 Session where it was finally passed, but with an entirely different purpose.

As originally introduced, LB 306 proposed to create an efficiency commission consisting of the Commissioner of Education and four members appointed by the Governor.⁴⁹  The commission was to be given authority to approve or deny capital construction projects of local governments.  The measure found support from such groups as the Nebraska Association of School Boards and the Nebraska Association of Hospitals and Health Systems. ⁵⁰

When the bill emerged from the Revenue Committee and placed on General File on April 1, 1997, it had retained essentially the same mission but with much more detail about the duties of the commission.  More importantly, it also included a levy exclusion of up to 12¢ for school districts.  The levy exclusion could only be accessed if the commission approved the building project.⁵¹ The addition of the levy exclusion, while certainly appealing to school officials, was a shock to many who believed the levy limits, which had yet to become operative, carried a promise to taxpayers for property tax relief.  The new levy exclusion appeared to be a major reversal in policy just one year after the passage of LB 1114 (1996).

General File debate on LB 306 began on April 30, 1997, just ten days after the death of its sponsor, Senator Jerome Warner.  Senator Warner was well respected in the area of revenue-related legislation and his absence from the scene would no doubt have a bearing on LB 306.  Senator Stan Schellpeper, a member of the Revenue Committee, had designated the bill as his individual priority for the 1997 Session.  Senator Schellpeper would find himself carrying much of the weight to sell the bill to other members of the Legislature.  And almost immediately the deck appeared stacked against him.

Senator Schellpeper made a good effort to demonstrate that LB 306 represented part of the Revenue Committee's overall plan to put the property tax package into place.  Other pieces of the 1997 property tax package included:

• LB 180, prioritized by Senator Coordsen, to create the Property Tax Relief Incentive Fund to help local governments cope with lids that take effect in 1998;
  
  
• LB 269, prioritized by Senator Warner, to make changes in the property tax relief package of 1996, including to lid changes for community colleges; and
  
  
• LB 271, prioritized by Senator Robinson, to change the motor vehicle property tax to a fee-based system.

However, some members of the Legislature were not entirely impressed with the need to include LB 306 as a part of the overall property tax package of 1997.

The criticism focused on two issues.  First, some legislators criticized the concept of a state efficiency commission as being something akin to Orwell's "Big Brother" overlooking what should be local decisions to construct or renovate buildings.⁵²  The second criticism should not have been a surprise to anyone.  Lawmakers generally disliked the idea of granting schools a new levy exclusion even if it did require the approval of the state commission in order to access.  Senator John Hilgert of Omaha was one of the outspoken critics of the new levy authority.  "Frankly, to the taxpayer this is a 12-cent retreat on the 1114 commitment we made last year," Hilgert said.⁵³

Within a short period of time, Senator Schellpeper realized his priority bill was in trouble.  The following day, May 1st, Schellpeper requested to have the bill passed over on the agenda so he could confer with other members of the Revenue Committee on possible compromises.⁵⁴  "We needed to get off on some other bills to allow the body time to negotiate what to do on some of these issues," Schellpeper later said.⁵⁵ In truth, LB 306 had no hope of being revived in the 1997 Session, and, in fact, no further action would be taken on the measure that year.  LB 306 would become the single piece of the 1997 property tax package that did not pass.  It would, however, carry over to the 1998 Session for disposition.

For many school officials, the failure of LB 306 was a bitter disappointment.  The levy caps under LB 1114 (1996) did allow for an exclusion for building funds but only if the fund was "commenced" prior to April 1, 1996.⁵⁶  Any building project and corresponding building fund established after this date would be subject to the maximum levy provision.  The existing law permitted schools to levy up to 14.5¢ for building construction and renovation and another 5¢ for compliance with the Americans with Disabilities Act (ADA) or for abatement of hazardous materials such as asbestos.  Nevertheless, by the start of the 1998 Session it appeared very likely that LB 306 would not pass so long as it contained the existing provisions.  "It seems like every time we discuss the building levy we don't get anywhere," Senator Schellpeper said of the decision to abort the legislative effort.⁵⁷

By the start of the 1998 Session, a new and more pressing issue arose concerning the levy limitations.  The issue involved the ability of local governments, particularly school districts, to place a levy override question on an election ballot in time for the first year of implementation of the maximum levies.  LB 1114 (1996) stated that the maximum levy provisions would become operative for fiscal years beginning "after July 1, 1998."⁵⁸ Given this operative date, some attorneys representing school districts questioned whether a levy override election could be held prior to the July 1st date.  And a few school districts, particularly hard hit by the levy limits, had an immediate need to seek a levy override in order to sustain school operations.

This was an issue that probably should have been caught prior to 1998.  The Legislature had made changes to the pending levy limitation provisions in 1997, so legislation was available had the issue been discovered.  Since it was not brought forward until the 1998 Session, there was a sense of urgency surrounding the matter, at least for some school districts.  The urgency was not only related to the July 1st operative date for the levy lids, but also the April 15th deadline to provide reduction-in-force notices to school employees.  Some school districts faced teacher layoffs unless additional levy authority could be obtained through an override ballot issue.  All these issues combined would require a legislative initiative on the fast track in order to have any chance of helping these school districts.

The normal legislative process necessitated a public hearing on new subject matter, and this issue certainly qualified as new subject matter.  Accordingly, a new bill was introduced in the 1998 Session to carry changes to the levy limitation laws.  Senator Bob Wickersham, chair of the Revenue Committee, introduced LB 994 (1998) to serve as the legislative vehicle.  Within this bill were not only provisions concerning the levy override elections but also cleanup provisions relating to the new motor vehicle tax and fee system.  The bill also provided a timeline for the allocation process for sub-county units of government seeking levy authority from cities and counties.  This would include such local governments as library districts and fire control districts that were not allotted specific levy authority under LB 1114 (1996).⁵⁹

For school districts, however, the central focus of the bill was the levy override provisions.  LB 994 provided a more specific election procedure and ballot language for elections to exceed the levy limits.  It created a process for a local governing body to rescind or modify a previously approved levy override ballot issue, something not considered at the time LB 1114 (1996) was passed.  The bill specified that a local governing body could only pursue one levy override attempt per calendar year, but the patrons of the district may bring forward any number of petition efforts to override the levy limit as they wish during a calendar year.⁶⁰  The idea was to avoid placing limits on the will of the people.  Finally, the bill changed the operative date of the existing law concerning the ability to override the levy limits from July 1, 1998 to December 1, 1997.⁶¹ The retroactive date would permit schools and other political subdivisions to exceed the levy limits in time for the first year of implementation (1998-99).

The public hearing for LB 994 was held before the Revenue Committee on January 21, 1998.  Testifiers included representatives for city and county governments, and representatives from the public education community.  Al Inzerello, Westside Community Schools (Omaha), Harry Weichel, Ralston Public Schools, Virgil Horne, Lincoln Public Schools, and Russ Hicks, Johnson-Brock Public Schools all testified in support of the legislation.⁶² Several of the districts represented at the hearing had, in fact, planned to pursue levy override elections in the immediate future.  If the provisions of LB 994 became law, these districts would have the opportunity to pursue the levy overrides much sooner.  Westside Community Schools in Omaha had intended to hold their special election on March 10th so long as the legal issues were resolved with the assistance of LB 994.  The school board for Ralston Public Schools had voted not to pursue an override, but a petition circulated on behalf of the district had successfully achieved the necessary number of signatures.  The Ralston election would also be held on March 10th assuming all legal issues were resolved.

Within five days of the public hearing, the Revenue Committee would act to advance the provisions of LB 994, but not LB 994 itself.  The committee essentially had two available options.  It could advance LB 994 and ask Speaker Kristensen to have the bill special ordered on the agenda.  Or the committee could use an existing vehicle already on General File (such as LB 306) and amend the contents of LB 994, along with provisions of several other bills, into the "shell" bill.  In fact, it would be the latter strategy that the committee chose to take, and for a very specific reason.

LB 306, as it existed at the end of the 1997 Session, posed a real threat in the minds of some lawmakers and perhaps to the administration.  The idea of creating a new levy exclusion for school districts could have been seen by critics as a policy reversal even before the levy limits had a chance to be put into operation.  And one way to put the issue to rest, at least for the time being, would be to "gut" LB 306 during floor action and replace the contents with the provisions of LB 994.

The urgency of the situation concerning the levy override provisions in effect had school officials and representatives over a barrel.  If they wanted help on the override provisions, they had to give up the levy exclusion provisions currently pending on LB 306.  As part of the agreed strategy, Speaker Kristensen would assist the effort to pass the revised version of LB 306 in an expedited manner.  He agreed to designate the bill as a Speaker Priority and place it on the agenda for immediate action.  The deal was sealed.

The Speaker placed LB 306 back on the General File agenda on January 29, 1998.  Senator Wickersham explained the situation to his colleagues and the need to adopt the revised committee amendments to LB 306 in order to help school districts with the levy override elections.  Senator Schellpeper, whose priority bill it had been in 1997, explained that the idea to forgo the levy exclusion provisions in the original committee amendment came about during the interim period.  Schellpeper explained:

In hearings last summer with the Revenue Committee and Education Committee, basically, there was a lot of different ideas and a lot of different views of what that should be used for, how much it should be, whether it should be 15 cents, whether it should be 3 cents, or 5 cents.  And the committee decided that maybe we're not ready to move this forward yet this year.⁶³

Schellpeper said the levy override provisions were simply more crucial at that particular time than the levy exclusion provisions.  "But the building fund levy is not dead, it will come back, we will address it later on," he added.⁶⁴ In truth, the issue would not return.

Perhaps aided through a substantial lobbying effort by public school interests, the discussion on the new version of LB 306 progressed smoothly.  Legislators were made aware prior to the debate of the importance to pass the bill as soon as possible.  Senator Ardyce Bohlke, chair of the Education Committee, spoke to her colleagues about "getting this done" as urgently as possible.⁶⁵  And, after a very short discussion, the revised committee amendments to LB 306 were adopted by a unanimous 26-0 vote.⁶⁶  The bill would be advanced as amended to second-round consideration on a 35-0 vote.⁶⁷

Select File debate, occurring on February 5th, would move even faster than first-round debate.  The Revenue Committee would add yet more provisions to the bill at this stage via a second omnibus committee amendment.⁶⁸  While clearly on the fast track, LB 306 gave rise to an opportunity for members of the Revenue Committee to pile on a number of necessary revenue-related provisions.  The legislation had become what Senator Jim Jensen of Omaha referred to as one of those "Heinz 57 bills, because it seems to be about 57 varieties in this one bill."⁶⁹  The bill advanced on a voice vote.⁷⁰

By the time LB 306 arrived at the third and final stage of consideration on February 12th, it had grown in both scope and length, and incorporated provisions from four different bills from the 1998 Session, including LBs 935, 994, 1054, and 1153.  As amended, LB 306 contained provisions to eliminate the "preliminary" property tax levy, which was first enacted by LB 1085 (1996).  It changed, from November 1st to October 15th, the date by which a county board of equalization must levy taxes each year for the current year.  It also provided that the property "tax request" for the prior year would be the property tax request for the current year for purposes of the levy set by a county board of equalization, unless the governing body of a political subdivision passes by a majority vote a resolution or ordinance setting the tax request at a different amount.  The bill provided that the property tax levy authority of certain miscellaneous districts would be determined by the county board of the county in which the greatest portion of the political subdivision's valuation is located.  The bill allowed a political subdivision (other than a Class I school district) to exceed a final levy allocation with voter approval if the vote to exceed the allocation is approved prior to October 10th of the fiscal year that is to be the first to exceed the final levy allocation.⁷¹

As it relates to school finance law, LB 306 had both direct and indirect consequences.  The changes to the levy override provisions did not directly modify the statutes comprising the TEEOSA.  But these changes would naturally have a bearing on the calculation of state aid since the success of a levy override election would result in additional resources to the school district.

The direct changes to TEEOSA did not receive as much attention during the public hearing and floor debate stages.  The sole substantive change to the formula itself involved the inclusion of motor vehicle tax receipts as formula resources.  In fact, LB 306 served as a cleanup bill, of sorts, to LB 271 (1997), which eliminated the property tax-based motor vehicle tax system.  The 1997 legislation imposed instead a tax and fee system based on the age and type of vehicle.  LB 306 would serve nicely as a technical modification bill to LB 271 (1997) due, in part, to the expedited effort to pass the legislation early in the 1998 Session.

• Clarification that a county treasurer must distribute motor vehicle tax funds upon receipt from the State Treasurer to taxing agencies within the county in the same proportion that the levy of each such taxing agency bears to the total of such levies of all taxing agencies in the county.
  
  
• Resolution of the problem that if a taxing district has been annexed, merged, dissolved, or in any way absorbed into another taxing district, any apportionment of motor vehicle tax funds to which the taxing district would have been entitled would be apportioned to the successor taxing district that assumes the functions of the former taxing district.
  
  
• Requirement that the Department of Motor Vehicles annually furnish to the State Treasurer, by March 1st, a tabulation showing the total number of original motor vehicle registrations in each county for the immediately preceding calendar year, which will be the basis for computing the distribution of motor vehicle tax funds.
  
  
• Resolution of the problem that if a motor vehicle registration expired during 1997, the taxes and fees on renewal must be calculated under the law as it existed on December 31, 1997, regardless of when the taxes and fees are paid.
  
  
• Elimination of references to the Property Tax Administrator with references to the Department of Motor Vehicles in relation to such duties as determining the value of vehicles weighing up to five tons and certifying such determinations to the proper county official of each county by November 15th (formerly September 1st).

