LB 829 (1991)
June 5, 1991
SPEAKER BAACK: LB 813 passes. We'll now go to LB 829.
CLERK: Mr. President, Senator Kristensen would move to return the bill for specific amendment. (Kristensen amendment appears on pages 2906-07 of the Legislative Journal.)
SPEAKER BAACK: Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Mr. Speaker and members of the body. I filed this amendment for the purposes of speaking at the moment, and speaking about the situation I believe we're in with LB 829 as it relates to our property tax situation. At the present time I think most of us, if we sit down and think about it and look at the situation, will agree that the short-term solution that we have here probably does violate the federal law, violates the federal law 4-R Act because we discriminate in our taxation of certain industries, in particular the railroads, although this is other legislation similar to the railroads that we may run afoul of. For all practical purposes, let's deal with the railroad situation because that is the most likely, and probably has the largest impact of what we're doing. Time and time again we have attempted, in I think very good faith, to address the personal property tax problem in this state, and the real problem... and the real estate. We've attempted in a number of ways, through special sessions, through difficult times this session, through a tremendous amount of work, through the Revenue Committee, through some very difficult debates on the floor, and I think in our zeal to do it we came very, very close, but for just the last provisions of upping that surcharge and making a disparate treatment, where we give 2 percent to one, and we put 4 percent on the centrally assessed items. if you think about it, I think you'll have to admit to yourselves we do violate the 4-R Act. And are we then going to introduce and pass legislation that is going to again violate that act, in the attempt to deal with this solution, either short-term or
long-term. With that, I filed a motion yesterday, the rest of you have probably seen by now, and that's to extend the session for two more days. That is solely for the purposes of LB 829, that is not for the purpose of constitutional amendment 186, 1 have nothing in mind with that, that is not the agenda, that is not the purpose for filing that motion to extend. It was done in a limited purpose for a reason. If we do need to. deal with 829 and change it, and the change... the amendment I have up here is really Senator Horgan's amendment that he had the other day, and that's to put all the property at 2.3, to treat everything equally, but maintain the integrity of this plan that I think has been worked out, and I think is probably satisfactory to deal with the short-term problems. But I have a tough time, because when I know when we're going to go back home we're going to have a lawsuit filed against us. And you can bank and say, well, maybe the railroads or those centrally assessed properties aren't going to file suit against us, and we'll get by one year. If all we can do is buy ourselves one year of time, we'll be okay. But I don't think that probably makes very good sense to know that we're going to violate federal law when we do it. And, once again, the Legislature, people are going to say to us, you can't get it right, you screwed it up again, we're back in the Supreme Court, and the integrity of the system again is called into question. And my intent was at some time, because I think a legitimate concern should be, well do you have a replacement plan. At this point in time we've discussed every replacement plan in sight. I think with a minor modification we can do that. If we truly want to do something with LB 829, we either don't take it up today, we don't advance it, and spend some time to fix it, and I think the fix is very slight, but I think it's very significant to bring it into compliance with the federal law. If the body wants to go ahead and pass LB 829, so be it. Then I think the need and the necessity for extending the session isn't there. Why would you want to extend the session? Well, one, it's cheaper than calling into special session because that's seven days. The two extended days does not have to be tomorrow and the next day, in fact it might be wise to have a cooling off period. Might be wise to come back a week from Monday and Tuesday, there's nothing sacred about extending it for three days either. We can handle that motion later. The reason I had it printed was at least to alert you to the fact that was an option there. I know there's threats of special session, I think that has to do with 186 and the other attendant amendments or positions on that bill. But a simple extension of the session is inexpensive, compared to a special
session. We're here, we've got the issue at hand, and I think the corrections are slight. With that, I know there's a couple other people who want to speak, and so I will leave this on. I will probably wait and see how the discussion of the body goes, but I think it's in our best interest at least in my perception. that, if we know we violate the 4-R Act, why do we want to go ahead and pass the piece of legislation.
SPEAKER BAACK: Thank you, Senator Kristensen. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members. I rise in opposition to Senator Kristensen's motion to return the bill for specific amendment. You're having handed out to you the summary of what LB 829 does do. The argument that .... You got that same summary, I think, yesterday in your boxes. But just for purposes of redundancy I'm passing it out again. The argument that Senator Kristensen makes with regard to whether or not the additional 2 percent surcharge and depreciation violates the 4-R Act, I guess the tougher act, you know, the whole issue of the pipeline case that he talked about yesterday is, I guess, an argument that could be made. I don't know that the issue of whose integrity in raising the argument is properly placed. I would argue that very likely the centrally assessed properties, who raised that as a specter to bring down LB 829, or at least hold it up, I would question, I guess, their integrity, not Senator Kristensen's clearly, but those folks who have been saying that this is a problem. What does the 4-R Act say? You know what the 4-R Act is? It's a piece of legislation that was passed in the 1970's, and the only line in it that deals with the issue of the railroads, and how they're treated, and which causes us all our problems as it relates to the taxing issue, is a line that reads like this, it says, the imposition of any other tax which results in discriminatory treatment of a common carrier by railroad, subject to part, period. That's all it reads. That's all it is. That's all it says. And Senator Kristensen says today that we are going to violate that because of the imposition of this surcharge depreciation, additional scale. Well, ladies and gentlemen, the cases that we have talked about, that we have dealt with don't have anything to do with this surcharge on depreciation. At best a case of this type would be a case of first impression, in other words, there wouldn't be anything else out there on which to build your case on. The pipelines, the railroads, the airlines know that. They would be starting out down a new path on this issue, and they would have nothing to lay that on, because there would be no
case history to back them up, not on this specific tax, it isn't there. There isn't another one like it. And what they're asking you to believe is that they're going to do that for a 10 million dollar hit spread out over one year. They're going to walk through the process and say that this is something that we are going to do to fight this. They did not fight the 4-R Act issue as it related to personal property for probably about the first five years that that one line was put into federal statutes. And they want you to believe that now we're going to coming in, and on this issue, which has no correlation, I argue that it has no relationship to the issue, the personal property tax that clearly was found to be unconstitutional and in violation of the 4-R Act. When Senator Kristensen read from the pipeline case, the other day, he read this statement, he said that the Legislature stated justification is illusory. We fail to see any real and substantial difference between personal property used for income production by one type of business, and the same type of income producing personal property used by another type of business. And he argued that you cannot do this, the court, in that opinion, says you can't do this. Well, the only problem with .... And he's right in that when he read that statement, that's exactly what it said, ...
