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January 22, 1998
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SENATOR COORDSEN: Thank you, Mr. Chairman, and members of the Revenue Committee. For the record, my name is George Coordsen, here to introduce LB 989 on... at the request of the Governor. LB 989 is a bill that I'm not going to spend a lot of time explaining in this presentation because there are others here who would welcome the opportunity to explain the details to it. But I believe it's important for me to say that this is an issue that I support. This is an issue that I've had a number of conversations with Governor Nelson, going back over some period of time. It's an issue that Senator Warner and I used to speak to at some length, of trying to put together a comprehensive package of statute that would have the effect of having real, defined, lasting property tax relief. At the time of the discussions that finally led to the introduction and later passage of (LB) 1114, 1 had some relatively serious disagreements with Senator Warner over what the best course was for the Legislature to take in order to effect more effective, efficient local government services. Suffice it to say that he did, in fact, convince me that, at that time, (LB) 1114 was the only thing that was going to go; that we could not present a total comprehensive package; that the effect of that would be so dramatic in the minds of people, who have a difficult time any time, understanding how local property taxes are, in fact, collected and local government budgets receive the money that they feel they need to have to deliver the services; that we simply would not be able to do anything. And ultimately, I agreed with him, and ultimately, (LB) 1114 was, in fact, passed and signed by the Governor. But-that was not the end of the story. We had in place, leading into (LB) 1114 a series of different bills, including LB 299 which was designed to hold down the growth of local budgets so that the impact of (LB) 1114 would be less than what it would have been otherwise. (LB) 989, then, is a continuation of that effort to create a statutory system in which those governing boards of all units of local government have to give due consideration to the amount of money that they are spending by placing, as you will have explained to you 'An more detail a little bit later, a percentage growth restriction on local general fund operating budgets with some opportunity to adjust for population growth and emergencies and creation of sinking funds and that sort of thing. So this is an important bill in the area of property tax restructuring. My analysis of it is that it is the single most important bill of the year.
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January 22, 1998
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It continues our process. It doesn't end the process, but it continues the process of affording to the citizens of the state of Nebraska effective, efficient, local service delivery systems that meet the needs of their communities but are pre... are protected from what sometimes happens, the excess of individuals that might have the positions on a few boards across the state of Nebraska. We've seen examples of that happening. This is an encouragement to local boards to do, not only the good job they're doing, but a better job in the future. With that, Mr. Chairman, if there are any questions?
SENATOR WICKERSHAM: Any questions for Senator Coordsen? Senator, thank you.
SENATOR COORDSEN: And I would ask, then that, Mr. Chairman, that the Governor be allowed to present his view on this bill, and then following him, if he has from his administration individuals that he might feel to be qualified in answering technical questions, or explaining the technical aspects of the bill, that he'd be afforded that opportunity also.
SENATOR WICKERSHAM: Yes, that'll be fine. Thank you. Governor, welcome to the Revenue Committee, I think for the first time this year. It might not be the last time, I understand.