For school districts, LB 306 provided that motor vehicle tax receipts constitute "other actual receipts" for purposes of calculating formula resources under the school finance laws.⁷² The existing law already included pro rata motor vehicle license fee receipts, which referred to the old property tax-based system.  LB 306 clarified that motor vehicle tax receipts, referring to the new system, received by local school systems after January 1, 1998 would constitute "accountable receipts."  It was intended all along that these receipts be counted, but it had not been expressly provided under LB 271 (1997).

LB 306 passed with the emergency clause attached on February 12, 1998 by a 42-1 vote.⁷³  It took only 14 days, from the time of first-round debate to Final Reading, to place the bill on the Governor's desk.  Governor Nelson signed the bill into law the same day he received it on February 12th.⁷⁴  The addition of the emergency clause meant the bill would be operative one day after the Governor signed into law (i.e., February 13th).  The passage of LB 306 effectively gave the green light to those school districts with pending levy override elections.  As Table 99 illustrates, no less than 25 school districts set election dates for levy override questions prior to July 1, 1998, the former effective date for the excess levy limit authority.  Had LB 306 not passed, these school districts would have had to wait until after July 1, 1998 to pursue levy override elections.

LB 1134 (1998) modified a reorganization incentive program created under LB 1050, a comprehensive school finance measure passed in 1996.  The program was created with the intent to "encourage consolidation" of school districts by offering monetary incentives for a three-year period in order to "reward the reorganized districts for their efforts to increase efficiency in the delivery of educational services."⁷⁵  To qualify, the reorganization had to occur within a five-year window of time (May 31, 1996 to August 2, 2001).  The State Committee for the Reorganization of School Districts was given the authority to approve or deny applications for incentive funds if the reorganized district met certain requirements and would "most likely result in more efficiency in the delivery of educational services or greater educational opportunities."⁷⁶

The incentive payments were based upon the number of students in the consolidating districts being moved from one tiered cost to a lower tiered cost.  An incentive payment schedule was inserted into LB 1050 for the purpose of calculating the total incentive payments due to each approved reorganized district.  The incentive payments would be paid from equalization funds under TEEOSA such that each year 1% of the total amount of available equalization funds would be set aside for incentive payments.⁷⁷  As an example, for the 1996-97 school year, the program required about $3.34 million to be set aside from a total pool $334 million in available equalization funds.⁷⁸ Naturally, this meant a shift of funds to reorganized districts from other districts entitled to equalization aid.

In 1998, Senator Ray Janssen of Nickerson introduced LB 1134 to make several changes and additions to the reorganization incentive program based upon concerns brought to his attention by his own constituent school districts and others across the state.  The bill, as originally introduced, had three major goals.  First, and perhaps most important, it changed the timeline for first-year incentive payments.  Prior to 1998, payments were not made until at least the second fiscal year following the reorganization.  This translated into a significant lag time between the time incentive payments were approved and the time payments actually commenced.

LB 1134 required that payments be made the first year in which the district offers educational services beginning with reorganizations that occur during the 1997-98 school year.⁷⁹  "Improving the timing of these incentives might make a big difference in encouraging a school district to reorganize," Janssen said during the public hearing for LB 1134 on January 27, 1998.⁸⁰ Janssen argued that reorganized school districts potentially face immediate funding shortages at the time of reorganization.  He listed the causes as hiring new staff, adjusting pay scales, and improving facilities.  If the Legislature truly wished to encourage consolidation, Janssen said, then the incentive funds would be forthcoming sooner rather than later.

Second, the legislation proposed to double the reorganization incentives paid when the reorganization involved Class VI (high school only) and Class I (elementary only) school districts.⁸¹ This policy change, Janssen alleged, was justified on several grounds.  For one thing, he said, the existing incentive payment schedule seemed geared toward two or more K-12 districts reorganizing rather than a Class VI and one or more Class I districts.  The existing schedule did in fact separate payments by grade ranges (i.e., K-6, 7-8, and 9-12).  A Class VI district reorganizing with one or more Class I district might only qualify for incentive funds from two of the three grade ranges even though the newly formed K-12 would offer instruction in all grade ranges.  Another consideration, particularly brought out by subsequent proponent testifiers at the public hearing, concerned the additional expense of paying teachers at comparable salary levels with other K-12 districts.  Teachers from the former Class I districts, for instance, may require payment of higher salaries under negotiated contracts by the reorganized district.

The third major provision of LB 1134, as introduced, created a hold harmless provision for reorganized school districts.  The provision would ensure that school districts forming a reorganized district would receive, for the first year as a reorganized district, at least 100% of the state aid that the individual districts would have otherwise received in the previous year.⁸²  "This protection would allow the district to have certainty in planning as they go through the reorganization process," Janssen said.⁸³

Both the incentive funds and the cost of the hold harmless provision would be paid from a newly created Reorganized School Assistance Fund, which would be allocated an annual transfer of 1% of the TEEOSA funds.⁸⁴ This would essentially maintain the existing process, except that, under the existing provision, any incentive funds remaining after each fiscal year were rolled back into the equalization formula.

There were no opponent testifiers at the public hearing for LB 1134.  There were questions raised about whether some Class I districts were able to hold back significant cash reserves, which would, if true, require some measure of accountability within the reorganization process.  Senator Janssen cast doubt about the claim:

Cash reserves, I don't think the Class I schools out there, after the last few years, have any cash reserves left.  If there is, it doesn't amount to anything.  So I think the horror stories of the large cash reserves is not the situation in most of the consolidated districts anyway.⁸⁵

Janssen stressed several times during the hearing that it was the responsibility of the Legislature to ensure proper operation of the incentive program.  "I believe that it is time that we put our money where our mouth is and make the changes necessary to help make these incentives really work for the school districts," he said.⁸⁶  He felt so strongly about the necessary changes that he designated LB 1134 as his individual priority bill for the 1998 Session.⁸⁷

The Education Committee obviously agreed with at least some assertions made by Senator Janssen.  Approximately two weeks after the hearing, the committee voted unanimously (8-0) to advance the bill to General File, but not exactly in the form Janssen would have preferred.⁸⁸  During closed session, the committee voted to eliminate the provision that would double incentive payments to reorganizations involving Class VI and Class I districts.  The committee also eliminated the hold harmless provision, which would have provided at least 100% of the state aid that the individual districts would have otherwise received in the previous year.  But the committee did preserve what Janssen, himself, called the "main goal of the bill," which was to move up the timeline for payment of reorganization incentives.⁸⁹  Under the committee amendments, reorganization incentives (for reorganizations in 1997-98 and beyond) would be paid beginning in the year following the year in which the reorganization occurs rather than in the second year after the reorganization as the law previously provided.⁹⁰

During first-round debate on February 24, 1998, the body was accepting of LB 1134, as proposed by the committee amendments.  The only real item of controversy, perhaps confusion, involved a one-time transfer of $2 million from the State's Cash Reserve Fund to the newly created Reorganized School Assistance Fund under LB 1134.⁹¹  In truth, the transfer was necessary to make incentive payments for reorganizations occurring in 1997-98.  Since state aid to schools had already been certified for 1998-99, there was no practical way to set aside $2 million from equalization funds for the 1997-98 fiscal year.  The transfer would be made from the Cash Reserve Fund and then repaid from equalization funds the following year.  For 1999-00, 2000-01 and 2001-02, the committee amendments required $2 million to be set aside for first year incentive payments from the amount appropriated for equalization aid.⁹² Any funds remaining from the annual set-aside amount would be funneled back into equalization aid the following year.

After an explanation of the proposed transfer process, the committee amendments were adopted by a unanimous 29-0 vote, and the bill was then advanced to second-round debate on a 30-1 vote.⁹³

Select File debate occurred on March 10th.  Senator Janssen would make a last unsuccessful bid to reinsert the hold harmless provision contained in the original bill.⁹⁴  Janssen had several pending reorganization efforts within his own legislative district, and he was aware of other efforts across the state.  Senator Bohlke pointed out, however, that at least one of the reorganized districts within Senator Janssen's legislative area had an increase in property valuation due to the reorganization.  The increase in valuation, she said, meant more revenue from property taxes and, correspondingly, less state aid.  Senator Wickersham came to Bohlke's assistance by distinguishing state policy to reduce the disincentives to reorganize and new state policy to afford "special treatment" just because districts choose to reorganize.⁹⁵ Wickersham and Bohlke would both argue that making special allowances for increases in valuation might lead to calls for special allowances due to other circumstances, such as reductions in enrollment or corrections in state aid from the previous year.  The Janssen amendment, they argued, would lead to a slippery slope of endless special circumstances disserving of a hold harmless provision.

Janssen argued that the Legislature needed to determine how serious it was about encouraging consolidation.  If, he alleged, the Legislature was serious about encouraging reorganization then it would do all it could to make the concept attractive to schools.  Janssen reminded his colleagues that he was not advocating any new appropriations to fund the hold harmless provision.  The hold harmless payments would derive from the same $2 million pot of money set aside for base year incentive payments.  And Senator Janssen was not alone in his fight for adoption of the hold harmless amendment.  Senator Jones and Bromm were also helpful to his cause.  In the end, however, the votes were simply not on Janssen's side.  His amendment failed on an 11-25 vote.⁹⁶

LB 1134 would pass on April 2nd by a 43-2 vote.⁹⁷  Governor Johanns signed the bill into law on April 8, 1998.⁹⁸

• Change the reorganization incentive program created under LB 1050 (1996), which provides incentive payments to approved reorganized districts for three years;
  
  
• Allow reorganization incentives to be paid beginning in the year following the year in which the reorganization occurs rather than in the second year after the reorganization;
  
  
• Allow base year incentives to be paid in 1998-99, 1999-00, 2000-01 and 2001-02;
  
  
• Change existing law to allow incentive payments through July 1, 2004 rather than up to July 1, 2006, since the legislation moved up the payment of base year funds;
  
  
• Establish a Reorganized School Assistance Fund from which first year reorganization incentives would be paid in 1998-99 since state aid for 1998-99 had already been certified;
  
  
• Transfer $2 million from the State's Cash Reserve Fund to the Reorganized School Assistance Fund to make payments in 1998-99;
  
  
• Require a $2 million transfer by September 1, 999 from the State's General Fund to the Reorganized School Assistance Fund, which amount would be immediately transferred to the Cash Reserve Fund to payback the $2 million used to pay reorganization incentives in 1998-99;
  
  
• Terminate the Reorganized School Assistance Fund on September 2, 1999;
  
  
• Reduce the appropriation of state aid for TEEOSA by $2 million in 1999-00 to offset the $2 million transfer made from the General Fund to the Cash Reserve Fund;
  
  
• Require $2 million be set aside in 1999-00, 2000-01 and 2001-02 for first year incentive payments from the amount appropriated for TEEOSA aid;
  
  
• Reappropriate any funds remaining from the annual set-aside for TEEOSA aid in the following year;
  
  
• Prorate the annual set-aside if the $2 million is insufficient for first year incentive payments; and
  
  
• Exclude incentive funds from formula resources for purposes of calculating state aid.

Legislative Bill 1219 (1998) represents an example of grassroots policy development, and what Senator Ardyce Bohlke called "a creative way" to address the issue of consolidation.⁹⁹  The bill was sponsored and prioritized by Senator "Cap" Dierks of Ewing and sought to implement a new form of reorganization.  Under LB 1219, two or more Class II or III (K-12) districts may form a "unified system" as a sort of trial consolidation.¹⁰⁰  If the trial period proved successful, the unified system may opt to formally consolidate into one local system, one identity.  However, during the unification period, the individual districts comprising the unified system would retain most of their own identity.  The districts would retain their individual district names, athletic programs, curriculum, etc.  Senator Bohlke quipped during the public hearing that the process was similar to "being engaged to get married," a time to try out the feel of being consolidated without necessarily being consolidated.¹⁰¹

The idea originated from school officials within Senator Dierks' legislative district.  Representatives from the K-12 public school systems of Orchard, Clearwater, Ewing, and Elgin spoke to Senator Dierks during the 1997 interim about forming a type of "super district."¹⁰²  As Al Schleuter, superintendent of Orchard Public Schools, testified, "We believe the intent of the bill is to allow schools, such as our four districts, to unify under one central administrative district and still allow our districts to maintain their present facilities and K-12 status."¹⁰³  Each participating school system would retain its own school board, and at least one school board member from each system would comprise the unified system school board, the super board.¹⁰⁴

As introduced, LB 1219 defined unified system as two or more Class II or III school districts participating in an interlocal agreement with approval from the State Committee for the Reorganization of School Districts.  Class I districts also may be part of the interlocal agreement.  The bill provided that state aid and property tax resources were to be shared by the unified system.  The board of a unified system would determine the general fund levy for all participating districts and the distribution of tax resources and state aid.¹⁰⁵

The interlocal agreement would also specify whether personnel would be employed by the individual districts or by the unified system.  For any certificated staff employed by the unified system, tenure and seniority as of the effective date of the interlocal agreement would be transferred to the unified system and tenure and seniority provisions would continue in the unified system.  If a district withdraws from the unified system or if the interlocal agreement expires, certificated staff employed by a participating district immediately prior to the unification would be reemployed by the original district and tenure/seniority as of the effective date of the withdrawal or expiration would be transferred to the original district.  The interlocal agreement would address how certificated staff hired by the unified system, and not employed by a participating district immediately prior to the unification, would be treated if the interlocal agreement expires and is not renewed.¹⁰⁶