SPEAKER BAACK: One minute.
SENATOR HALL: ... it came right out of the case. But go down to the next paragraph and read the next paragraph. The next paragraph says this, it says, the Legislature's effort to exempt railroads is not based on a reasonable classification, and violates both the proportionality and special legislation requirements in the Nebraska Constitution. There is no reasonable basis for treating railroads differently from other common carriers, and therefore the distinction is a classification and basis for an exemption from personal property tax reflected in LB 7, results from special legislation prohibited under the Nebraska Constitution, Article III, Section 18, and violates the Uniformity Clause in the Constitution. The issue here, Iadies and gentlemen, is that we're not treating railroads differently, we're treating them the same as all other centrally assessed property. They're all being treated alike. We don't break from the classification. And it's a very reasonable, very rational classification that we have here.
PRESIDENT MOUL: Time.
SENATOR HALL: All these centrally assessed properties have the same type of property, they can be treated differently, we do it in LB 829, it's clearly constitutional. I'd argue that you should not return the bill, we should vote on it.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Moore.
SENATOR MOORE: Madam President, members, along with Senator Kristensen, I guess we were the only two that voted against this actual measure when it was adopted the other day. And for those reasons it will be that I will oppose the passage of LB 829. And it is with great reluctance, because I'm convinced that part of the bill, at least if we do not pass something and at least exempt all personal property for this year, we have the problem of rewarding the taxpayers in the State of Nebraska that contested their personal property tax valuation and those that trusted us will have screwed up, and will have lost out, unless we do something, because they will not... could -very well eventually not get their money back, I think that's indeed unfortunate. So if we do not pass LB 829, 1 certainly hope that we're back here soon fixing that, because I don't think... I think that's the wrong way to move ahead. one of the reasons that I am not voting no on this bill, and some people have asked me about it, is the concern that I raised, on Select File on Monday, about the problems with the funding gap of 829, and the fact that it does not generate the revenue to fund itself. And that was my concern, that was why I offered amendments, to try to cure that, on Monday. That was not cured. We have 12.8 million, this bill is $12.8 million short of paying the $97 million bill that the A bill presents to the state by fully reimbursing locals dollar for dollar, it's $12.8 million short, and obviously that impacts on when we turn around and do override action, it's going to impact on that, obviously. But I ,do not think the budget reason is not a good reason to vote against this bill. I'm going to vote against it because it's bad 'policy. As Senator Kristensen stated, I am concerned that if you pass this, in federal court soon the railroad will get some exemption in a couple months, couple months after that the other centrally assessed companies will also be equalized, and we will have a tremendous amount of egg on our face. Obviously, that is just my opinion on that. I vote no on LB 829 knowing full well that if this bill does not advance we have every reason, and if the Governor does not call us back here, we should come back here and address the problem. So, with that,
I'd turn any remaining time I have over to Senator Bernard-Stevens.
PRESIDENT MOUL: Senator Bernard-Stevens.
SENATOR BERNARD-STEVENS: Madam Chairman, how much time is remaining?
PRESIDENT MOUL: Two and a half minutes, or...
SENATOR BERNARD-STEVENS: Okay, that's...
PRESIDENT MOUL: I'm sorry, yeah, it's two and a half minutes.
SENATOR BERNARD-STEVENS: Okay, I'll go ahead and use that time, and I thank Senator Moore. I have not spoken out on this issue at all, from General File, Select, until this particular time. And I've been going along saying I'm going to listen to Senator Hall, I'm going to listen to Senator Will and other people, Senator Lindsay and those are certainly much more involved in the tax issue than I have been. And I was going to sit back, go with the flow a little bit, and at some point think about what we have and make a decision. Well, it's decision time for me. And one of the things that I go back to is when we began this road of problems was the 4-R Act, which Senator Hall aptly described as basically a single section of a very, very large bill. And that started us down the road to where we are today as far as the court making decisions that have affected us. And I-look at what we have in 829, and to me we've come full circle. We're going to solve the problem by again violating what I would call the 4-R Act again. The one concern I have is I hear Senator Kristensen say, clearly in his view it's unconstitutional, I hear Senator Hall very eloquently say, clearly in his view it's constitutional, and I've heard all of these types of arguments before. I heard it on the pipeline case, I heard it on the original railroad case, that both sides argued their case well. The problem is no one speaks with the Supreme Court. I'm very contented to sit here and listen to Senator Hall and Senator Kristensen spout their views on what the court is going to say. But the point is the court surprised every one of us on the Enron pipeline case.
PRESIDENT MOUL: One minute.
SENATOR BERNARD-STEVENS: And the point is we don't know what
they're going to do. And, quite honestly, when I look at it there was another alternative, we did not have to go this particular route. And I think we look kind of silly, to be honest with you, putting out a policy that we know may violate the Constitution, excuse me, the 4-R Act, we know may causeproblems, but for political convenience, and it was, it was so nice to be able to take those companies and those corporations that had most to do with it and hit them a little harder. it was fun to do. But because of that now we may jeopardize, in my opinion, the whole concept. I agree with Senator Moore, I think it's poor policy, it doesn't have to be done. There are other ways to do it, and because of that I'm not willing to...
PRESIDENT MOUL: Time.
SENATOR BERNARD-STEVENS: ... take that particular risk, because there are other options available. I will be voting no on 829.
PRESIDENT MOUL: Thank you, Senator Bernard-Stevens. The speaking order is Senator Lamb, Senator Abboud, Senator Robak, Senator Bernard-Stevens, Senator Horgan, Senator Beutler, Senator Hall, Senator Will, Senator Schmit. Senator Lamb.
SENATOR LAMB: Thank you, Madam President and members. I rise to oppose whatever we're talking about, and I'm not sure what we're talking about (laughter), because I don't know what Senator Kristensen really has in mind. But I really have a question of Senator Kristensen, if he'd yield.
SENATOR KRISTENSEN: Yes.
SENATOR LAMB: You mentioned, Senator Kristensen, that a number of people, including the Revenue Committee, worked very. hard this year on this problem, and I agree. But I don't recall you bringing forth a solution, similar to something, or an 829, or have I forgotten about it?
