CLOSE Window

COMMITTEE STATEMENT

LB 1059

HEARING DATE: January 25, 1990

COMMITTEE ON: EDUCATION AND REVENUE

TITLE: LB 1059 (Withem, et al) Tax Equity and Educational Opportunities Support Act

ROLL CALL VOTE, FINAL COMMITTEE ACTION

Advanced to General File

Y Advanced to General File with amendments

Indefinitely Postponed

Vote results:

12 Yes: Senators Withem, Hall, Dierks, Hefner, Bernard-Stevens, Hartnett, Crosby, Landis, Chizek, Rogers, Nelson, Baack

2 No: Senators McFarland, Peterson

1 Present, not voting: Senator Haberman

1 Absent: Senator Labedz

PROPONENTS	Representing
Senator Scott Moore	Introducer
Larry Vontz	School Finance Commission
Duane Stehlik	School Finance Commission
Gene Koepke	School Finance Commission
Don Leuenberger	School Finance Commission
Dr. Norbert Schuerman	Omaha Public Schools
Dr. Larry Dlugosh	G.I. Public Schools
Walter Radcliffe	Nebraska Realtors
Jim May	Self
Larry Belz	Self
Ron Witt	Millard Public Schools
Rich Schlesselman	Petersburg Public Schools
Marge Young	League of Women Voters
Gary Thompson	Beatrice Bd. of Education
Tom Vickers	NTCCA
Dale DeReise	Holdreqe Public Schools
Walt Thompson	State Board of Education
Dale Siefkes	NASB
Carl Newquist	Self
Glenn Uecker	Pierce Public Schools
John Hansen	Nebraska Farmers Union
Mary Mancuso	Scottsbluff Public Schools, Norfolk Public Schools, Columbus Public
	Schools, Grand Island Public Schools, North Platte Public Schools
Meg Lauerman	Lincoln Public Schools
Written Testimony:
Dr. James E. Ossian	Supt. Waverly
Bruce Neidig	Nebraska Farm Bureau
OPPONENTS	Representing
Don Osborne	Supt. Big Springs
Mick Karmazin	Lawrence School Board

LB 1059

Page 2

Scott Butterfield	Supt. Macy Public Schools
John DeCamp	Class VI Schools
Rick Baum	NSIA
Monty Rohmer	Self
M. L. Smith	Self
Lester Rhoades	Self
Dennis Gengenbach	Bertrand School District 54
Ken Babcock	Meridian Public Schools
A. Loy Todd	New Car Dealers
NEUTRAL	Representing
Deb Thomas	Governor

Summary of purpose and/or changes:

Section By Section Summary

Section 1. Names the Tax Equity and Educational Opportunities Support Act.

Section 2. States legislative funding that there is an over-reliance on the property tax for school support, that state aid has not kept pace with increasing school costs, and that the over-reliance on the property tax and inadequate state funding have created tax inequities for Nebraska taxpayers and inequities in educational opportunities for Nebraska students.

States legislative intent to provide state funding for 45% of aggregate school operating costs, (For 1990-91 an additional $211.3 million would be required to meet this goal) to reduce reliance on property taxes for school support through dedication of a portion of the income tax for school support, to assure a greater level of equity for Nebraska students and taxpayers through implementation of the new equalization formula, and assure that there is a shift from property tax support to state tax support for schools through implementation of effective budget limitations.

Section 3. Provides Definitions.

Section 4. Dedicates for Fiscal Year 1990-91, 20% of all income tax receipts collected by the state net of credits and refunds. Provides for direct return of 20% of identifiable individual income tax receipts to the school district where such originated (estimate for 1990-91, $80 to $90 million). Class I school districts, Class VI school districts and county nonresident tuition funds would receive a prorata share of such income tax receipts. That part of individual income taxes not identifiable to any school district plus 20% of corporate, nonresident, trust and other non-individual income tax receipts would be distributed through the equalization formula. (Estimate for 1990-91, $20 to $28 million)

Section 5. Provides that the State Department of Education will place all school districts in average daily membership

LB 1059

Page 3

tiers of comparable size in order to calculate each school district's tiered per student costs for use in the equalization formula.

Section 6. States that each school district will receive state aid to the extent that its "formula need" exceeds "formula resources."

Section 7. The total "formula need" of each school district is computed by multiplying the number of students it educates in kindergarten, grades 1-6, grades 7 and 8, and grades 9-12 times the tiered per student costs for each such grade grouping.

Section 8. Each district subtracts from its "formula need" its local effort rate yield, which is the statewide local effort rate multiplied by each district's "adjusted" valuation. The local effort rate is calculated annually by the State Department of Education based on available appropriations, school district needs and school district resources. (The estimated local effort rate for 1990-91 is approximately 1.00 which equates to a typical tax rate of approximately one dollar per hundred dollars of taxable valuation.)