Application for a unified system would be made to the State Committee for the Reorganization of School Districts.  If the interlocal agreement complies with the provisions of the act and all school boards of the participating districts have approved the interlocal agreement, the state committee must approve the application.  The "super board" established in the interlocal agreement may begin meeting any time after the application has been approved by the state committee.  Upon granting the application for unification, NDE would be required to recognize the unified system as a single Class II or III district for purposes of state aid, budgeting, accreditation, enrollment of students, state programs, and reporting.  The class of district would be the same as the majority of participating districts, excluding Class I districts.  If there were an equal number of Class II and Class III districts in the unified system, the unified system would be recognized by NDE as a Class III district.¹⁰⁷

Unified systems would be eligible for incentive payments through the state aid formula under the 1% set aside from TEEOSA funds.  In order to encourage unification, incentive payments would be paid to each unified system based on grade ranges for a three-year period.  Incentive payments would be calculated based on average daily membership in each affected district in the school year immediately preceding the first year of the unification.  The unified system would receive 100% of the incentive payments calculated for the base fiscal year, 75% for the second year, and 50% for the third year.¹⁰⁸  The base fiscal year was defined as the first school fiscal year following the school fiscal year in which the unification occurred.¹⁰⁹

The new local system would be allowed to maintain its unification status for a period of seven years.  If the unified system discontinues its status as a unified system and does not consolidate prior to the beginning of the eighth year as a unified system, the districts in the unified system must pay back the incentives.  The total incentives paid to the unified system would be divided between the districts based on the adjusted valuation of each district in the year prior to the discontinuation of the unified system, and each district's share must be paid back through reductions in state aid in equal amounts for five years.  The bill provided that no incentive payments would be made after July 1, 2006, which created a limited window of opportunity for creation of unified systems.¹¹⁰

LB 1219 was generally well received at the public hearing on February 9, 1998.  Those offering support for the measure included the Nebraska Rural Community Schools Association, the Nebraska State Education Association, and the Commissioner of Education, Doug Christensen, who represented the State Board of Education.¹¹¹  "We need this model out there so that other schools can see how we can do this and how we can do it right," Christensen said.¹¹²  The commissioner added that there were three equally important issues surrounding the unification theory:  "unifying on the concept of governance, unifying on the concept of finance, and unifying on the concept of curriculum."¹¹³  Christensen stated that he and his staff had recently conducted area meetings, in part, to speak with school officials about the unification process and to encourage them to contact the four schools that originated the idea.  Said Christensen:

We have talked to numerous other boards of education groups, administrative groups, and teacher groups about this same concept, getting a very favorable response.  So once this particular union takes off, I would think that you will see a domino effect that others will look at it seriously.  However, they need the incentives provided to make this happen.¹¹⁴

Incentive payments may have been an important element of the unification process, but it certainly was not the only consideration, especially for the group representing teachers.

Attorney Mark McGuire, representing the NSEA, called the legislation "innovative and creative" and said it presented "a great amount of opportunity," but he also had some issues to address relevant to collective bargaining within the concept of unification.¹¹⁵  McGuire had been involved with many of the major labor-oriented legislative initiatives concerning collective bargaining agreements and related issues.  One of his major clients was the designated labor organization for Nebraska teachers, the NSEA, which retained his services beginning in 1974.  McGuire's concerns with LB 1219 were embodied in several friendlyamendments designed to clarify the relationship of the new unified system to certificated instructional staff.

The first proposed amendment involved clarification that the unified system would be the employer for purposes of collective bargaining.  The second involved clearer language stating that certificated personnel would become employees of the unified system.  The third and final suggestion by McGuire addressed the hiring of new staff by the unified system and what would become of them if the unified system dissolved at some point in time.  McGuire asked that language be included to designate the reduction-in-force policy adopted by the unified system's super board as the appointed instrument to serve these particular employees.¹¹⁶  Those certificated staff employed prior to unification by a participating district would retain employment within the participating district if the unified system dissolved.¹¹⁷

The Education Committee would take action to advance LB 1219 on March 3, 1998 by a unanimous 7-0 vote.¹¹⁸  The committee amendments incorporated many of the suggestions made during the public hearing.  The amendments stipulated that the unified system would be the employer for all certificated staff.  The certificated staff hired by the unified system without being employed by a participating district prior to the unification would be subject to the reduction-in-force policy of the system if the agreement expires and is not renewed.  The amendments clarify that the unified system would be deemed an employer for purposes of the Industrial Relations Act.¹¹⁹

The bulk of the committee amendments contained language to permit limited re-affiliation of Class I districts in contemplation of unification.  The amendments clarified that Class I districts could only participate in a unified system if the entire valuation was included within the unified system.  A Class I district with more than 50% of its valuation affiliated with a single Class II or III district participating in a unified system may re-affiliate so that the entire valuation is affiliated with the Class II or III district.  Similarly, if there is not 50% of the valuation affiliated with a single Class II or III district, the Class I district may re-affiliate so that its entire valuation is affiliated with a Class II or III district participating in a unified system.¹²⁰

Lastly, the committee amendments required a district withdrawing from a unified system prior to the beginning of the eighth year to repay incentives attributable to the district's participation.  A provision was added to require interest to be calculated from the date the incentives were paid until the estimated repayment date for any repayments.¹²¹

From the time the bill was introduced until the time it was advanced from committee, LB 1219 received strong support.  It was a creative, innovate idea.  It would encourage other districts to follow suit.  It would enhance the educational opportunities of students.  But as the bill was prepared for first-round floor debate, the exuberance behind the legislative proposal would be tempered with skepticism by some and outright opposition from others.  There were, after all, some serious policy issues to be addressed in the underlying proposition of unified school systems.

Unlike LB 1134, the other reorganization bill of the 1998 Session, LB 1219 would involve a much more lengthy deliberation due to the creation of an entirely new type of school organization.  As one would expect, LB 1219 would foster general discussions on school finance and school organization.  The very nature of the legislative proposal invited such philosophical discussion.  Within these philosophical discussions, however, there also were discussions on the technical aspects of the legislation.  Some of these debates lead to modifications of various components of the bill.  As always, the art of compromise would win the day for LB 1219, but not necessarily to the full satisfaction of everyone concerned.

First-round debate would begin on March 26, 1998, just three days after Speaker Doug Kristensen designated LB 1219 a Major Proposal.¹²² The super priority status would ensure that the bill had an opportunity to be debated, but not necessarily final passage.  In hindsight, it may have been this enhanced status that gave the legislation a chance at all, particularly in a 60-day, short session.

General File debate primarily focused on the technical, philosophical, and political aspects of the duration and outcome of unification agreements.  Two camps of thought sprang from these discussions and would define the remainder of the debate.  Some senators, particularly those representing urban areas, wanted a shorter unification timeline, the elimination of authority to renew the unification agreement, and more pressure placed on the participating districts to go through with the final consolidation.  The other camp of thought represented the exact opposite viewpoint.  They wanted to allot plenty of time for the engagementperiod and also permit the opportunity to renew the unification agreement.  The one item both camps seemed to agree upon was the notion that a district would repay, with interest, the incentive payments if the district withdraws from the unified system or if the unified system dissolves entirely.

The first amendment addressing the duration and outcome of unification agreements was brought forward by Senator Ron Raikes of Waverly.  His amendment proposed to establish a minimum two-year requirement for interlocal agreements that created a unified system and required participating districts to either remain a unified system or consolidate at the beginning of the fifth year.¹²³ Under the Raikes amendment, districts would not be allowed to return to the status quo, as individual districts, following the fourth year of existence as a unified system.  The idea would be supported by a number of legislators, but not by the chair of the Education Committee.

Senator Bohlke spoke to the Raikes amendment and admitted the minimum two-year requirement may have some justification.  It would prevent any early bailouts and require at least a reasonable period of time to try out the unified arrangement.  But Senator Bohlke could not agree with the idea of shortening the maximum duration of the unification agreement.  She reminded her colleagues that the unified system would need a reasonable period of time to make structural and operational decisions, including decisions about retention of staff, facilities, curriculum, etc.  "It gets very complicated and it's going to cause people to make significant change in how they are reorganizing their schools," Bohlke said.¹²⁴

The Raikes amendment resulted in one of the longer debates of any amendment offered on the bill, and would demonstrate the rural/urban split on the issue.  The amendment failed by a 19-22 vote, but the narrow margin would serve to encourage further discussion on the matter.¹²⁵  In fact, the very next amendment addressed by the Legislature, offered by Senator Deb Suttle of Omaha, proposed to require all participating districts to repay incentive funds if the unification dissolves without taking the next step to formally consolidate.¹²⁶  The committee amendments simply required repayment of funds if a participating district drops away from the unification agreement.  The Suttle amendment carried an extra hammer to force participating districts to consolidate.  The Suttle amendment also failed, this time by a 12-25 vote.¹²⁷ Once again, the record vote demonstrated a largely rural/urban split on the issue.

The unification bill, as it came to be known, had survived any substantive changes during first-round debate, but the real battle was yet to come.  Before the bill was advanced, however, LB 1219 would take on a secondary role to address an entirely different problem involving Class I districts.  The focus of the issue concerned the budget setting process under the combined effects of the changes made to the state aid formula as per LB 806 (1997) and the levy limitations as per LB 1114 (1996).  The recent changes in school law coupled with the affiliation and combined levy laws of the early 1990s had created an unintended and undesirable consequence.

As Senators Curt Bromm and Bob Wickersham explained during the debate, there were reported instances where the combined budgets of the primary high school district and the affiliated Class I districts would produce a levy asking that exceeded the property tax levy limitation.  At the time, the levy limitation was $1.10 for each local system, which included the primary high school district and all affiliated Class I districts.  Each Class I district was required to submit its proposed budget to the high school district school board in order to establish a combined property tax asking.  But nothing in existing law guaranteed a smooth process, as Senator Bromm explained:

When we have a district with a Class III that is the budget-setting district and we have several affiliated Class Is, if each entity submits their budget to the Class III and then the Class III absorbs that information and ... and adopts a budget, if that budget is over $1.10, results in a levy over $1.10, there is no process in the statute for how to resolve that problem.  The only thing the Class III board has the authority to do is to not approve a budget for a Class I where they are proposing to spend more than the average cost per pupil when you average their cost and the Class IIIs cost for elementary students.¹²⁸

The high school district was charged with the responsibility of overseeing the budget process, but it had no authority to resolve this type of problem.

In addition to the budget setting issue, another problem arose with regard to building funds established by Class I districts.  LB 1114 (1996) provided an exclusion from the levy limits for building funds commenced prior to April 1, 1996.  The building funds for any project commenced after this date would be subject to the maximum levy.  But nothing precluded a district, including a Class I district, from initiating a building fund.  This created the potential for what Senator Bromm called a "rogue building fund levy" initiated by a Class I district and forced upon the primary high school district.¹²⁹

Neither the budget setting issue nor the building fund issue amounted to a sudden revelation to lawmakers.  The issues were raised during the 1997 interim period and were the subject of a legislative proposal in the 1998 Session (LB 1008).  However, as time elapsed during the session, LB 1219 became one of the few viable and relevant vehicles to attach an amendment and address the problems.

Jointly introduced by Senators Bromm, Wickersham, Raikes, and Bohlke, the amendment to LB 1219 would create what Bromm called a "road map" for local systems to deal with these issues if they arise.¹³⁰  The amendment added a new section to TEEOSA that provided a three-prong approach to resolving the issue if the total levy required for property tax requests for all general fund budgets in a local system exceeds the amount that can be generated by the maximum levy.  In such cases, the high school district would be permitted to take "necessary steps" to comply with the maximum levy.¹³¹ The first step would be to reduce the property tax request for each district up to the amount by which the district's budgeted general fund cash reserve exceeds 15% of the district's general fund budget of expenditures for the preceding school fiscal year.  It was estimated that 15% cash reserves roughly equates to two to three months of the average district's operational expenses.

If the reductions under the first step do not resolve the problem, the primary high school district would utilize the second step.  This step would reduce the property tax request for each district proportionately based on the amount of the difference between:

(Each district's general fund budget of expenditures [minus] the special education budget of expenditures for the current budget year) [minus] (a two-year average for the two preceding school fiscal years of the general fund budget of expenditures [minus] the special education budget of expenditures).¹³²

If the reductions under steps one and two do not reduce the levy to the appropriate level, a high school district may reduce the property tax request for each district by an amount proportional to the district's share of the total property tax request for the preceding school fiscal year.¹³³

The second part of the amendment addressed the building fund issue.  Under the amendment, the maximum building fund allowed for Class I districts would be reduced from 17.5¢ per $100 million valuation to 5¢.  This amount would include any amounts levied for environmental hazards or accessibility barriers.  The amendment also required the approval by the primary high school board of any building fund for a Class I district within the local system.¹³⁴

"I will probably make some of my friends in the Class Is uncomfortable to hear Senator Bromm and I stand up and make this proposal," Senator Wickersham said during floor debate.¹³⁵  "We were confronted last year with difficulties in finding ways to develop a structure so that the Class Is and the high schools that they were either affiliated with or a part of could develop budgets that met the 1114 objectives," he said.¹³⁶  Unfortunately, Wickersham added, some districts within certain local systems were simply not cooperating with one another in the budget process and thereby not doing what was "good and appropriate for the children of the district."¹³⁷  "I have been saddened that that does not always seem to me to be what has occurred and when that doesn't occur then we have very little choice but to give the kind of direction that Senator Bromm's amendment is now bringing to you for consideration," Wickersham concluded.¹³⁸

The amendment represented a fairly significant policy for school districts, and further enhanced the authority of the primary high school district.  There was no debate on the amendment, only an explanation of the problem and the recommended solution.  The Bromm amendment was adopted by a 27-0 vote.¹³⁹  LB 1219 was then advanced to second-round debate by a 31-1 vote.¹⁴⁰

Second-round debate on LB 1219 commenced on April 1st, just six days after its advancement from General File.  It was at this stage that the bill would take yet another twist.  The issue, brought forward by Senator George Coordsen, involved the impact on some school districts due to the changes in the state aid formula under LB 806 coupled with the levy limitations under LB 1114.  In essence, the Coordsen amendment was meant to buy time for certain districts in order for their local boards to evaluate their available options, including reorganization.