SENATOR KRISTENSEN: No, I think you're right, Senator Lamb, and...
SENATOR LAMB: Okay, thank you very much.
SENATOR KRISTENSEN: Okay. (Laughter.)
SENATOR LAMB: Here we are, okay, here we are on the 89th day,
or is this the 90th, this is the 90th day of the session, excuse me, I wanted to stay one more day instead of two. Here we are on the 90th day of the session, and Senator Kristensen says, this plan is not right, Senator Hall, and the Revenue Committee, and the other people that supported 829 are wrong, wrong, wrong. But Senator Kristensen has. not brought forth a plan that's right, or has even brought forth a plan, you heard him say that. So what ... what...what right, or why is he bringing forth a proposal here to stay two more days? How are we going to solve it in two days when we didn't solve it in 90 days, and particularly since he evidently still does not have a solution in hand. So, with all those facts, all that consideration of the fact that we don't have a plan here, we're just going to extend the session two days in hopes that we find one on the doorstep, like some of these have been found out in the lobby, you know, I think some of them were found in the manger, dressed in swaddling clothes, but that nobody claims. I don't think... I don't think Senator Kristensen, at least from what I hear, he doesn't have a plan in mind. He says we just stay down here two more days and we fix it because we could not fix it in 90 days. I oppose his proposal to extend the session.
PRESIDENT MOUL: Thank you, Senator Lamb. Senator Abboud.
SENATOR ABBOUD: Madam President, colleagues, I rise as well to oppose the proposal for an extension of the session for an additional two days. The problem with LB 829 is that it tries to create the image that we have a crisis in the state over the tax situation, personal property taxes. And I guess if you want to analogize it, it would be similar to Senator Hall driving down the street, let's say down on 13th and 0 Street, and there wouldn't be a stop sign there, but he would be pulled over by a policeman from Lincoln, and he would say, you just ran a stop sign that's going to be put there in two months. And then he would be charged and convicted for a crime which may occur in the future. And that is what we're attempting to do today with LB, 829. We're guessing, and that's all we're doing. we're guessing that the Nebraska Supreme Court might strike down some of our personal property tax sections. There's not one person in this body, there's not one person in this state, and I would assume that there's probably not one on the Supreme Court that would be willing to state that in the future they will be striking down that personal property tax system. But yet we're changing our personal property tax system, we're saying that certain items should not be taxed, and other items should be
taxed. I don't think it's going to make any difference if we debate this issue for another two or three months, we're probably going to end up with this bill that we have here before us. And I resent the statements that have been made inferring that the Nebraska Legislature is any way responsible for this crisis dealing with our property tax system. I think we've acted in a very good manner throughout the years. We've had these taxes on the rolls for years, for decades, and I don't feel that at this time there is a need for a change. And if I can also add to the bill that's coming up later on today, the constitutional amendment, I feel the same way. We're reacting to a crisis which could occur, and that isn't the way the Legislature should do business.
PRESIDENT MOUL: Thank you, Senator Abboud. Senator Robak.
SENATOR ROBAK: Thank you, Madam President and members of the body. I seldom get involved in game playing like this, but I usually observe them and I find them quite amusing and entertaining. But right now I'm kind of angry at the situation. I feel like Senator Howard Lamb kind of stole my line here, because I was just going to say that work expands to fill the alloted time, and two more days we'd just goof around like we did for the last 90 days, and really since the last two years when we could have had this done, if we really wanted to. And I really oppose returning LB 829 to Select File for extending the session for 90 days. We're playing some games here at the cost of our constituents, and I think it's just time 49 members stopped playing some games and got down to work, we should have done it a long time ago, get it over with, we're all tired, we want to go home. Thank you.
PRESIDENT MOUL: Thank you, Senator Robak. Senator Bernard-Stevens.
SENATOR BERNARD-STEVENS: Thank you, Madam President, members of the body. I may have missed something here. I thought the amendment that was filed, in fact could I have the Clerk read the amendment that is before us at this time.
PRESIDENT MOUL: Mr. Clerk.
ASSISTANT CLERK: (Read Kristensen amendment as found on pages 2906-07 of the Legislative Journal.)
SENATOR BERNARD-STEVENS: So, Mr. Clerk, there's... I guess... reading that, that's the entire amendment, correct? I didn't hear anything about an extension of the session in that amendment. And I guess to Senator Lamb and Senator Robak, I'm glad you're upset, but you might want to save it for the actual amendment, if it comes up. This is not what that amendment does. In fact, Senator Lamb was saying, and I don't need to do it for Senator Kristensen, that there are no other plans out there. If I understand the amendment, what the amendment does is solve a potential problem. The amendment says, right now we have a bill that has a 2 percent... 4 percent on the surcharge, there could be some problems with that, change it to simply 2.3, across the board. No problems with that. Everyone is treated the same. And I find Senator Hall's argument interesting, and very rarely do I disagree with Senator Hall on tax policy, because he is a wizard with the numbers, he is good at what he does. But in this case I think we're taking an unnecessary risk. On one side, when we have a 2 and 4 percent, we have a potential, possible problem. On the other hand, if we go 2.3, we still raise the same amount of money, for the most part, and we don't have a potential, possible problem. There is our choice, there is the decision. You can choose to have a potential problem, that one side says there is no problem, the other side says there is, obviously there might be, or you can choose to go with the policy that clearly says we're not going to have a problem in the area. There's the choice, and that solves part of the problem with 829. It does not solve the funding gap. And I want to emphasize what we have in 829 now in regards to the funding gap, for those thinking that we're going to have overrides, for the most part, with 829, the way it is now, we're already $4 million in the red with the vetoes we have now. Any other override that takes place will simply be used against those bills that the Governor still has, the Governor has approximately $20 million of bills, 15 of that is LB 91. You. tell me where the money is going to come from. That's the policy question we have. Senator Kristensen has put forward an amendment that simply says you can take a gamble at 2.4, keep your fingers crossed, hope Senator Hall is correct. If he's not correct, we've got a serious problem. Or you can go ahead, bring it back, make- the change to 2.3, there will be no potential problem, we can then go our merry way home and say not only did we work hard on 829, not only can we congratulate the Revenue Committee, but when we had a little problem at the end, we took the time to do it right, and because we bring it back we then may have to stay another day or two in order to go through
the process, assuming we cannot suspend rules. That's what we have before us. I yield any further time to Senator Kristensen, if he'd like, if I have enough time worth his time.