Section 9. The Revenue Department will use adjustment factors to adjust taxable valuation to reflect as nearly as possible actual value. Adjustment factors will be established based on best available assessment practices (sales assessment ratios, targeted appraisals etc.) Adjusted taxable values will be used in the formula for purposes of computing school district eligibility for state aid.

Section 10. Districts will subtract from their total "formula need" the amount of individual income tax revenues returned by the state to the district pursuant to section 4 of this act.

Section 11. Districts will subtract from their total "formula need" all other actual, accessible resources. The list includes all forms of local, state and federal receipts of school districts except federal categorical receipts.

Section 12. Creates the School District Income Tax Fund and the Tax Equity and Educational Opportunities Fund for receipts and distribution of income tax funds and state aid funds.

Section 13. Provides for distribution of income tax and state aid payments to school districts.

Section 14. Limits growth in school district budgets based on allowable growth rates to be set annually by the Legislature. The basic allowable growth rate will be based on projections of available state revenues and school district costs.

Section 15. Provides that each school district must submit

LB 1059

Page 4

a copy of its budget statement to the State Department of Education. The State Auditor will make necessary changes in budget documents to facilitate implementation of the budget limitation provisions.

Section 16. For school year 1990-91, the basic allowable growth rate will be 4%. The allowable growth range will be 4% to 6.5%.

Section 17. Provides for the State Department of Education to compute each district's "applicable allowable growth rate". Each district's growth rate will depend on whether it has budgeted expenditures of more or less than the average of comparable size school districts. Those districts spending below average will be able to spend above 4%, up to 6.5%.

Section 18. Limits school districts in budgeting of cash reserves, depreciation funds and contingency funds to a range of percentage levels based on school district size.

Section 19. Provides for exceptions to the growth limitations in the following cases:

(1) New or expanded programs or services mandated by changes in state or federal law. (2) Districts' project enrollment increases for the ensuing school year, in which case the Department will compute additional allowable growth capacity. (3) Construction, expansion, or alterations of school district buildings will cause an increase in building operation and maintenance costs.

Section 20. Provides that school districts may exceed allowable growth rates by an additional 1% upon a 75% majority vote of the school board or by any amount upon the approval of voters at a special election.

Section 21. Provides that school districts may carry-over to future years unused budget authority (if a school board does not choose to budget the maximum allowed by law.)

Section 22. Provides that the Department of Education will provide data to enable the Governor to introduce legislation to appropriate funds to reach the goal of 45% state support for schools to appropriate 20% of income tax receipts and to set allowable budget growth rates for the upcoming year.

Section 23. Creates a school finance review committee to monitor implementation of the new finance plan and suggest needed revisions.

Section 24. Provides for reporting of data by school districts on which state aid payments will be computed.

Sections 25 and 26. Harmonize references in existing statutes.

LB, 1059

Page 5

Section 27. Increases the state income tax primary rate to 3.70% effective for tax year 1991.

Section 28. Increases the state sales and use tax rate to 5% effective July 1, 1990.

Sections 29 to 33. Harmonizes provisions in an existing statutes.

Section 34. Is the severability clause.

Section 35. Is the repealer section.

Section 36. Declares an emergency.

Explanation of Amendments, if any:

1. Clarify that the legislative goal to provide state support for 45% of school operational costs applies to school operation costs in the aggregate, not for each school district.

2. Clarify income tax terms for purposes of calculating dedicated and distributable income tax proceeds.

3. Provide that special grants to school districts would be outside the budget limitations.

4. Provide that property valuation of property held to be exempt or nontaxable would not count against a school district in the calculation of its local effort rate yield. This would assure that districts paying refunds to railroads or pipelines etc. would not be penalized in state aid calculations.

5. Clarify the definitions of income tax receipts.

6. Clarify that the amount of income tax revenues returned to schools will be based on liability not receipts.

7. Clarify the year for which the Revenue Department is to determine the Revenue Department must compute the remainder of the portion of income tax receipts dedicated for schools.

8. Clarify that school districts must convince the State Board that additional budget authority is required due to new or expanded federal or state mandated programs.

9. Clarify that unused budget authority may be carried over and added to current budget authority.

10. Provide that the income tax rate increase would be applicable for tax year 1991 rather than tax year 1990.

11. Provide a hold harmless provision for districts which receive less aid under the new formula than under the School Foundation and Equalization Act. For school year 1990-91, no district would receive less than 100% of the amount received under the Foundation and Equalization Act; for 1991-92--80 and for 1992-93--60%. Thereafter the new formula would apply.

Chairperson