Senator Coordsen proposed to create a special "temporary mitigation" fund for local systems that have property tax and state aid resources for school fiscal year 1998-99 less than 90% of their property tax and state aid resources for the previous year (1997-98).¹⁴¹  The funds would help those local systems particularly hard hit by the loss of state aid due to LB 806.  The Coordsen amendment was actually the focus of a separately introduced bill (LB 1247), a bill sponsored by Senator Coordsen.¹⁴²  LB 1247 was introduced with the acquiescence of Governor Nelson, as Senator Coordsen explained during floor debate:

LB 1247 was an outgrowth of a number of meetings that the Governor had with school administrators and school board members around the state who were suffering from a dramatic reduction in available funds for the '98-99 year as a result of a combination of effects of (LB) 806 and (LB) 1114.  The Governor felt or at least he indicated to me that he felt that we needed to do some temporary assistance to those schools that were the most disadvantaged by the loss of revenue.¹⁴³

Coordsen said the original bill was expected to impact "about 61 schools," although the precise number of schools that would ultimately qualify and take advantage of the mitigation funds was unknown.¹⁴⁴  "I thought ... that 1247 could be an adjunct and an enhancement to 1219 in that it would provide a mechanism to tide a number of schools over 'till they had a chance to look at this new way of organizing schools within an area, that is, unification," Coordsen said.¹⁴⁵

Under the Coordsen amendment, the local system would receive a one-time, lump-sum payment in an amount equal to 90% of the 1997-98 property tax and state aid resources minus the 1998-99 property tax and state aid resources if the following criteria were met:

1. The local system's 1997-98 general fund budget of expenditures minus the special education budget of expenditures did not exceed the 1995-96 general fund budget of expenditures minus the special education budget of expenditures by more than 2% plus the percentage growth in students for the local system; AND
   
   
2. One of the three scenarios held true for the local system:
   
   1. The local system has "shown an intent to merge, consolidate, or unify" with at least one specified high school district by June 1, 1999, through a public affirmative vote by the school board of the high school district, and
      
      
      • a majority of the members of the school board sign an affidavit acknowledging that the intent of the signing board member is to proceed with a merger, consolidation, or unification, and
        
        
      • the affidavit is filed with NDE by August 1, 1998; OR
   2. The local system is within the sparse cost grouping or the very sparse cost grouping; OR
      
      
   3. The local system is subject to a loss of state aid due to clerical error.¹⁴⁶

The Coordsen amendment provided that if the payments due to local systems exceed the amount of funds appropriated by the Legislature, the funds would be distributed on a pro rata basis.  Payments would be made by September 15, 1998.  Payments to local systems that include Class I districts would be divided proportionally among the districts in the local system based on the weighted formula students attributed to each district in the local system for the certification of state aid to be paid in the 1998-99 school fiscal year.  NDE was required to identify the local systems qualifying for payments and distribute the funds accordingly.  The financing for the mitigation funds would derive from the State's Cash Reserve Fund in the amount of $4.5 million, which would be transferred to the State's General Fund by September 1, 1998.¹⁴⁷

The principle critic of the Coordsen amendment was Senator Chris Beutler of Lincoln.  Beutler expressed several concerns about the amendment, including the fact that the mitigation funds were outside the normal state aid distribution system.  "The state aid formula is the system that this body agreed upon was the fair way to distribute money," Beutler said.¹⁴⁸  He was also concerned that the funds were not more directly tied to the intent on the part of the receiving districts to reorganize.  He desired an "added measure of sincerity" on the part of the districts to form more efficient school systems if they were to receive mitigation funds.¹⁴⁹  Accordingly, Beutler filed several amendments to the Coordsen proposal, one of which required the temporary mitigation funds to be returned if the receiving district does not merge, consolidate, or unify prior to June 30, 2000.¹⁵⁰  "My amendment is to simply ensure that there is no way that the intent could be a subterfuge or treated in a frivolous manner by any school board," he said.¹⁵¹

The differing viewpoints brought out by Senators Coordsen and Beutler instigated an interesting debate that lasted through the morning session and into the afternoon.  The debate focused in part on the changes made to the state aid formula a year earlier.  Many of the proponents of the Coordsen amendment were also former opponents of LB 806 (1997).  They argued that the comprehensive changes to the formula coupled with the levy limitations had caused some districts to take a serious look at reorganization, but the reorganization process took time.  It takes at least two willing districts to move forward with a reorganization plan, and not all districts desiring to merge can find a willing partner.  The proponents of the Coordsen amendment argued that the mitigation funds should be granted with no absolute pressure to merge, consolidate, or unify.  It was not the policy of the state, they argued, to force people and local governments into situations they do not desire.

Those resisting the Coordsen proposal relied on two central arguments.  First, LB 806 (1997) and LB 1114 (1996) were measures passed and signed into law.  It was the will of the majority speaking through these policy directives.  Both measures carried an underlying intent toward efficiency of government, even if that meant reorganization.  In fact, the 1996 property tax relief package intended for local governments to pursue efficiencies.  And, if the first argument had any flaws, the second argument was more difficult to counter.  The provisions of the levy limitation law, they argued, permitted a district to exceed the lid through a levy override.  If the school districts in question had reasonable claims to additional funding, they should pursue the appropriate spending and levy lid overrides.

Both sides put forward reasonably compelling arguments, but it may have been Senator Gerald Matzke of Sidney who put the issue into proper perspective using a nautical metaphor:

I think we have a decision to make.  Is this bill going to be a penalty bill or is it going to be a life raft?  We, when we passed 1114, we set in motion a Titanic of a property tax relief measure and then last year came along with another titanical bill in 806.  And unfortunately, the two have collided.  And the result is that we have a number of school districts floating in the freezing water about ready to be extinguished from being able to provide education.  And that's all that this bill does.  LB 1247 is a life raft proposed initially by the Governor, worked on by Senator Bohlke and Senator Coordsen to provide a life raft to certain school districts for a one-year transitional purpose.¹⁵²

The transitional purpose of the Coordsen amendment was intended to include such options as unification, the principle goal of LB 1219, or another form of reorganization.  But the districts receiving temporary mitigation funds would not be forced into reorganization by virtue of accepting the funds.

Ultimately, the Beutler amendment, which required the return of mitigation funds if the district did not reorganize, failed by an 11-19 vote.¹⁵³  Several other proposals would come forward, but all were either withdrawn or failed.  Finally, Senators Bromm, Coordsen, and Beutler proposed a compromise amendment.  The amendment proposed that temporary mitigation funds must be returned if the receiving district does not merge, consolidate or unify prior to June 30, 2000.  However, the funds need not be returned if, prior to June 30, 2000, the receiving district is unable to merge, consolidate or unify despite good faith efforts to do so.  The State Committee on the Reorganization of School Districts would have the authority to determine whether the district actually made a good faith effort.¹⁵⁴

The Bromm-Coordsen-Beutler compromise amendment was adopted by a unanimous 27-0 vote after a short discussion.¹⁵⁵  However, the main amendment, the Coordsen amendment to provide mitigation funds, took two votes before adoption.  On the first attempt, the amendment failed by a 23-12 vote.¹⁵⁶  A successful motion to reconsider the vote brought about a triumphant conclusion with a 26-6 vote.¹⁵⁷

The main part of the bill, to permit unification agreements, would consume the remainder of second-round debate.  Senators Bohlke and Raikes would successfully seek adoption of a compromise amendment concerning a minimum period of existence for unified systems.  Senator Raikes had pursued such a proposal unsuccessfully on first-round debate.  However, after speaking with some area superintendents, it was believed that a minimum three-year period would actually be beneficial to the participating districts.¹⁵⁸  "I think it maybe gives the unification a better guarantee that it has some time to work," Bohlke explained to her colleagues.  The amendment was adopted by a 26-0 vote.¹⁵⁹

LB 1219 was passed on Final Reading with the emergency clause attached by a 35-13 vote on April 14, 1998.¹⁶⁰  Governor Nelson would sign the bill into law on April 18th.¹⁶¹  As passed, LB 1219 contained three major components:  (1) provide for unification agreements; (2) provide a budget process to meet the maximum levy provisions; and (3) provide mitigation funds to certain local systems.

1. Unification Agreements.
   
   Budget Process.
   1. Definition.  A unified system is defined as two or more Class II or III school districts participating in an interlocal agreement with approval from the State Committee for the Reorganization of School Districts.  The interlocal agreement may include Class I districts if the entire valuation is included within the unified system.
      
      
   2. Interlocal Agreement.  The agreement for unification would have a duration of at least three years.  The agreement must provide that all state aid and property tax resources are shared by the unified system.  The agreement must also provide that a "super" board be created and comprised of school board members from among the participating districts.  The super board must include at least one school board member from each district but may include more if the agreement so provides.
      
      The agreement must provide that certificated personnel will be employees of the unified system rather than the individual districts.  If a district withdraws from the unification or if the agreement expires and is not renewed, certificated staff must be reemployed by the original district.
      
      The super board will act as the collective-bargaining agent for the unified system and will have the authority to hire and terminate teachers and other staff.
      
      
   3. Application.  Application must be made to the State Committee for the Reorganization of School Districts.  The application must contain a copy of the interlocal agreement signed by the president of each participating school board.  The state committee must approve/disapprove applications for unification within 30 days after receipt.  Unification agreements will become effective on June 1st following approval from the state committee or on June 1st of the year specified in the agreement.  The super board established in the agreement may begin meeting any time after the application has been approved by the state committee.
      
      
   4. Recognition.  Upon granting the application, NDE must recognize the unified system as a single Class II or III district for state a  id, budgeting, accreditation, enrollment of students, state programs, and reporting.  The class of district will be the same as the majority of participating districts, excluding Class I districts.  If there is an equal number of Class II and Class III districts in the unified system, the unified system will be recognized as a Class III district.
      
      The school districts participating in a unified system will retain their separate identities for most purposes.  For instance, districts within a unified system may retain their individual athletic and other extracurricular programs.
      
      
   5. Incentive Payments.  To encourage unification, incentives will be paid to unified districts in certain size ranges for a three-year period.  Incentive payments will be calculated based on average daily membership in each affected district in the school year immediately preceding the first year of the unification.  The unified system may file an application with the state committee for incentive payments either following approval or in conjunction with the application for unification.  For unification, 100% of the amount calculated will be included in the distribution of state aid in the base fiscal year, 75% for the second year, and 50% for the third.
      
      
   6. Withdrawing.  If, prior to the beginning of the 8th year of operation, the unified system discontinues its status as a unified system and does not consolidate, the districts in the unified system must pay back the incentives plus interest.  The total incentives paid to the unified system would be divided between the districts based on the adjusted valuation of each district in the year prior to the discontinuation of the unified system, and each district's share would be paid back through reductions in state aid in equal amounts for five years.
      
      
2. LB 1219 provides procedures for a high school district to follow to reduce property tax requests when the total levy for a local system budget exceeds the amount that can be generated by the maximum levy.  It also reduces the amount which may be levied by a Class I school district for school buildings, sites or repairs from 17.5¢ to five cents on each $100 valuation.  This cap also includes any amounts levied for environmental hazards or accessibility barriers.
   
   
3. Temporary Mitigation Funds.
   
   The new law provides for a transfer of $4.5 million from the Cash Reserve Fund to the General Fund on or before September 1, 1998.  The funds transferred to the General Fund are appropriated to NDE in 1998-99 to distribute as one-time temporary mitigation funds to schools which have property tax and state aid resources in 1998-99 which are less than 90% of their 1997-98 property tax and state aid resources.
   
   Systems must meet certain criteria in the new law in order to receive aid.  First, the local system's 1997-98 general fund budget, minus expenditures made for special education, could not have exceeded its 1995-96 general fund budget, minus special education, by more than 2 percent plus the percentage growth in students. Second, the local system must fit into one of three categories: (a) it must be classified as sparse or very sparse for state aid purposes, (b) it must be subject to loss of state aid because of a clerical error in determining adjusted valuation, or (c) it must have shown an intent to merge, consolidate or unify with at least one specified high school district by June 1, 1999.  This intent would be shown through a public vote of the board of the high school district, and a majority of board members would have to sign an affidavit acknowledging such intent.
   
   NDE is to calculate the systems eligible for aid and distribute the funds by September 15, 1998.  Payments are to be prorated if the appropriation is not sufficient to fund all claims.  The temporary mitigation funds must be returned if the receiving district does not merge, consolidate or unify prior to June 30, 2000.  The funds need not be returned if the state reorganization committee determines a merger, consolidation, or unification is not possible.

The policy history of gifted education in Nebraska was not particularly noteworthy until the early 1990s.  In 1967 the Legislature passed a bill to grant the Department of Education the authority to employ a "special consultant trained and experienced in the field of special education for gifted children."¹⁶²  The consultant, if employed, would have the duty to encourage, advise, and consult with each district in the development and implementation of plans for special education of gifted children.  The bill defined gifted children as:

[C]hildren who excel markedly in ability to think, reason, judge, invent, or create and who need special facilities or educational services or both such facilities and services in order to assist them to achieve more nearly their potentials for their own sakes as individuals and for the increased contributions they may make to the community, state, and nation.¹⁶³

The new law did not require the department to hire a consultant, nor did it appropriate funds to carry out the act.  It only provided limited instruction for the department if it opted to hire a consultant.  Generally speaking, the State of Nebraska did not place a particularly high level of concern on those students who required special services due to their gifted educational performance capacity.  This would change in 1993.