PRESIDENT MOUL: Minute and a half is left.
SENATOR KRISTENSEN: Thank you, Madam President, thank you, Senator Bernard-Stevens. Senator Robak, I think you summed up, in your speech, the feeling that we all have. I'm tired, I want to go home, it's been a long session, the issues have been tough, and I just want to get out of here. But, at the same time, I get so sick and tired of reading the paper, some time in August, and some time in September when a court decision comes out that says the Legislature messed up again. And I'm not saying that this is unconstitutional, and maybe that isn't important to everybody. But what I'm saying is I think it violates the federal law. And so we won't be in the Nebraska Supreme Court, you're going to be in federal district court, where Trailer Trail v. Leuenberger was decided. There are other states in this country who have had a tax challenging the 4-R Act on other than property tax matters.
PRESIDENT MOUL: One minute.
SENATOR KRISTENSEN: And those cases have occurred and they've come. And I think that we'll find ourselves in federal court and not in state Supreme Court. And Senator Hall, I think, is right. I think he's starting to ... you know, he's talking about those items of uniform, and proportionality, and reasonable classifications. That's going to be the issue. And what I was talking about the other day, I was using that as an example. But as I sat and thought through this whole process the last couple of days, the real challenge will be to the 4-R Act and not probably to the uniform and proportionate clauses. And so, at this point in time, I think my amendment takes you back and puts everybody taxed at the same rate instead of having one taxed...
PRESIDENT MOUL: Time.
SENATOR KRISTENSEN: ... at a higher rate than another.
PRESIDENT MOUL: Thank you, Senator Kristensen. Senator Horgan.
SENATOR HORGAN: Thank you, Madam President and members. You
know I find it a little bit interesting, the other day I offered this amendment, and there wasn't much discussion of it, and we didn't t deal with it very thoroughly, I didn't think. And there didn't seem to be much interest in discussing it on the floor, and it kind of went down to a glorious defeat. Senator Kristensen, this morning, asked me if I would bring it up again, and I said, Doug, I don't want to bring it up again, there's not much interest in it. And Senator Withem just said to me, what is it about Kristensen, he offers an amendment and everybody is up wanting to talk about it. I think it's ... you know, I think the point is the same as the point that we made two days ago when we talked about this. Centrally assessed corporations are not going to lightly take being taxed differently than other corporations in the state are. I spent about eight years working for the Enter North Corporation, now the Enron Corporation. And when I worked there they talked a lot to management about what your obligation is. Your obligation as an employee of a corporation is to create shareholder wealth, that's your number one obligation. You do what you can to raise revenues for the corporation so that it can be returned to the shareholders. There are not corporations, particularly centrally assessed corporations, in this state that are going to idly sit by and allow us to tax them unfairly. They would see it as a violation of their obligation to their shareholders. They are going to say, you're taking us more heavily than you're taxing anyone else. Who pays that tax? The shareholders pay that tax. What's our obligation to that? Well, we ought to call up to the 13th floor, or wherever it is, and get some lawyers looking into it and seeing, you know, what opportunities we have to get some of that money back. You know, corporations want to be good corporate citizens. Corporations want to do good things. Corporations want to employ people, and they want to pay their fair share of taxes, but they damn well don't want to pay any more than the other guy, and they'll do everything they can to defend their right. I think for us to say that we're going to tax some corporations at 2 percent, and then we're going to tax other corporations at 4 percent, on the face of it is unfair, on the face of it they're going to look at it and they're going to say, they're treating us differently, they're not treating us the same, they're not being fair with us, and we're going to pursue our rights. Now, whether or not their rights are going to be found to be true or not is obviously a matter of debate. I think we should, personally, when I offered this amendment two days ago we should have dealt with it then, and we'd be done, and it would be the 90th day and
we would be going home. And I've got to tell you, as a freshman senator, I'm more anxious to get out of this place than probably anyone else. (Laugh.) But I think Senator Kristensen is trying to deal with a legitimate problem. And it's nice of us to be able to say these people created the problem for us, we ought to make them pay for the problem as much as we can. I am convinced those people are going to say, you're not going to continue to do what you have been doing, we have continually won in court saying that you can't do it to us, you can't treat us differently, and we will pursue that. I think we can pass 289 (sic) and take our chance and go home. I think we can try and fix it and feel a little more safe. I mean I'm not anxious to go home to Omaha and tell people we're charging them 2.3 percent. I'd rather tell them we're charging them 2 percent. But I don't know if I want to come back and say, well we're all of a sudden $10 million shorter than we thought we were, and we're already short, and we got ourselves in a case because we did exactly the same thing that we've done year, after year, after year, which is to treat...
PRESIDENT MOUL: One minute.
SENATOR HORGAN: ... taxpayers differently, and it's a lesson we don't seem to be able to learn, and so we just continue to come up with the same solution and keep getting the same answer that you can't do it. I reluctantly support the return of the bill to Select File. Thank you.
PRESIDENT MOUL: Thank you, Senator Horgan. Senator Beutler.
SENATOR BEUTLER: Senator Hall, if I may, just a couple of questions. I don't have the 4-D Act (sic) in front of me, and I can't seem to come up with it right now. But the language from the Nebraska court case, from the natural pipeline case, seems to indicate that federal law prohibits Nebraska from the imposition of any tax which results in discriminatory treatment of a common carrier by railroad.
SENATOR HALL: Um-huh.
SENATOR BEUTLER: Let me ask you this, when you looked at the 4-D Act (sic), does it discriminate ... does it distinguish as between types of taxes, or is it any kind of tax that results in discriminatory treatment? Does it make any reference to specific kinds of taxes, such as personal property taxes or
SENATOR HALL: The answer to your question, Senator Beutler, is no, the sentence reads as this, it says, the imposition of any other tax which results in the discriminatory treatment of a common carrier by railroad, subject to this part.
SENATOR BEUTLER: Okay, so we know that it applies...that as far as this being an inventory tax, that makes no difference. That's not the question, right?
