LB 1219 (1998) - Provide for Unified School Systems/Temporary Mitigation Funds


Via the passage of LB 1219, school districts are authorized to establish a unified system that allows school districts to share programs and costs and to qualify for state reorganization incentive payments without having to fully consolidate into one new district, thus allowing participating districts to maintain their separate identities.


LB 1219 defines a unified system as "two or more Class II or III school districts participating in an interlocal agreement under the Interlocal Cooperation Act 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 in the unified system." (The bill allows a Class I district to reaffiliate its entire valuation with a single K-12 district in a unified system, as long as not more than 50 percent of the Class I valuation is affiliated with any other single K-12 district.)


Districts seeking to form a unified system must submit an application to the State Committee for the Reorganization of School Districts.  The application must include a copy of the interlocal agreement signed by the president of each participating school board.  The agreement must provide that all state aid and property tax resources will be shared, and a board, composed of at least one school board member from each participating district, will determine the general fund levy to be applied in all participating districts and the distribution of state aid and property tax resources within the system.  Additionally, the agreement must be for a minimum of three years.  The state committee must approve or deny the application within 30 days of receipt.  If the interlocal agreement complies with the requirements and all participating districts have approved the agreement, the state committee will approve the application.


The State Department of Education will recognize a unified system as a single district for purposes of state aid, budgeting, accreditation, enrollment of students, state programs, and reporting; and for all purposes not specifically listed, participating school districts will retain their separate identities.  The class of the unified system will be the same as the majority of participating districts; however, if there is an equal number of Class III and Class III districts, the system will be recognized as a Class III district.


Pursuant to LB 1219, unified systems are eligible for incentive payments.  Currently, the Tax Equity and Educational Opportunities Support Act authorizes incentive payments for three years to consolidating school districts in recognition of their efforts to provide more efficient delivery of educational services.  LB 1219 makes unified systems eligible for these payments; however, a unified system's incentive payments for the second and third years will be smaller amounts.


Additionally, if a unified system discontinues its status as a unified system and does not consolidate prior to the beginning of its eighth year as a unified system, the participating districts must pay back the incentives.  The total incentives paid to the unified system will 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 will be paid back through reductions in state aid in equal amounts for five years.  Likewise, if an individual school district withdraws from the unified system prior to the system's eighth year, the district must repay incentives attributable to its participation.


LB 1219 also provides approximately $4.5 million from the Cash Reserve Fund to local school systems facing drastic reductions in property tax revenue and state aid for the 1998-99 school year.  The concept of providing these mitigation funds was originally prescribed in LB 1247.  Local systems with property tax and state aid resources for FY1998-99 that are less than 90 percent of their property tax and state aid resources for FY1997-98 will be eligible to receive a lump-sum payment to bring them up to 90 percent of their FY1997-98 resources if:


(1)   The local system's 1997-98 general fund budget, less special education expenditures, did not exceed its 1995-96 general fund budget, less special education expenditures, by more than two percent plus the percentage growth in students; and


(2)   The local system fits into one of the following four categories: (a) it must be classified as sparse or very sparse for purposes of state aid, (b) it must be subject to loss of state aid because of a clerical error in determining adjusted valuation; (c) it must have more than 175 miles of territory (This requirement was not in the enacted version of LB 1219.  It was first included in LB 1175 and then enacted in LB 1, the special session legislation); or (d) it must have shown the intent to merge, consolidate, or unify with at least one specified high school district by June 1, 1999.


If a system receives mitigation funds and shows an intent to merge, consolidate, or unify, and fails to do so by June 30,2000, the system must return the mitigation funds, unless all other districts with which the receiving system could reasonably be expected to merge, consolidate, or unify declined to do so.


Finally, LB 1219:


    Restricts the ability of a Class I district to merge, dissolve, or reorganize if 50 percent or more of its valuation is affiliated with a single K-12 district;


    Establishes a procedure if the budget requests of all districts in a local system, including the high school district and all Class I districts, causes the total property tax levy for the system to exceed the statutory lid; and


    Prevents Class I districts from using any special tax levy authority without approval from a high school district.  (These provisions were originally found in LB 1008.)


LB 1219 passed with the emergency clause 35-13 and was approved by the Governor on April 18, 1998.