On January 5, 1993, Governor Ben Nelson appointed Jan McKenzie of Harvard to replace Senator Rod Johnson, who resigned from office.  McKenzie, a former teacher, had been very active in the cause of gifted education having been an honor student at the University of Nebraska-Lincoln.  She had served as president of the Nebraska Association for the Gifted (NAG) from 1988-1990.¹⁶⁴

Senator McKenzie would waste little time after her appointment to place the issue of gifted education on the public agenda.  In 1993, her first year as state senator, she introduced legislation to mandate the identification of learners with high ability.  The bill, LB 647, defined a learner with high ability as a "student who gives evidence of high performance capability in such areas as intellectual, creative, or artistic capacity or in specific academic fields and who requires services or activities not ordinarily provided by the school in order to develop those capabilities fully."¹⁶⁵

The bill was referred to the Education Committee and carried over to the 1994 Session where it was passed and signed into law.¹⁶⁶  The stated purpose of the legislation was to assist and encourage school districts in the development, improvement, and implementation of educational programs or services that will serve the educational needs of learners with high ability at levels appropriate for their abilities.¹⁶⁷  Beginning with the 1997-98 school year, each school district and educational service unit (ESU) was required to identify learners with high ability and to provide programs or services that would address the educational needs of the identified students.¹⁶⁸  The requirement for provision of programs and services was contingent upon available local, state, or federal funding.  In order to provide some financial assistance, the legislation permitted school districts and ESUs to apply for grants from the Education Innovation Fund (State Lottery) to be used for development and improvement of approved programs or services.¹⁶⁹

LB 647 specifically directed the Department of Education to monitor the efforts of school districts and ESUs to implement approved programs or services.  It also took the 1967 legislation a step farther by requiring the department to appoint a full-time professional employee and the necessary support staff.¹⁷⁰  This time, however, the Legislature would appropriate necessary funds to hire the additional staff.¹⁷¹

Even with the potential availability of grant funds, some school districts looked upon LB 647 as just another unfunded mandate.  It was not necessarily that school officials opposed the concept of gifted education.  It had more to do with finding the resources to create the necessary programs and provide the services.  These considerations were certainly brought out during the debate on LB 647.  It was for these reasons that the legislation mandated programs and services contingent upon the availability of financial resources.  It was for these reasons that grant funds were made available to school districts, and it was for these reasons that the effective date for the programs and services was delayed until the 1997-98 school year.

LB 647 would set in motion the promulgation of rules and regulations governing the approval process of gifted education programs and services and also the process of identifying students with high ability.  The State Board of Education eventually adopted what became Rule 3 governing high ability learners.¹⁷² This regulation along with the state laws pertaining to high ability learners would be expanded four years later with the passage of LB 1229.

By the start of the 1998 Session, Senator McKenzie had resigned from her elected office and had become the consultant for gifted education under the Department of Education.  While no longer a state legislator, her presence would still be known on the issue of high ability learners.  In 1998, Senator Ardyce Bohlke, chair of the Education Committee, would introduce a series of financial incentive-based bills.  The topics of the legislation ranged from encouraging certain districts to reorganize, to encouraging districts to adopt specific programs, such as programs for expelled students or teacher mentor programs.  Another of Senator Bohlke's incentive-based bills would take up where LB 647 left off, and would further encourage the local adoption of programs for high ability learners.

LB 1229 (1998) was chiefly sponsored by Senator Bohlke and cosponsored by twelve other lawmakers.¹⁷³  Six of the eight members of the Education Committee would sign on as co-sponsors with a seventh, Senator Chris Beutler, adding his name shortly after the bill was introduced.  Senator Don Pederson of North Platte, another co-sponsor, took a personal interest in the legislation and designated LB 1229 as his priority bill for the 1998 Session.¹⁷⁴

The original intent of LB 1229 was to mandate the provision of approved accelerated or differentiated curriculum programs for students identified as learners with high ability beginning with the 1998-99 school year.  The bill also provided funds for such programs and included those funds in the special education allowance.  This represented a significant policy change since the existing state policy was to allow each district to determine for itself whether funds were available to provide such programs.

Under the bill, school districts would be required to annually provide the Department of Education with the criteria used to identify learners with high ability, the number of students identified and the number participating in an approved program.¹⁷⁵  The State Board of Education was charged with the duty of adopting and promulgating rules and regulations to implement the provisions of the act.  The regulation was to include criteria for the approval of accelerated or differentiated curriculum programs and data requirements for measuring academic progress of students participating in the accelerated or differentiated curriculum programs.¹⁷⁶

LB 1229 required the Legislature to appropriate funds for high ability learner programs.  The original bill directed the appropriation of $6 million in 1998-99.  In each year thereafter, the appropriation was to be increased by the percentage growth in identified participating students plus the basic allowable growth rate.¹⁷⁷  The distribution of funds to schools would fall within two categories.  First, local systems would be eligible to receive a percentage of the total appropriation if they provide at least a 50% local match.  Second, local systems may apply for start-up funds to initiate programs for high ability learners.  A small portion of the total annual appropriation would be set aside for start-up grants, but the bulk of the appropriation would be used for matching funds.¹⁷⁸

LB 1229 would impact the state aid formula because the bill required that grant funds received by schools would be included as part of the special education allowance.¹⁷⁹  The legislation would also classify the grant funds as local resources for purposes of calculating state aid.¹⁸⁰ LB 1229 would infuse an additional $6 million in the school finance system for both equalized and non-equalized local systems.

In order to maintain eligibility for grant funds, LB 1229 required local systems to operate an approved accelerated or differentiated curriculum program (i.e., as approved by NDE).  Local systems had to provide funds from other sources for the approved program greater than or equal to 50% of the matching funds received from the state.  Schools had to provide an accounting of the funds received, the total annual cost of the program, and the data regarding the academic progress of students participating in the program.  Local systems also had to include identified students from Class I districts that are part of the local system.¹⁸¹

At the public hearing on February 9, 1998, Senator Bohlke recognized the work of former Senator Jan McKenzie in the field of gifted education.  McKenzie was present at the hearing in her new capacity as a consultant with the Department of Education.  Bohlke proceeded to articulate what would become an often-used rationale for passage of the legislation.  High ability learners, she said, were special education students although perhaps not in the traditional sense of the expression.  "And I would say, as I think about special education, that students with high ability also could be looked as a part of special education; their needs are unique, as other student's needs are unique," Bohlke said.¹⁸²

LB 1229 received no opposing testimony at the hearing.  Such notable groups as the Nebraska Parent Network, the Nebraska Association for Gifted, the State Board of Education, the Nebraska Rural Community Schools Association, and the Nebraska Council of School Administrators all cast their support for the bill.¹⁸³

Undoubtedly, some of the more compelling testimony derived from parents and several very bright students who appeared in support of the legislation.  Daniel Naber, a seventh grader at Westridge Middle School in Grand Island, spoke to the Education Committee about the lack of challenge in the classroom experience:

They don't challenge us.  Sometimes a lot of people that are the smarter people will mess around, not listen, they get bored.  The day just seems to wear on and in sixth grade I had a lot of problems with going to school.  I often played hooky and stuff like that.¹⁸⁴

Greg Bachman, also a seventh grader at Westridge Middle School in Grand Island, spoke of the disparities in educational opportunities for some students, although he did not quite use those terms.  "I think that just because gifted people are talented, they shouldn't be neglected," he said, adding, "I think that the gifted people are just as important as the slower learners are."¹⁸⁵

Interestingly, the Nebraska Farmers Union appeared in a neutral capacity at the public hearing.  Union President John Hansen said his organization supported the underlying concept of the bill, but he also noted the difficulty that some rural schools might have in carrying out its mission.  Said Hansen:

[A]t some point, and I guess that point came when the Nebraska Legislature chose to pass LB 806, there gets to be a need for those of us who represent the interests of rural education across the state of Nebraska, to do what approximates a reality check.  And the reality check is that, unfortunately, as a result of LB 806, those schools who are in the bottom of the end of the standard classification are not likely to get the amount of state education needs of financial support from the distribution formula to meet just basic needs.¹⁸⁶

Hansen spoke of the "double restrictions" imposed on schools due to the levy limitations under LB 1114 (1996) and the "shortfall" some districts received under LB 806 (1997).¹⁸⁷

Less than two weeks after the public hearing, on February 24th, the Education Committee met in executive session to consider the fate of LB 1229.  On a 7-0 vote, the committee advanced the bill to General File in its original form (no committee amendments).¹⁸⁸

"An island unto itself"

First-round debate would take place on the morning of Monday, March 9, 1998, the date of one of the worst winter storms in recent years.  Schools and businesses were closed throughout southeast Nebraska.  Almost one-third of the legislative body was absent from the Chamber due to weather-related reasons.  In normal circumstances, this particular situation may not have had a significant impact.  However, in the case of LB 1229, at least one senator forced to be absent on that day would take exception with the actions of his colleagues and would later seek a reversal.

The only item of controversy throughout General File debate was the first amendment considered on LB 1229.  Senators Don Pederson and Ardyce Bohlke jointly filed an amendment to change a major provision of the legislation.  LB 1229, as originally introduced and advanced from committee, would have required all school districts to offer gifted education programs.  The sponsors felt they could justify the mandate because the legislation also provided funding to help defray the costs of implementing such programs.  The Pederson/Bohlke amendment, however, proposed to strike the mandatory element, thereby allowing but not requiring schools to create and offer gifted programs.¹⁸⁹

Senator Pederson introduced the amendment, he said, due to the realization that not all schools would be in a financial position to initiate a gifted program even with the help of the state.  He and Senator Bohlke were well aware of the criticism that could befall such a move especially among those who strongly endorsed the idea of making gifted programs available to all children no matter where they might attend school.  But, he argued, LB 1229 still makes a giant step forward in comparison to the surrounding states that already provided funding to schools for gifted programs.  "Nebraska is virtually an island unto itself," said Pederson concerning the issue of funding for such programs.¹⁹⁰ LB 1229 might at least encourage schools to launch a gifted program.

The Legislature would adopt the Pederson/Bohlke amendment by a unanimous 25-0 vote, but the issue was far from over.¹⁹¹  The Legislature then advanced the bill by a 28-0 vote.¹⁹² But as the snow melted away and the roads became unclogged, the legislator most discontent with the new twist on LB 1229 would be available to make his concerns known in time for second-round consideration.

On March 23, 1998, the Legislature took up debate on LB 1229 once again.  And Senator Ernie Chambers of Omaha was ready, having filed a floor amendment on the same day to effectively reverse the decision to make gifted programs a discretionary choice of individual school districts.¹⁹³  The amendment, he said, was offered both in respect to those who had tirelessly promoted gifted education in the past and to set the record straight on the power of the state over political subdivisions.  Chambers acknowledged the past and present work of individuals like former Senator Jan McKenzie on the issue.  "My impression, because of the respect that I have for these people, is that these programs were designed to benefit youngsters," he said, "They were not for the convenience of school boards, school districts, teachers or anybody else."¹⁹⁴

Senator Chambers used the age-old argument that political subdivisions, including school districts, were "creations of the state."¹⁹⁵  As such, Chambers argued, "They carry out the will of the state, and the state has the obligation to ensure that certain programs are available to every child in the state regardless of how backward and high bound the individual school board members are."¹⁹⁶ Obviously, Senator Chambers was less worried about offending local officials and more concerned about equity of educational opportunities, which was, after all, one of the underpinnings of the TEEOSA in 1990.  And, as far as local school officials, they could hardly call LB 1229, as originally proposed, an unfunded mandate if the state was prepared to fund at least part of the program implementation.  They could, of course, call it an under-funded mandate if the state funding did not quite cover all necessary costs.

Nevertheless, Senator Chambers had a point to make and it related as much to the process of establishing state policy as it did the fair treatment of those affected by such policy.  "LB 1229 is to establish a policy, a state policy, based on deliberation, facts and an understanding and conviction that there are children in the schools throughout this state who need programs in addition to or beyond those which are given as a part of the core curriculum," Chambers said.¹⁹⁷  "Either all children situated in this manner should be entitled to the same services or they should not," he concluded.¹⁹⁸

The rationale offered by Senator Chambers' was difficult to refute.  Of course, from the perspective of school officials, there are many programs and opportunities they wished to make available to their students if only funding were available.  And contrary to what some may have thought, there were school boards that had the best of intentions in mind for the students under their care.  They also had hard realities to face in terms of limited resources.  The Chambers amendment failed on a 17-19 vote, which should have given all pause to think maybe he was on the right track after all.

Had the Chambers amendment succeeded, the fiscal impact on some schools might have been entirely different.  As it turned out, the bill was allowed to advance under relative mandate-free provisions, excluding some minor reporting requirements upon school districts.  LB 1229 advanced on a voice vote on March 24th, the day after Senator Chambers' attempt to amend the bill.¹⁹⁹  The legislation received final passage on April 2, 1998 by a 36-9 vote.²⁰⁰

In a final twist, Governor Nelson opted to line-item veto half the total funding originally proposed under LB 1229A, the appropriation bill to LB 1229.  In a letter of explanation, Governor Nelson wrote:

With this letter, I am returning LB 1229A with line-item reductions.  I believe LB 1229 is important in increasing quality educational opportunities; however, in lieu of recent increases in funding for education, I recommend appropriating $3,025,500 for FY1998-99 and $3,092,850 for FY1999-00 of the funds provided by the Legislature for accelerated and differentiated curriculum programs funded under LB 1229.