SENATOR HALL: That's correct.
SENATOR BEUTLER: Okay. And we know also that they are being asked to pay a different rate. So the only question remaining is whether the classification, based upon being centrally assessed, is a difference or a distinction. Is that ... does that get to the...
SENATOR HALL: It...well, the question is whether...
SENATOR BEUTLER: ... question?
SENATOR HALL: ... it's a reasonable, rational classification. Does it... and it ...
SENATOR BEUTLER: And as far as the basis of the classification is, doesn't... isn't the distinction, doesn't it only go to the method of collection? Is there any other real distinction than that classification?
SENATOR HALL: Well, are you asking about this specific classification?
SENATOR BEUTLER: I ...
SENATOR HALL: Of centrally assessed properties?
SENATOR BEUTLER: Yeah, right.
SENATOR HALL: Yeah, there has to be... there has to be some uniformity of the class. I mean you can't just take and lump five different groups of individual companies in there and say, you make up class A, you make up class B. There has to be some commonality in terms of their type. These all happen to be
centrally assessed properties. They are unique in the way we treat them. They all take up huge land masses, in terms of the state, but they are linear in their approach. They have public access that we allow them, because they use... I mean really the railroads are the only ones that own any substantive amount of property, real property, the rest of them we let have access for their pipelines, or their cables, whatever it may be on centrally assessed. Yes, they clearly all are treated uniquely in our valuation and assessment. That's why we call them centrally assessed. So for my purposes it's a clear, rational, reasonable classification by which we look at centrally assessed properties. And, clearly, we have the ability to tax them at a different rate.
SENATOR BEUTLER: And that same kind of distinction can't be made in terms of pure personal property taxation.
SENATOR HALL: That's correct.
SENATOR BEUTLER: The courts have already said that.
SENATOR HALL: That's correct, and these...
SENATOR BEUTLER: So all the factors that you're talking about equally apply to the two different taxes, except for the method of collections, is that not so?
SENATOR HALL: Well, that and then in the personal property tax case the question there was, the problem was that you had individuals who were exempted. Seventy-five percent of the income producing property, personal property was exempted completely. We do not exempt anyone from the surcharge on depreciation, no one, we tax them all. We tax all of them at 2 percent, and then we tax the centrally assessed an additional 2 percent. That's another key ingredient here, is that you were dealing with an exemption...
PRESIDENT MOUL: One minute.
SENATOR HALL: ...issue in the personal property, 75 percent were paying no tax, and that's where the discrimination came in on the Leuenberger, the trailer train issue.
SENATOR BEUTLER: Senator Hall, thank you. I remain a little skeptical, I guess, and conservative in the sense I would much
rather spend a little extra time here and not have to tell my people I voted for something that turned out to be in violation of the federal act. But I think you're next, Senator Hall, and I'm still listening. Thank you.
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Thank you, Madam President, members. Again, I rise in opposition to return to the bill to Select File, although it's nice to have choices. If I remember right, there were a lot of choices on this proposal, approximately 60 in the form of amendments that were filed at any given time, half of which were taken up. We come now at this point in time, which is as good as any other point in time, to deal with it. We did debate this proposal when Senator Horgan offered it. And I again argue that we don't have a problem here. I said that in the special session, I said we have a problem here, and I was ignored and never once did I say, told you so, but I just did. You don't have to buy my proposal. You don't have to do that. You can return the bill to Select File, and look at the amendment, and offer it, and adopt it. I think you're making a mistake. I think that would be unwise to do that at this time. What we have done here is we've created a new tax, and we call it a surcharge on depreciation. And we have taxed everyone across the board, without exception. We're in a totally different atmosphere at this point. We're in a totally different arena than the cases that have dealt with personal property in the past. They are... this issue would be a total first impression. There would be nothing on the books that would be anywhere near to this issue. They can make correlations to the personal property and use them as an example, sure. And the whole argument here is, what I'm hearing is are we in trouble of losing, at the outside, because really the additional 2 percent raise is approximately, I think it's $7 million, $6 to $8 million. Two million of that is represented in railroad property that the 4-R Act deals with. There is no protection ... well, TEFRA, I guess, protects the airlines, but there is no protection for any other centrally assessed companies, no such federal protection. So worst case, you're talking about 8, best case you're talking about $2 million that you could very likely be looking at. Argument has also been that we don't raise enough money in this proposal. I would argue we raise enough money in this proposal, and we will raise more than enough money in this proposal. The surcharge and depreciation figures are conservative, at best.
We don't exactly know what it's going to raise, so they are as conservative as they can possibly be, to the point of being miserly, I believe. And the money is going to be there. I firmly believe that the money is going to be there. if I remember right, we adopted an amendment of Senator Moore's on Select File on this bill, that took care of it in case it wasn't. You can bring the bill back. There is clearly no pride of authorship on my part, I mean everybody offered an amendment to this puppy. It is... it is... that's not the point. The point is do you want to put in place a tax that is fair, it is fair to the people that it's addressed to. There is no discrimination in this provision, And that's what all the 4-R Act, the Leuenberger, the trailer train, the pipeline cases....
PRESIDENT MOUL: One minute.
SENATOR HALL: ... that's what, they dealt with discrimination. We're not discriminating, we're treating everyone in that class exactly the same. They don't like it, that's another story, that's another question, they don't like it. They don't want to be treated differently. But is it something that we have to deal with in federal court? No, and it won't be brought up. I will tell you right now that they will not address this issue because it isn't, (a) it isn't economically feasible for them to do that. They know it's a one-year proposal, they're going to pay it, they're not going to like it, but they don't want to see something like this go on the books because it is a way for other states to look at taxing these entities, and they don't want to see that happen. They'll pay it, if everybody else is paying the same share. But when you classify them and do them together as centrally assessed properties, and put them at a different rate, they look at this and say, you know, we're probably going to have to pay that.
PRESIDENT MOUL: Time.
SENATOR HALL: They don't like seeing that come down the pipeline, no pun intended,, and that's exactly what's going on here, ladies and gentlemen. The proposal is in good shape, we ought to read it.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Will.