I believe that reducing the recommended appropriation of $6,025,500 by $3 million will leave intact adequate funding for local gifted education programs, taking into consideration that additional funding sources exist for these programs.  Since FY1996-97, state aid to schools has increased by $145,445,902, and new spending for education I have supported this year equals $11,725,000.

Under LB 1110A, local school districts and systems may receive assistance from Educational Service Units which received $9.7 million for funding core services including instructional materials.  New funding opportunities are also created under LB 1228 funded by the Education Innovation Fund, which allows schools to receive quality incentive payments which may be spent on programs for high ability learners.  Schools may also apply for Education Innovation Fund competitive grants to receive funding to create accelerated and differentiated curriculum programs.  Approximately $9.4 million will be available for schools from the Education Innovation Fund for FY1998-99.

I believe increased educational funding from these sources and my recommendation for funding under LB 1229A will enable schools to provide quality educational opportunities for our state's best and brightest.²⁰¹

The line-item veto was officially announced on April 8th, the 58th day of the 1998 Legislative Session.  There was certainly time to stage an override, but the prevailing political wind was not in the proponents' favor.  No motion to override was filed and the line-item veto was sustained by the Legislature.

LB 1229 related to gifted education for high ability learners.  The new law did not require districts to implement a gifted education program but did provide financial incentives to do so.  LB 1229 also contained a provision concerning kindergarten enrollment.

1. Criteria for Identification.  (mandatory)
   
   
   1. Reports.  School districts must annually provide NDE with a copy of:
      
      
      1. criteria for identifying learners with high ability,
         
         
      2. the number of students identified according to the criteria, and
         
         
      3. the number of students participating in an approved accelerated or differentiated curriculum program.
   2. Inspection.  School districts must also have a list of the students identified and how the students compare to the criteria available for inspection by department personnel.
      
      
2. Gifted Programs.  (non-mandatory)
   
   Kindergarten Enrollment.  Prior to LB 1229, a district could admit a child who will reach the age of five between Oct. 16 and Feb. 1 of the current school year if the parent/guardian requests such entrance and provides an affidavit stating that either the child attended kindergarten in another jurisdiction in the current school year, OR the family anticipates a relocation to another jurisdiction that would allow admission within the current year.  LB 1229 added a third option to current law.  Under the new law, a school board may approve "recognized assessment procedures" to determine whether a child is capable of carrying the work of kindergarten or the beginner grade.  There is no requirement upon districts to adopt such a procedure.
   1. Permissive Programs.  LB 1229 does not require school districts to offer gifted education programs, but it does provide an financial incentive to do so.  In order to be eligible for funds to offset the cost of a gifted program, a district must adhere to the following items:
      
      
      1. Provide an approved accelerated or differentiated curriculum program for students identified as learners with high ability;
         
         
      2. Provide funds from other sources for the approved accelerated or differentiated curriculum program greater than or equal to 50% of the matching funds received;
         
         (Note:  If a local system will not be providing the necessary matching funds, the local system must request a reduction in the amount received such that the local system will be in compliance with the matching fund requirement.)
         
         
      3. Provide an accounting of the funds received and the total cost of the program on or before August 1st of the year following the receipt of funds in a manner prescribed by NDE, not to exceed one report per year;
         
         
      4. Provide data regarding the academic progress of students participating in the accelerated or differentiated curriculum program in a manner prescribed by NDE, not to exceed one report per year; and
         
         
      5. Include identified students from Class I districts that are part of the local system in the accelerated or differentiated curriculum program.
         
         (Note:  Local systems not complying with the foregoing requirements will not be considered eligible local systems in the following year.)
         
         
   2. Appropriation.  Beginning with school fiscal year 1998-99, the Legislature must appropriate funds to be distributed by NDE pursuant to local systems annually on or before October 15th.
      
      Notes:  The original intent of LB 1229 was to appropriate, for FY1998-99, $6 million and, for FY1999-00 and each year thereafter, the amount of the previous year's appropriation increased by the percentage growth in identified participating students plus the basic growth rate. In a letter to the Legislature, Governor Nelson indicated his support for gifted education but his opposition to the amount of the annual appropriation.
      
      The Governor recommended through his line-item veto that $3,025,500 be appropriated for FY1998-99 and $3,092,850 for FY1999-00.  The Governor rationalized that additional resources to help operate local gifted education programs may potentially be offered through the ESU core services.  The Governor also noted that another measure, LB 1228, was designed to offer incentive payments to those districts that meet certain criteria.  The incentive payments could be used by a district to offset the expenses of a gifted education program.
      
      
   3. Distribution of Funds.  The new law provides that up to 5% of the appropriation for aid in 1998-99, 1999-00 and 2000-01 will be used for start-up costs for schools and will be distributed on a pro rata basis based upon eligible costs submitted by schools.  School systems may also receive .1% of the appropriation as base funds.  The remaining funds are to be distributed as a pro rata share based on the students participating in high ability learner programs.  Up to 10% of the prior year's membership of students participating in accelerated or differentiated curriculum programs may be counted for aid purposes.
      
      NOTES:  Based on an appropriation of $6 million in 1998-99, up to $300,000 of the funds appropriated can be used for start-up costs.  If all 286 school systems qualify for base funds, then $1,716,000 of the appropriation will be distributed on this basis.  The remaining $3,984,000 will be allocated based on students participating in high ability learner programs.  Once again, a 50% match must be provided by a local school system to receive any of these funds.
      
      
   4. Special Education Allowance.  The inclusion of aid funds received for high ability learner programs as part of the special education allowance for state aid purposes and as an accountable receipt for purposes of determining local resources insures that school systems which receive aid for high ability learner programs will not be penalized by a loss in equalization aid.
      
      
   5. Rules and Regulations.  The State Board of Education is authorized to adopt rules and regulations to implement LB 1229, including criteria for the approval of accelerated or differentiated curriculum programs and data requirements for measuring academic progress of students participating in the programs.

Source:  Legislative Bill 1229, in Laws of Nebraska, Ninety-Fifth Legislature, Second Session, 1998, Session Laws, comp. Patrick J. O'Donnell, Clerk of the Legislature (Lincoln, Nebr.: by authority of Scott Moore, Secretary of State), §§ 1-13, pp. 1-9 (748-56).

Unlike LB 1229, the gifted education bill, LB 1228 did not have a direct impact on the school finance formula.  It would have an indirect impact, but it did not modify the actual statutes that comprise the TEEOSA.  Nevertheless, the legislation should be classified among the other major proposals that shaped public school finance in Nebraska.  From a policy perspective, the legislation brought out some important policy discussions, not the least of which was the true purpose of an equalization-based school finance system.  LB 1228 was touted as a great achievement for public education with far reaching objectives.  Although in recent times, most of the financial elements of the 1998 legislation have been set aside due to state budget shortfalls and economic troubles.

LB 1228 was the product of various contentious issues that arose in the previous four or five years.  And some of the policy directives contained in LB 1228 represented attempts at resolving long standing debates and controversies.  The bill was sponsored by Senator Ardyce Bohlke, chairwoman of the Education Committee, and co-sponsored by 20 other state senators.²⁰²  Senator Bohlke's commitment to the bill was such that she designated the measure as her personal priority just one day after the bill was officially introduced on January 20, 1998.²⁰³ Being a 60-day, short session, Senator Bohlke wasted no time in letting her colleagues know where much of her attention would be spent.  In fact, She had used the interim period to carefully prepare the proposal, building a collaborative network of support, and testing the idea with consultants and advisors.

Bohlke's position on the Education Committee gave her the authority to establish the public hearing schedule for bills under her committee's jurisdiction.  And LB 1228 was among the first to be heard in a public forum.  The public hearing was held on February 2, 1998 and most every major representative group was there to support the bill, in addition to a variety of rural and urban school district representatives.²⁰⁴ The only opponent of the measure was Ross Tegeler, who represented the Excellence in Education Council, the governing body having statutory authority to disperse funds from the Education Innovation Fund (a beneficiary fund under the State Lottery).  So why would a state created governing body oppose such a bill?

"The heart of education"

The opposition by the Excellence in Education Council sprang from what its members considered a raid on the monies within their oversight.  The funding source for LB 1228 would largely derive from monies distributed to the council from the state lottery proceeds.  Since 1992 these funds had been used for grants to schools that make application and vow to make certain improvements or innovations in educational services to students.  But ever since its creation, the beneficiary funds under the State Lottery had been the subject of countless grabs or attempted grabs by lawmakers in order to bypass the more difficult task of procuring appropriations from the state's General Fund.  In short, the beneficiary funds were easy and convenient targets for funding sources.

One year before the introduction of LB 1228, the Excellence in Education Council adopted a resolution, a set of guiding principles, to outline the mission of the council.  As Ross Tegeler testified on February 2nd, the principles provide that:

1. the funds should be utilized to encourage innovation;
   
   
2. the funds should be considered as research and development resources for education in Nebraska;
   
   
3. the funds should be support local school improvement planning and the implementation of those local plans; and
   
   
4. the funds should be distributed through the grant application process as initially prescribed by the Legislature.²⁰⁵

Tegeler emphasized it was not the goals within LB 1228 that the council opposed but rather the funding source.  He noted that LB 1228 was but one of many bills designed to utilize funds under the council's supervision.  "We are also aware that a number of other bills before this session of the Legislature would also seek to utilize resources from the Education Innovation Fund," he said, "In fact, the aggregate of the proposals to reallocate funds from the Education Innovation Fund far exceed the receipts to that fund."²⁰⁶

In the case of LB 1228, Senator Bohlke believed the policy objectives justified usage of lottery proceeds.  In fact, the objectives were so important, she felt, that both lottery proceeds and General Fund appropriations were justified.  So what were these objectives that were so important as necessitate state appropriations along with a restructuring of the Education Innovation Fund?

Since coming to her position on the Education Committee, Senator Bohlke believed the dominant item of discussion had been the school finance formula.  In 1995, her second year as chairwoman, the major piece of legislation was spending limitations and special education funding.  In 1996, major modifications to the formula were enacted under LB 1050 while the Legislature also set about establishing levy limits under LB 1114.  In 1997 the attention of the Legislature focused on major formula modifications under LB 806.  Through most of this timeframe, very little actual discussion occurred on what Senator Bohlke called the real issues of education.  "I think we've set the parameters on the funding," she said, referring to the school finance formula.²⁰⁷  "Now we're looking at the heart of education," she added.²⁰⁸

As advanced from committee on February 24th by an 8-0 vote, LB 1228 proposed to create the Quality Education Accountability Act with four major components:  (1) quality education incentives, (2) a financial reporting system, (3) a testing program, and (4) a mentor teacher program.²⁰⁹

1. Quality Education Incentives.
   
   Quality education incentive payments would be provided to a local system each year it meets the qualifications.  The first two years a system qualifies, the system must meet all of the "primary quality factors."  The third and fourth years, the system must meet all of the primary factors and at least two of the "premier quality factors."  The fifth and sixth years, the local system must meet all of the primary factors and at least three of the premier factors.  The seventh year and each year thereafter, a local system must meet all of the primary factors and all of the premier factors.
   
   The primary quality factors are:
   
   
   1. Adoption of state academic standards or standards approved by the State Board as being more rigorous;
      
      
   2. An alternative school, class, or educational program is available or in operation for all expelled students or there is a policy to have such a program available if any students are expelled;
      
      
   3. Each district has an approved program for learners with high ability or there is a policy to have a program available if any students are identified; and
      
      
   4. At least 60% of the graduating seniors have taken a standard college admissions test and the average most recent score is above the statewide average on any exam taken by at least 25% of the graduating seniors.
   
   The premier factors are:
   
   
   1. At least one teacher certified by the National Board for Professional Teaching Standards;
      
      
   2. At least 36% of the certificated teachers in the local system have advanced degrees;
      
      
   3. Each district participates in the mentor teacher program and provides a mentor for each first-year teacher or has a policy to participate and provide mentors if any first-year teachers are hired; and
      
      
   4. The high school district improves the annual percentage dropout rate from the prior year or maintains a dropout rate of 4% or lower.
   
   If at least 40% of the formula students qualify for the poverty factor as per the school finance formula and meets all of the qualifications except that the average test scores are not above the statewide average, the local system would receive payments equal to $50 per formula student multiplied by 2 times the percentage of seniors who scored above the statewide average on any test is divided by the number of seniors who have taken a standard college admissions test.
   
   Applications would be submitted to the Excellence in Education Council on or before July 1 of each year, using the most recent information and data available.  If the criteria are met, the local system would qualify and receive payments from the Education Innovation Fund on or before September 1.  The payments would be $50 per adjusted formula student or $100 per adjusted formula student for local systems in the very sparse cost grouping.  If the unobligated balance in the fund is less than the amount calculated, each system would receive a pro rata amount.
   
   The incentive payments may only be used for the purposes set forth for major competitive grants from the Education Innovation Fund.  The payments would be made to the high school district, which would determine how the payments are to be used after consultation with all Class I districts in the system.  Payments may be transferred to Class I districts.  Payments would not be included as formula resources.  The Excellence in Education Council may audit the use of quality education incentive payments.
   
   
2. Financial Reporting System.
   
   The State Board of Education must provide a financial reporting system for all local systems beginning in 1999.  The reporting system must:
   
   
   1. Provide for standardization and uniformity in the classification of all receipts and expenditures;
      
      
   2. Report all receipts and disbursements to the public and to NDE in a consistent format that easily explains to taxpayers how education funds are spent and where the funds are generated for the state, each local system, and each attendance center;
      
      
   3. Be adaptable to changing requests for information;
      
      
   4. Be provided in an electronic format;
      
      
   5. Provide for the inclusion of Class I data with the primary high school district in a manner that allows for analysis of the Class I and the primary high school district separately and as an aggregate;
      
      
   6. Provide for electronic filing of reports with the department and the Auditor;
      
      
   7. Provide for electronic access to reports; and
      
      
   8. Maintain compatibility with existing accounting systems.
   
   NDE must, by rule and regulation, prescribe the format and content of financial reports that are to be filed or made available to the patrons of each system.
   
   The system may be purchased fro m a private vendor or developed by the department after a cost analysis.  NDE must also provide periodic training to district and ESU personnel and to school board members and interested members of the public.  The department and each local system must provide defined financial reports to the media and other interested parties.  The state information must also be available on a statewide public computer information network.  Districts may also provide additional financial reports and data generated by the financial reporting system.
   
   
3. Testing Program.
   
   The State Board must implement a statewide testing program for students in a selected grade in each of the grade ranges 4-6, 7-9, and 10- 12 each fall semester beginning in 2000 and must be responsible for the cost of the test materials and scoring.  The testing program must consist of one test purchased from a recognized testing service that tests students in the areas of mathematics, reading, science, and social studies, plus one writing test, either developed within the state by educators with expertise in writing assessment or purchased as a part of the test for the other specified subjects.
   
   The purposes of the testing program are:
   
   Mentor Teacher Program.
   1. Evaluate whether or not students have acquired skills and knowledge to meet or exceed state academic standards;
      
      
   2. Measure progress of students toward meeting state academic standards;
      
      
   3. Provide information for analysis of standards and consideration of new standards;
      
      
   4. Allow comparisons between the achievement between local systems; and
      
      
   5. Allow comparisons between Nebraska students in other states.
   
   All public school districts must participate, and all students in the designated grade levels must be tested, except the State Board must establish criteria that may exempt special education students from testing in any or all subject areas.  The state board may also adopt alternative tests or scoring for special education students and students with limited English proficiency.
   
   The individual scores must be confidential, must be reported to the district, and must not be reported to the department.  Aggregate results for each district must be reported to the department by the testing service and writing test scorers.  Districts may also make aggregate data available based on attendance centers.
   
   
4. The state board must develop a mentor teacher program to for individuals entering teaching.  The state board must conduct a comprehensive study of the needs of new teachers and how those needs may be met through a program of orientation and mentor support.  The state board also must develop and coordinated mentor teacher training to be funded by the Education Innovation Fund and must develop criteria for selection excellent, experienced, and qualified teachers to be participants.  The state board must report to the Legislature on or before December 1, 1998.

The legislation proposed to amend the law relevant to the Education Innovation Fund in order to allocate up to 10% of the available funds first for mentor teacher training and another amount for quality education incentive payments.  Any remaining money would be allocated by the Governor through the existing provisions for mini-grants to school districts.²¹⁰  At the time, the Education Innovation Fund received about $9.4 million per year in lottery proceeds.  This meant that about $940,000 would be available for the teacher mentor program, and about $6.5 million would be available for the quality incentive payment program.²¹¹

Debate and Passage

Unlike LB 1229 related to gifted education, LB 1228 would consume a large amount of time for floor debate and deliberation during the 1998 Session.  Most of the heated discussion focused on the proposed assessment system, and whether there should be a single test or a multiple test system.  There was discussion about the varying impact the legislation would have on different sized school systems and how many students and teachers would be benefited from the various proposed programs.  Generally, the debate was not so much whether the bill should become law, but exactly in what form.  There was generally constructive, supportive dialogue among legislators on the outline of the proposal.  "It is not often that a bill comes along that overall, in my opinion at least, has such a positive effect on the possible quality of education," said Senator Chris Beutler.²¹² However, there were a few vocal dissenters among the body.

Those who opposed the legislation had various concerns, such as the proposed assessment system or the cost of the programs.  At least at one point in the floor debate, Senator Ernie Chambers had a blanket complaint with the entire bill.  "This bill is not about education," Chambers warned.²¹³  "This bill is about getting hold of some money and finding a way to implicate enough districts in this scheme to get enough votes to pass this bill into law," he said, "It is very poorly considered legislation, and it is self-contradictory."²¹⁴ He believed that if funds were to be distributed by the state then programs should be mandated so that all children receive the benefit.  This was a consistent argument that the Omaha senator voiced with regard to LB 1229.

The important item to note about LB 1228, as it relates to the school finance formula, is that the funds received for quality incentive payments or for the mentor teacher program were not considered as actual receipts.  Equalized as well as non-equalized districts would be eligible for the funds and it would not be counted against the state aid they receive the following year.  And this raises one of the more interesting questions about the legislation that did not come out during debate perhaps as much as it should have.  The policy question might have been whether the funding programs contained in the bill were consistent with the concept of a true equalization formula.

LB 1059 (1990), LB 1050 (1996), and LB 806 (1997) all sought to implement or further implement an equalization aid-based formula.  Those districts that need the funds most would receive them first.  LB 1228, on the other hand, added another layer of state aid, albeit a smaller amount, to those districts that met certain criteria unrelated to such considerations as property valuation, tax levies, spending lids, and student population.  A further criticism of the 1998 legislation might have been that the measure tended to be more easily accessible to those districts that possessed the existing resources, both labor and finances, to apply for the funds.  The latter criticism was, in fact, brought out during the debate, both on the floor and behind the scenes.

The argument could have been made that if the intent of the Legislature was to tap into the resources of the Education Innovation Fund, the funds should have flowed through the equalization formula.  This would have been in keeping with the work completed and the legislative intent already forged in developing an equalization-based formula for public schools.  Of course, one of the other elements of school finance is the political-- the will of a legislative body to meet a policy objective.  In the case of LB 1228 there were, what the sponsors believed, some very important educational themes, services, and programs to be promoted.  These included programs for expelled students, so that they were not without educational opportunities, and gifted education, so the other side of the special services equation was addressed.  The Legislature, through LB 1228, wanted to establish some of the priorities it collectively wished for public education, such as adoption of academic standards, high college admission scores, low dropout rates, and more teachers possessing graduate level education.  The presumption made by the legislation was that if schools achieve or at least pursue some or all these objectives then students would benefit and public education would be improved.

LB 1228 did produce some long over due discussion about the educational issues that may have been ignored in previous sessions.  In fact, the previous two legislative sessions were largely used on school finance issues.  Perhaps this was by necessity in light of the property tax policy changes.  But in 1998, the discussion turned directly to issues that impacted public education, at least in the collective opinion of the Legislature.

Senator Bohlke's priority bill may not have sailed through the legislative process as fast as she had hoped, but it did receive strong approval at each stage of debate.  Finally, on April 2nd, the body passed LB 1228 by a 40-6 vote.²¹⁵  Governor Nelson signed the measure into law on April 8th, but he line-item vetoed the companion appropriation bill.  In a letter dated April 8th, Governor Nelson wrote:

With this letter, I am returning LB 1228A with a line-item veto.  This legislation also provides for the implementation of an annual statewide assessment beginning in the school year 2000-2001.  I am vetoing $1,728,000 General Funds provided by the Legislature for Fiscal Year 1999-00 for carrying out the provisions of the assessment program in LB 1228.

My decision allows the Department of Education time to prepare a Request For Proposal (RFP) and receive bids from national testing services on the cost of potential testing instruments.  The department can return to the Legislature with this information and a more precise estimate of the costs for the implementation of this testing program.

I believe the state will benefit from taking more time to collect and review data on the implementation of a statewide assessment before committing the funding for this program.²¹⁶

Nelson's action may have been an annoyance to the department, and perhaps to Senator Bohlke, but he did have a point about getting the cart before the horse.  It was simply not known for sure what the cost of the assessment instrument might be at that time.

On the whole, the passage of LB 1228 was a great victory for Senator Bohlke and other supporters.  The bill caused a fairly significant collaborate effort by a variety of organizations and different sized school districts.  Unfortunately, just a few years later the Legislature would find it necessary to siphon off the proceeds of the Education Innovation Fund to help the state with its budget difficulties following the "911" disaster and the economic chaos that ensued.

Introduced and prioritized by Senator Bohlke, and co-sponsored by 20 other senators, LB 1228 created the Quality Education Accountability Act.  The new can be divided into four components:  (i) quality education incentive payments, (ii) financial reporting system, (iii) statewide assessment, and (iv) teacher mentoring.

1. Quality Education Incentive Payments.
   
   
   1. Criteria.  Quality education incentive payments would be provided to local systems each year the local system meets the qualifications described below.
      
      

      Qualification Years	Qualifying Factors
      1st - 2nd 3rd - 4th 5th - 6th 7th & beyond	all primary quality factors all primary quality factors and at least 2 premier quality factors all primary quality factors and at least 3 premier quality factors all primary quality factors and at least 4 premier quality factors

      
      Primary Quality Factors:
      
      
      • Academic Standards.  Each district in the local system has adopted academic standards adopted and promulgated by the State Board of Education OR academic standards approved by the state board as generally more rigorous than the academic standards adopted and promulgated by the state board.
        
        
      • Alternative Education for Expelled Students.  Each district in the local system has an alternative school, class, or educational program available or in operation for all expelled students or, for districts that do not have any expelled students, an adopted school board policy to have an alternative school, class, or educational program available or in operation for all expelled students if any expulsions occur.
        
        
      • College Admissions Test.  At least 60% of the graduating seniors in the local system have taken a standard college admissions test and those students have an aggregate average score, using the most recent test score on each test taken for each student who has taken at least one of the tests, above the statewide average score on any of the standard college admissions tests which at least 25% of the graduating seniors have taken.
        
        
      Premier Quality Factors:
      
      
      • National Certification.  The local system has at least one teacher who has received credentials from a national nonprofit organization the purpose of which is to establish high and rigorous standards in a broad range of educational areas for what accomplished teachers should know and be able to do and which issues credentials to teachers who demonstrate that they meet those standards;
        
        
      • Graduate Degrees/Courses.  At least 36% of the certificated teachers in the local system have advanced degrees or at least 30 graduate-level hours.
        
        
      • Teacher Mentoring.  Each first-year teacher in a local system is provided with a mentor participating in the mentor teacher program established under LB 1228 or a mentor teacher program established by a district in the local system and approved by the state board.
        
        
      • Dropout Rate.  The high school district improves the annual percentage dropout rate from the prior year or maintains a dropout rate not to exceed 4%.
        
        
      • Gifted Education.  An approved program for learners with high ability is available to every student identified as a learner with high ability in the local system and there is at least one learner with high ability identified.
   2. Application Process.  Local systems meeting the criteria may apply to the Excellence in Education Council for quality education incentive payments on or before October 1, 1998, for the 1998-99 school fiscal year and on or before July 1st of each fiscal year thereafter, using the most recent information and data available.  If the information and data in the application indicate that the local system meets the criteria, the local system will qualify for quality education incentive payments.
      
      
   3. Payment Amounts.  Incentive payments will be made from the Education Innovation Fund (State Lottery) on or before December 1, 1998, for the 1998-99 school fiscal year and on or before September 1st of each school fiscal year beginning with 1999-00 school fiscal year.  The payments will equal $50 per adjusted formula student or $100 per adjusted formula student for local systems in the very sparse cost grouping based on the most recent certification of state aid.  Pro Rata:  If the unobligated balance in the fund is less than the amount calculated for quality education incentive payments due to qualified local systems, each qualified local system will receive a pro rata amount such that the amount of payments equals the unobligated balance in the fund.
      
      
   4. Permitted Uses for Incentive Payments.  Incentive payments may only be used for pilot projects or model programs for the purposes set forth in section 9-812 for major competitive grants.  Incentive payments may not be used to supplant federal, state, or local funds.  The payments must be made to the high school district, and the high school district prior to the application must determine how the payments will be used after consultation with all Class I school districts in the local system.  Incentive payments, or portions of such payments, may be transferred to the Class I school districts.  (NOTE:  Quality education incentive payments will not be included as local system formula resources.  The Excellence in Education Council may audit the use of quality education incentive payments at the discretion of the council.)
      
      
2. Financial Reporting System.
   
   
   1. Feasibility Study.  With NDE's assistance, the School Finance Review Committee is directed to complete a feasibility study and make recommendations for a financial reporting system for all K-12 local systems and report to the Legislature's Education Committee by December 1, 1998.
      
      
   2. System Specifications.  The financial reporting system must:
      
      
      • Provide for standardization and uniformity in the classification of all receipts and expenditures as a basis for preparing financial reports;
        
        
      • Report all receipts and disbursements to the public and NDE in a consistent format that easily explains to taxpayers how education funds are spent and where the funds are generated for the state, each local system, and each attendance center;
        
        
      • Be adaptable to changing requests for information;
        
        
      • Be provided in an electronic format;
        
        
      • Provide for the inclusion of Class I data with the data of its primary high school district in a manner that allows for analysis of the data for the Class I and the primary high school district separately and as an aggregate;
        
        
      • Provide for electronic filing of reports with NDE and the State Auditor;
        
        
      • Provide for electronic access to reports as filed; and
        
        
      • Maintain compatibility with existing accounting systems.
3. Statewide Assessment.
   
   
   1. Creation of Program.  The State Board of Education is directed to implement a statewide assessment program for students in each of the grade ranges 4-6, 7-9, and 10-12 each fall semester beginning with the fall semester of 2000.
      
      
   2. Purchase/Development of Assessment Instrument.  The assessment program will consist of one assessment purchased from an assessment service for each selected grade which tests students in the areas of mathematics, reading, science, and social studies, plus one writing assessment, either developed within the state by educators with expertise in writing assessment or purchased as a part of the assessment for the other specified subjects.
      