SENATOR WILL: Thank you, Madam President., members of the body. I rise in opposition to the motion to return the bill. Senator
Kristensen and other members of the body raise some questions about LB 829 that certainly are not to be dismissed lightly. I think that we're dealing with a bill that is not a perfect solution, it's something that has undergone a number of changes. But I think we have reached a point that at least it's a package that we can live with for a year, and I think that's the important thing to remember, this is a one-year proposal. This isn't anything that we're writing in stone, this is something that is simply intended to get us through a year with a personal property tax system that is reasonable and that can probably be accepted by the courts. Sure there is no guarantee that this will pass 4-R muster, there's no guarantee that this will pass constitutional muster. Frankly, anything that we do, outside of the original LB 829, which would have put all property back on the tax rolls, anything that we do, other than that, is probably open to challenge in court because frankly our Supreme Court is in relatively unchartered waters on issues of this type. They've taken a path and interpreted some things in our Constitution in ways that we probably never would have predicted just a few years ago. I think anything we do because of that, again, outside of the original LB 829, is probably open to question. I think we've reached a point where, as I said, we have a package that is not perfect, but we could probably live with it. I think the important thing to bear in mind is that it is only for one year. I think we probably... the best course to follow at this point is to read the bill and vote on it today. With that, I would urge your opposition to the motion. Thank you.
PRESIDENT MOUL: Thank you, Senator Will. Senator Schmit.
SENATOR SCHMIT: Madam President and members, several times during the course of the debate on this floor individual legislators emphasized that it was the intent of this Legislature to get the money where the exemptions came from. In other words, if the railroads were exempted for $100 in taxes, we would get the $100 back from the railroads. That was the first mistake we made, I believe, and I emphasize that I was wrong, that even my constituents told me just raise the sales tax, income tax, and get it there and be done with it, stop all the rest. of the rearrangement. Number two, Senator Rogers and myself offered an amendment, pretty tough for you to swallow it, no one liked it. But the facts are it would have been a safe amendment, would have been equitable, although it might have not been very politically satisfying to some of us who would have
voted for it, I think it was something we could have gone home and defended, and I can assure you the courts would have smiled upon it. I do not know either what will be the result here, but I would predict, I do not know if this bill carries a severability clause or not, but it had better carry it, because I doubt very much if the disparity in taxation rates will be allowed to stand. Point number two, Senator Will says it's for one year. I pointed out yesterday that in my opinion the Lindsay case will not go directly to the Supreme Court. The Attorney General is not going to stipulate to a set of facts and bypass the district court, it's not going to go directly to the Supreme Court. And, if it does go to the Supreme Court, or when it goes to the Supreme Court, it will be a long time before we get a report back from them. In the meantime, the United States Supreme Court will be hearing. the Macy (phonetic) case from California, and it will be that case on which we will decide, here in Nebraska, what shall be the tax policy of this state. If LB 829 becomes law, and if it withstands the test of time, and of the courts, and of the U.S .... perhaps Judge Urbom, then I can guarantee you it will not be a one-year solution, it will be a two-year solution, because we will be back here, a year from now, attempting to comply with the mandates of the United States Supreme Court. I have opposed LB 829 for a variety of reasons, and I continue to oppose it. But I do not know either if you can fix it that fast, Senator Kristensen. Mr. Hall of the Revenue Committee would know more than I do as to whether or not we have the severability clause on it, and whether or not we lose the entire bill, or only that portion of the tax which was considered to be unfair and excessive. Might well be, Senator Hall, we're going to save 90 million bucks anyway, and the locals are going to have to pick up the slack somewhere, which we talked about on this floor several times, would not necessarily be all bad. So I think that Senator Kristensen was right to raise the issue. Mr. Hall may be correct in his assessment of it. I do not support the amendment, but I do believe that eventually we are moving more closely toward the kind of solution that was proposed by Senator Carson Rogers and myself, albeit very, very unsavory politically. I would support the motion to return, but I do not expect it to be successful, and I would expect that the bill would pass, but I expect that the bill will have a rough time from that time forward. And I, too, share with those of you who say I do not like to suffer the embarrassment of having to go back to my constituents and say...
PRESIDENT MOUL: One minute.
SENATOR SCHMIT: ... I did not know what I was doing. I want you to know at this time I believe it is unfair to tax ... whether it is unconstitutional or not I do not know. I believe it is unfair to tax one entity at twice the rate we tax another. And I have other questions about LB 829. 1 would support the motion to return.
PRESIDENT RESIDENT MOUL: Thank you, Senator Schmit. Before we proceed with further debate, I would like to call the senators attention to the area under the south balcony, a special guest today of Senator Eric Will is Pat Murphy of Omaha. And a special guest of Senator Beutler is Steve Svoboda of Lincoln, a Lancaster County Commissioner. Would you both please rise and be recognizes. Welcome today. Thank you. The speaking order now is Senator Wehrbein, Senator Lynch, Senator Hartnett, Senator Warner, Senator Withem, Senator Robak, Senator Abboud, Senator Wesely, Senator Morrissey, Senator Lamb, Senator Byars, and Senator Beutler. Senator Wehrbein.
SENATOR WEHRBEIN: Madam President, members, with a list like that, I'm going to be brief. I'd like to ask Senator Hall a couple questions, first. Senator, do you know of any other states that have a surcharge on depreciation schedule?
SENATOR HALL: None.
SENATOR WEHRBEIN: And if I interpreted what you said correctly, how much ... was it $2 million that the extra 2 percent surcharge on centrally assessed would raise?
SENATOR HALL: That would be approximately the railroads portion. The total 2 percent would raise about $7 million.
SENATOR WEHRBEIN: okay, thank you. I'm going to oppose returning, and I think we ought to get on with the business of doing what we really ought to do first of all in this bill, and that is to take care of the subdivisions of government in Nebraska that are in desperate need of support, based on the property tax ... personal property tax court case. I think we have an obligation to the subdivisions to provide for a source of income for them that they have lost. And I think that really ought to be the thrust of this bill. In fact, I can't imagine opposing this bill because I think that should be the overriding concern, is to provide some sort of income for them. And I
don't quite understand the opposition to this, because this should be the main reason for the bill. I'm going to oppose returning this bill. I think that I'm inclined to go with Senator Hall in this case. He makes the case, in my mind, that this is a legitimate way of ... with the surcharge on the centrally assessed property. I guess I'm willing to take that risk, if it be a risk. The other areas have been worked out carefully, I think in the... almost literally the 23rd hour, 22nd hour in the 90th day that we don't need to mess around anymore. I, too, agree that we're not going to make much more progress, and I would urge you to not consider this. Let's go ahead and read the bill and get on with some other important things. Another thing is, Senator Hall, could I ask you one more question. We were talking about, there's 4 million short, roughly, in this bill. That doesn't mean ... and some are saying that if we are in the hole, the Governor can veto this back to 93 million also, and make the subdivisions eat that 4 million rather than us, is that true?
SENATOR HALL: Senator Wehrbein, I don't think that's accurate. The provisions in this bill are as a whole, and the Governor would have to veto the bill as an entire proposal, an entire piece of legislation. I don't think he can line-item a revenue bill, but maybe he'd try. I ... I don't .... The answer to your question is, I don't think so.
SENATOR WEHRBEIN: But with the scenario that you're feeling that we could raise 97 or closer to 97 than 94 in the estimate, is that true?
SENATOR HALL: I believe it is...
SENATOR WEHRBEIN: That I interpreted...
SENATOR HALL: I believe that the surcharge on depreciation estimates are extremely conservative. And they should be that way because again it is a new tax, and we don't know, so we erred to the low side. I-believe we're going to come out all right. But it's my opinion, that's all it is.
SENATOR WEHRBEIN: Right. The point would be today, for our purposes, to balance a budget, or at least close to a balanced budget. If we were 4 million short, we'd then have ... we really would have to gamble on not replacing that 4 million, because if your scenario would come true and we would raise 97, the
estimates are saying we will have, for purposes of balancing our budget, they ... we may have to veto back 4 more, am I true, because we don't know, for a year and a half, whether your estimates will come true.
SENATOR HALL: That's correct, that's correct. The Governor may have...and for purposes of the veto overrides that are coming up, that's probably a consideration.
SENATOR WEHRBEIN: Okay, and the year and a half extra...
PRESIDENT MOUL: One minute.
SENATOR WEHRBEIN: ... 4 million might show up.
SENATOR HALL: That's correct.
SENATOR WEHRBEIN: Okay, under your scenario.
SENATOR HALL: Right.
SENATOR WEHRBEIN: All right, thank you. I would give any remaining time to Senator Lamb, if I may, please.
SENATOR LAMB: Thank you. I would like to make one point, and that is that if this amendment gets on there is not going to be an LB 829, because we've got to have 40 votes to extend the session. There's not 40 votes here to extend this session, especially if this amendment gets on. I don't like the depreciation surcharge in the first place, and I adamantly would not go above 2 percent. And I know a lot of other people here in this body feel the same way. So you've got to have... if this amendment goes on, you can't pass it today, you can't pass it tomorrow, it's a constitutional provision that it has to lay on our desks for a day.
PRESIDENT MOUL: Time.
SENATOR LAMB: So we'd have to have two more days, and we would be in special session, or have no-bill at all.
PRESIDENT MOUL: Thank you, Senator Lamb. Senator Lynch.
SENATOR LYNCH: Madam Chairman, I intend to yield half my time, what's left, to Senator Ashford first, and half my time,
whatever's left, to Senator Lamb. All I'd like to say is that what we're talking about now is really interesting, The best thing for us to do is to do nothing at this time, I really mean it. I think Senator Kristensen has a good idea, except that we should probably wait until some time in August, by then the Lindsay-Will-Chizek-Lynch lawsuit will probably be resolved by the Supreme Court. By then our 3-R Committee that we have appointed to look at the issue could have some recommendations for us about the resolution of this whole problem. By then we'll have some idea what the feds may or may not do as it applies to the 14th Amendment, and then we'll be doing business. We shouldn't do the ... we shouldn't do the constitutional amendment, or maybe even this one either. Just think about it for a minute, that might be a good idea. But, under the circumstances, we won't. And I will yield... I intend to... intend to oppose the return to Select File, and the rest of my time is divided between the two senators I already described.
PRESIDENT MOUL: Senator Ashford, two minutes.
SENATOR ASHFORD: Thank you, Madam President. I rise in opposition to the motion for a couple of reasons. I've listened to the debate. I think we need to draw some distinctions here to what we basically... as to what we did last time when we tried to create exemptions to deal with the 4-R Act and what we're doing now. And I think that's an important issue. Number one, we're not creating exemptions here, we are simply, to personal property tax, we are creating, as Senator Hall has said, a surcharge for one year on a specific class of property in Nebraska, class of taxpayers in Nebraska. And having read the cases again today, and the important language, 'I'm absolutely convinced that we, as a Legislature, legally have the authority to create such an interim charge on taxpayers in order to get, as we are doing here, from step A to step B, to create an overall tax plan which is ... will be and is designed to be equitable, and is designed to meet the criteria laid down by the federal courts in the 4-R cases, as well as by our Nebraska Supreme Court. It really is a legal and constitutional issue. And I would be concerned if someone could point me to a case anywhere in the country, in any court, that has denominated what Senator Hall and others have done, and Senator Will, in 829, point me to any case that has denominated such a charge as a discriminatory tax, especially in light of the fact that this is a one year, a one year measure. It is not creating a new property tax. We're not in a situation were we are ... where a
court would, as it has... as the Nebraska Supreme Court has done in several decisions, where it would be going back and valuing other items of personal property at zero because of the discriminatory tax. This is simply....Nor is it anything like what the Legislature did to try and get around the 4-R Act when we exempted certain items of railroad property. I think in looking at this, as a lawyer, and trying to judge what is the best thing to do, I think I only get concerned when someone can point me to anything even remotely that would suggest to me that we are in any way violating federal law. There just simply... there just is... I've not been pointed to any case that says that. And the broad language of the 4-R Act...
PRESIDENT MOUL: One minute is left, total.
SENATOR ASHFORD: ... just simply is... to me just does not seem to be a problem. I'd give the rest of my time to Senator Lamb. Sorry.