      
   3. Purposes of Assessment Program.
      
      
      • Evaluate whether or not students in a school system have acquired skills and knowledge which allow them to meet or exceed academic standards established by the state board;
        
        
      • Measure progress of students in a school system toward meeting academic standards established by the state board;
        
        
      • Provide information for analysis of adopted standards and consideration of new standards;
        
        
      • Allow comparisons to be made between the academic achievement of students in a local system and students in another Nebraska local system; and
        
        
      • Allow comparisons to be made between the academic achievement of Nebraska students with the academic achievement of students in other states.
   4. Participation.  All public school districts are required to participate in the assessment program, and all students enrolled in the designated grade levels in such districts must be assessed except as follows:  (i) the state board must establish criteria that schools may use to exempt special education students from assessment in any or all subject areas; and (ii) the state board may also adopt alternative assessments or means of scoring for special education students and students with limited English proficiency.
      
      
   5. Reporting.  The individual assessment scores will be confidential, will be reported to the school district for educational purposes, and will not be reported to NDE.  Aggregate results for each school district will be reported to the department by the assessment service and writing assessment scorers.  School districts may also make aggregate data available based on attendance centers.
      
      
   6. Cost of Assessment Program.  NDE is responsible for the cost of the assessment materials and scoring.
      
      Notes:  The Governor line-item vetoed a portion of the appropriation bill, LB 1228A, concerning the funding for the statewide assessment program.  LB 1228A would have appropriated $1,728,000 for FY1999-00 to fund the program.  The Governor argued that the funds were not needed at this time since the program would not be implemented until the fall of 2000.
      
      The Legislature's Fiscal Office estimates a General Fund cost of approximately $1,945,000 ($28.20 per test) for a multiple choice test and a writing assessment which is purchased from a major test publisher.  If only a multiple choice test is purchased from a testing company and the writing assessment is developed and administered by educators in the state, then annual testing costs may be closer to $1,511,000 ($21.90 per test).
4. Teacher Mentoring.
   
   
   1. Guidelines.  The State Board of Education is directed to develop guidelines for mentor teacher programs in local systems in order to provide ongoing support for individuals entering the teaching profession.
      
      
   2. Funding.  Funding for mentor teacher programs will be provided to local systems that provide a mentor for each first-year teacher in the local system.  The mentor teacher programs will be funded by the Education Innovation Fund and must identify criteria for selecting excellent, experienced, and qualified teachers.
      
      
   3. Report.  The state board must report to the Legislature on or before December 1, 1998, on its progress.
      
      Final Notes on LB 1228:  The quality education incentive payments and teacher mentoring programs are to be funded through the Education Innovation Fund.  In 1998-99 the estimated receipts to the Education Innovation Fund is $9.4 million.  LB 1228 amends existing law to create the following order of priority to draw funds from the Education Innovation Fund:  First Priority - up to 10% to fund mentor teacher programs; Second Priority - up to 70% for quality education incentive payments; and Third Priority - up to 20% for competitive grants (the original purpose of the Fund.
      
      Using estimated annual receipts of $9.4 million to the Education Innovation Fund, approximately $6.58 million will be available in 1998-99 and 1999-00 for quality education incentives.   If half of the adjusted formula students in the state qualified for incentive payments, then approximately $8.3 million (332,000 adjusted formula students x $50) would be needed for incentive aid, which would necessitate the prorating of available funds.

LB 1175 (1998) was introduced as a technical clean-up bill for statutes pertaining to schools.  The lengthy bill contained modifications to various sections of law in order to update them or otherwise edit them, but in most cases not produce substantive policy changes.

Clean-up bills are offered each year by just about every standing committee of the Legislature having jurisdiction over a specific area of law, whether it is criminal law, banking, health, education, etc.  In many cases, once advanced from committee these clean-up bills become what lobbyists and legislators alike call "Christmas tree bills," since interested parties attempt to attach ornaments (amendments) to them throughout the legislative process.  The bills usually have such a broad scope that issues of germaneness are seldom raised.  LB 1175 would befall the fate of all such bills and numerous amendments would be attached to the bill.  But unlike most technical cleanup bills, LB 1175 would become known as the technical cleanup bill that caused a special session.

Among the provisions of the bill, LB 1175 sought to change the calculation of special education allowances in the state aid formula to include receipts for wards of the state and wards of the court.²¹⁷  The bill changed the calculation of total adjusted formula students for local school systems qualifying for the extreme remoteness factor in the state aid formula.²¹⁸  The bill changed the parameters and qualifications for local systems within the very sparse cost grouping so that additional systems would be eligible for such cost grouping.²¹⁹  The bill also outright repealed several sections of existing law that provided for the Special Education Accountability Commission and the termination of the existing special education funding formula.²²⁰ Without the repeal of these sections, Nebraska simply would not have a funding formula for reimbursement of special education costs to school districts.

In all, the bill contained 71 sections and was comprised of 107 pages.  But it was one portion of the bill in particular that would escape the careful attention of the Legislature and the administration, and ultimately lead to its veto and later a special session.  This chain of events would also lead to further legislation in the 1999 Session concerning the issues raised by LB 1175.

The event that set off a chain reaction in legislative activity was the adoption of an amendment to LB 1175 on the evening of April 6, 1998.  The Legislature occasionally extends a session day into the evening in order to accomplish more business and make some headway on the overall legislative agenda.  This often occurs toward the end of a legislative session when senators are desperate to finish as much business as possible.  On April 6th, the Legislature was just eight days away from the end of the session, and there was a heightened sense of urgency to work through a number of bills, including LB 1175.  By this point in time, the bill already had been amended seven times and also survived a motion by Senator Ernie Chambers to recommit to the Education Committee for further review.²²¹

By the time the bill arrived for debate on Select File, the tedium of the intricate educational issues being addressed had taken its toll on most members of the body.  To be certain, members of the Education Committee were quite aware and knowledgeable about the amendments under discussion.  But to other members of the body, LB 1175 represented just another cleanup bill.  By the next morning, all this would change.

The amendment at issue was introduced and filed on March 30th, a week before it was to be debated, by Senator Bob Wickersham of Harrison.  Wickersham, a member of the Education Committee, had filed the amendment for the purpose of incorporating the intent and language of another bill, LB 1124 (1998), into LB 1175.  This is a common practice among legislators and it provides the opportunity to advance legislative proposals that might not otherwise have a chance for passage.

The Wickersham amendment to LB 1175 would change the method of calculating the amount of state aid to schools.  The local effort rate in the school aid formula would be established at 90.97% times the maximum levy allowed schools under the property tax lid.²²²  The Legislature would then be required to provide sufficient annual appropriations to fully fund the amount of state aid certified by NDE based on the local effort rate established under the bill.  In essence, there would finally be a guarantee, of sorts, by the Legislature to ensure complete funding from year to year.  The formula would function without political influences.  As Wickersham explained to his colleagues, "There is after, if this amendment is adopted, a clear, direct process formula for calculating the amount of money that should be appropriated to fund TEEOSA."²²³

The amendment established the local effort rate at $1.00 ($1.10 multiplied by .9097) for the state aid distribution in school years 1999-00 and 2000-01, which was the same local effort rate used in the distribution of state aid for the 1998-99 school year.  Upon the reduction of the maximum levy to $1.00 in 2001-02, as prescribed by LB 1114 (1996), the local effort rate would reduce to approximately 91¢.  The Legislature's Fiscal Office anticipated this would require an additional $70 million in state aid appropriations once the maximum levy dropped to $1.00.²²⁴

Interestingly, only one legislator questioned Senator Wickersham about the automation of funding that would be set in place by the amendment.  Senator Pam Brown of Omaha asked Wickersham, "This is the amount that we will then automatically put into the TEEOSA amount for state aid?"²²⁵  To which Wickersham answered in the affirmative even though at the time of debate no one knew for sure what the future increases in state aid appropriations would entail.  During his exchange with Senator Brown, Wickersham elaborated:

I'm not attempting to increase funding.  It's true that I did introduce a bill that had this formula in it that would in fact have increased funding and increased funding fairly significantly.  It is not our expectation that this actually increases the level of funding that we would receive under the current estimating process.²²⁶

Wickersham hastened to add, "I can't tell you that that's a hundred percent accurate, but that's my intention."²²⁷  Brown would later say that her colleagues simply did not understand what they were voting for.²²⁸ But this is certainly not the fault of Senator Wickersham who carefully explained the purpose of the amendment and offered to answer any questions posed to him.

In truth, the Wickersham amendment, which was adopted by a 25-0 vote, would have accomplished what Wickersham set out to achieve.²²⁹ It would have simplified the process of determining an annual appropriation to fund the formula from year to year.  It would have eliminated some of the educated guesswork by legislative and department staff.  Whether intended or not, it would have also increased state appropriations for public schools once the maximum levy dropped to $1.00.  And this became the catching point not only for the amendment but also for the bill itself.

The Governor's office, which often takes an active role in shaping legislation, failed to take immediate note of the amendment.  However, within a few days the administration had begun distancing itself from what it perceived as a blank check for public education.  Leslie Reed, reporter for the Omaha World-Herald, said perhaps what the administration wanted to say when she wrote on April 12th, "With a five-minute debate and a 25-0 vote, the Nebraska Legislature has committed itself to an additional $70 million a year for public schools beginning in the next few years."²³⁰

A Final Reading vote on LB 1175 was set for the very last day of the session, April 14, 1998.  While the last day of most regular sessions usually entails ceremonial activities and perhaps final passage of non-controversial bills, the 1998 Session would end with drama, a few hard feelings, and perhaps a lesson to all about seemingly technical-related bills.  During Final Reading discussion, Senator Ardyce Bohlke, chair of the Education Committee, filed a motion to recommit the bill to committee.²³¹ The motion was not meant seriously, but rather to offer her and Senator Wickersham a chance to respond publicly to the controversy generated by the Wickersham amendment.

Bohlke noted several sections of the bill that required the Legislature's immediate action and therefore justification for passage, but it was the termination of the existing special education formula that rose above all others.  Bohlke admitted that special education cost reimbursement would continue for the current school year but the same would not be true for the following school year if LB 1175 did not pass.  Said Bohlke:

The question is next year, next September when school begins until we would come into session, if we would not pass this, we would not have a special ed formula in place.  Therefore, schools would not know what the state will be reimbursing them for special ed costs.  That obviously would cause a great deal of confusion not only to schools as they try to determine which services they should offer, but more importantly to students in those special education programs and certainly to the parents of those students in those special education programs.²³²

Bohlke said the lack of a special education formula would be particularly difficult for smaller, rural schools that might not have the resources or reserves to make up the difference.

Bohlke then allowed Senator Wickersham to offer his comments on the situation.  Wickersham said he was surprised by the controversy surrounding his amendment and adamantly denied any intent to create a "new spending issue."²³³  He said the idea of accounting for the lost revenue to schools, due to the reduction in the maximum levy from $1.10 to $1.00, was an item of discussion dating back to the passage of LB 806 (1997).  Said Wickersham:

I am glad that the controversy now surrounding [AM]4207 has perhaps brought it to the front of your consciousness because it is something we need to be aware of.  It is something that we need to plan for.  It is something in my opinion that we need to provide for because it will happen.  I will not vote to raise the levy limitations.  And I will not vote to deprive schools of the resources that they need to provide an adequate education for students in this state.²³⁴

Wickersham said the Legislature made a policy decision when it passed LB 806 (1997) committing major modifications to the school finance formula.  Part of the policy decision was to infuse more funds into the formula to account for the newly imposed levy limitations under LB 1114 (1996).  The loss of local revenue would be made up by increased state aid.  His amendment to LB 1175, he said, was simply a continuation of the goals set out in that policy.

Bohlke withdrew her motion in order to permit a final vote, but the discussion would continue through the remainder of that morning and resume in the afternoon.  A number of legislators rose to speak in favor of the bill as it stood and endorsed the idea proposed by the Wickersham amendment.  Others, including Senator Brown, rose to encourage a reconsideration of the Wickersham amendment and permit the remainder of the bill to pass.  Ultimately, all attempts to stall the bill failed and a final vote for passage was allowed to happen.  The bill passed by a surprisingly wide margin with 34 in favor and only eight opposed.²³⁵

Governor Nelson vetoed the bill, as expected, four days after the Legislature had adjourned sine die.²³⁶  In a letter to the Legislature, Nelson wrote that he understood the significance of the bill to Nebraska's schools.  However, Nelson wrote:

I cannot support language in LB 1175 which changes the intentions of the State regarding policy to create greater efficiencies in political subdivisions and provide property tax relief for the citizens of Nebraska.  I am always concerned with "Christmas tree" bills, and in this case, unfortunately, the last ornament collapsed the whole tree.

LB 1175 changes the formula to calculate state aid to schools and states the Legislature shall "fully fund" the amount certified.  This formula alters what I believe Nebraskans expect in encouraging government to explore ways in which to become more efficient Spending limitations were put into place to provide property tax relief, not to create a tax shift to the State.  LB 806 was designed to address the changing financial challenges schools will face, and current statute allows the flexibility the State needs to determine the appropriate spending obligations of the State in the future.²³⁷

Nelson reminded legislators that state aid to schools had increased by 86% since 1992.  But increases in state aid were not the only priority of state government.  Nelson wrote, "The answer to providing tax relief and creating efficiencies in government cannot be answered by increasing the obligations of the State."²³⁸  He urged, if not chided, the Legislature to give more consideration before committing the state to a "policy shift" such as that found in LB 1175.²³⁹  Governor Nelson was not insensitive to the other important elements of LB 1175, at least as he viewed them, and he would call the Legislature back into session to address the less controversial items contained in the bill.