SENATOR LAMB: Thank you. I just wanted to, Madam Chair and members, I just want to emphasize and expand a little bit on what I said before, and that is that if this amendment gets on we're not going to extend the session two days, I'm sure. I don't think there are 40 votes here to do that. And what it does, if you believe what the Governor says, and I believe what he says, is that if we do not solve this short-term problem and the long-term problem, we will be back in special session. So, Senator Bernard-Stevens is correct when he says that the motion is not to extend the session, it's to amend the bill. Well, I agree, but as he very well knows, and Senator Kristensen very well knows, this leads to the next motion which will be to extend the session, because some people on the floor here...
PRESIDENT MOUL: Time.
SENATOR LAMB: ... do not realize that it's not a rule that says we have to lay that bill over, it's a constitutional provision. So then it takes 40 votes to extend the session.
PRESIDENT MOUL: Thank you, Senator Lamb. Senator Hartnett.
SENATOR HARTNETT: Madam Chairman, I would call the question.
PRESIDENT MOUL: Motion to call the question. Do I see sufficient seconds? We'll now vote on the motion to cease
debate. All those in favor please vote aye, opposed nay. Have you all voted on the motion to cease debate? Have you all voted? Have you all voted on the motion to cease debate? Please record, Mr. Clerk.
CLERK: 25 ayes, 10 nays to cease debate.
PRESIDENT MOUL: We have ceased debate. And I will recognize Senator Kristensen for closing.
SENATOR KRISTENSEN: Thank you, Madam President, members of the body. The discussion that we had, other than it took some time, is very healthy, because it talks about the thing that everybody is going to go home and talk about this year, the most important issue of the session, and the most important issue of the session is taxes. And I filed this motion, one, because there was nothing else in the bill, and the best way, I think, to make the correction to bring it to the position that I think it should be in was Senator Horgan's amendment. And so it would have been fruitless to bring in a whole new plan and stir the debate. What it is, is it preserves the integrity of the plan that we have with, I believe, the correction so it didn't violate the federal 4-R Act. I'm not talking about constitutionality. I'm not talking about uniform and proportionate, because there you get into reasonable classification. Senator Beutler correctly quoted the statute that says any tax that discriminates, it does, you treat them differently than somebody else, and you can't do that. Now what I think, after this debate, listening to it, when I'm done speaking I will pull this amendment. I think we should have an up or down vote on LB 829E. You can decide at that point in time whether the bill is flawed, or whether you're willing to take the risk to do it. And if you think the bill is in good shape, so be it, that's fine. If you vote to advance it, or vote to send it to the Governor for the purposes that you want to go home, because you want to plant beans, or corn, or I don't know,, Senator Warner, if you're done planting yet or not, but vacations, I want to spend some time at home, too. We will. But I think that it's important to understand that people do watch what we do, and the integrity of our system is valid. And if we think we do have a problem, and you want to correct it, we should do so, and not because we want to go home and say, well, we tried the best we could, and go home. If the bill does not pass, I would assume there may be a motion to reconsider my amendment, to try to put it on, to fix it. If you do that, you
then have two options. You can allow the Governor to call a special session, that requires a minimum of seven days. When that begins or ends, I don't know, and we don't have control of that. If you vote to extend it the two additional days, to carry out the correction, we do have control over that, we have control over when that might occur. And I think that's the option. Senator Lamb is absolutely right, it takes 40 votes to extend the session two additional days. I don't know if the body has the will to do that or not. And you need to take that into consideration, frankly, when you vote on LB 829E here. But at this point, I think we raised the issue, and you need to discuss it, and you need to make a decision on what we're going to do with this bill. With that, Madam President, I would like to have an up or down vote on LB 829, let the chips fall where they may. Thank you very much.
PRESIDENT MOUL: Thank you, Senator Kristensen. Do you have anything further on the bill? CLERK: Senator Hall, I have a motion from you, Senator, to return the bill.
SENATOR HALL: I would withdraw that, Mr. Clerk.
CLERK: Madam President, Senator Schmit would move to return.
PRESIDENT MOUL: Senator Schmit. Okay. Anything further, Mr. Clerk? Please proceed on reading the bill.
CLERK: (Read LB 829 on Final Reading.)
PRESIDENT MOUL: All provisions of law relative to procedure having been complied with, the question is, shall LB 829 pass with the emergency clause attached? All those in favor please vote aye, opposed nay. Have you all voted? Have you all voted? Please record, Mr. Clerk.
ASSISTANT CLERK: (Read record vote as found on page 2908 of the Legislative Journal.) The vote is 35 ayes, 12 nays, 1 present and not voting, 1 excused and not voting.
PRESIDENT MOUL: LB 829 passes with the emergency clause. LB 829A.
CLERK: (Read LB 829A on Final Reading.)
PRESIDENT MOUL: All provisions of law relative to procedure having been complied with, the question is, shall LB 829A pass? All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: (Read record vote as found on page 2909 of the Legislative Journal.) 38 ayes, 10 nays, 1 excused and not voting, Madam President.
PRESIDENT MOUL: LB 829A passes. LB 849.
CLERK: Madam President, in order to consider 849, Senators Will and Moore would move to suspend Rule 5, Sections 6(f) and (g), so as to allow 849 to be read without the accompanying A bill.
PRESIDENT MOUL: Senator Moore.
SENATOR MOORE: Yes. You may remember when we discussed LB 849, I guess I, myself, advocated the A bill not advance and that bill did not advance. The rules read that if a bill has an A bill, that the A bill must accompany it. Obviously, since the bill was separated, the A bill does not immediately follow this bill as it should. Section (f) of Rule 5, subsection 6, section (f), is the rule that states it needs an A bill, and section (g) is the rule that says the A bill must immediately follow it. Obviously, since the A bill does not accompany this bill, we need a rules suspension. Reason I signed on with Senator Will on this is that, though I did advocate the A bill not passing, it was not my intent to require that somehow, by rook or by crook, require this bill get 30 votes to be read. That is certainly not my intention. I think the bill should be read. The A bill does not. I think this is a rather unusual bill because you're talking about something contingent upon the passage of a constitutional amendment 18 months from now, an appropriation two years from now. I think, given that "unusuality" of it, I ... is why I argued against the A bill and at this time I'd simply ask the body to suspend the rules so we can, indeed, read the bill.
PRESIDENT MOUL: Thank you, Senator Moore. Senator Will.
SENATOR WILL: Thank you, Madam President, members of the body. I rise in support of this motion. As Senator Moore explained, the A bill did not advance along with LB 849. If you remember