GOVERNOR NELSON: Mr. Chairman, I think you're probably right. I think I might be back. But, thank you very much, Senator Coordsen, and Mr. Chairman, members of the Revenue Committee. For the record, my name is Ben Nelson, and I am Governor of the state of Nebraska. I want to thank you for the opportunity to be here with you today, and have this occasion to support LB 989 ... 989, the Local Government Spending Limits Initiative. The goal of the measure is to provide property tax relief by limiting the growth in local government spending. and I'm going to have a couple of key staff individuals here with me to go over part of this in just a minute. We know that the Good Life in Nebraska is something we treasure, and every Nebraskan treasures as well, and it comes with a cost., but the cost shouldn't be more than the families can afford, and they want property tax relief, and we understand why that is the case. We know from our experience that the only way to provide that true
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January 22, 1998
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property tax relief is to lower spending. During my seven years as Governor, I've sought to reduce the size of government, to reduce the size of the growth in government, to increase efficiency, and to limit the growth of spending. This year my commitment to lowering taxes, both income taxes and property taxes, is as strong as ever. As you know, the state has tried to ease that property tax burden that we've all discussed, and all spent time studying, numerous times by increasing state aid. As a matter of fact, come people, recently have suggested that the way you solve the property tax problem is that you just simply give more state aid back to local governments. If that could work, it would have, because aid to individuals, schools and local governments is now 60 percent of our state budget, and growing, but those state aid increases were used for new spending, and property tax went higher. The formula for providing true property tax relief to Nebraskans, I believe, will require three basic elements. Number one is exactly what Senator Coordsen said. The levy limits legislation that was passed last year, LB 1114. Number two is something I'm not here to testify about today, but that I will ask leave to return and testify on it, and that is a process to prevent what I refer to as huge spikes in property valuations, and I'll talk about that on another day. And number three is the spending cap, or spending limit, that I want to talk about today. We've also proposed a constitutional amendment to make it easier for local governments to share services and save money, and I know you already have pending before you a constitutional amendment that is comparable to that. We also believe that that in an important measure to enable more government efficiency so that governments can provide government better, speedier, and cheaper. The spending cap provided in LB 989 is an essential part of this formula, and I propose to limit the amount by which local government spending can increase in any one year to 2.5 percent. The cap would apply to the general fund expenditures of schools and the restricted finds of other local subdivisions. With this initiative, we can be sure that any increases in state aid, local sales tax dollars, keno proceeds, or any other ongoing revenues translate into reduced property taxes, not new spending. And I might add parenthetically that in 1989 if LB 84, the $110.9 million return of a surplus to local governments, had been in place, then some 80 percent or more of that money would have not gone for new spending, but would have had the desired effect of forcing property tax
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January 22, 1998
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takings down. I want to make it clear. This spending cap is not intended to frustrate local governments, although some may feel that it will be frustrating. It is, rather, intended to facilitate local accountability. Citizen participation and local control are, in fact, the keys to its success. The spending cap could be exceeded by an additional one percent with the approval of a supermajority or 75 percent of the local governing body, similar to LB 299 approved in 1996. Voters also have the option of overriding the spending cap and the levy limit. We think that's not only symmetrical, but it just makes good sense. Communities will, in fact, have the choice, increased spending or property tax relief. Whether or not the budget as it's presented on the basis of the tax collections is adequate to meet the needs, or more money is needed and property taxes need to be adjusted upward or raised in order to meet those obligations, that is, in fact, the ultimate of local control . Sound fiscal management requires the ability to responsibly deal with emergencies and a growing base of service users and expanding population, and needed capital improvements. This proposal doesn't tie the hands of local governments faced with these circumstances. It recognizes them. This initiative also gives local governments the flexibility to deliver essential services along with accountability, local control and reduced property taxes. it encourages priority-setting, efficiency efforts and consensus-building. And now remember the three elements that are... that I think are essential, and I think that others will be talking about as well: the levy limits, leveling valuation increases which provide stability and a spending cap. We need all three, we can't ... we can't make it with just one of those. We have to have all three to provide Nebraskans true and, at the same time, long-lasting property tax relief. At this time, I'd like to ask Cathy Lang, the Property Tax Administrator, to join me. We have some handouts to give you some explanation of an illustration of what would have happened, over the last couple of years, with the property tax receipts, had there been a spending lid...or had there been a, first of all, LB 1114, and then what a spending lid would have done. (Exhibit 1.) We'll get those in your hands so that you can follow along. If you refer to the ... I think it's called CTL Data sheet, as opposed to the long spread sheet,...sheets, I guess there's more than one. I might mention that the spread sheets are the detailed data that Ms. Lang will be
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able to go over, with you to explain, I guess maybe even tomorrow, in an Executive Session. They're for your perusal at the moment. The sheets I'm talking about are the shorter sheets, the 8 x 10 sheets that I'd like to talk about. If you turn to the 1995 CTL Data sheet, you will see that the... the ... this shows the estimated, with a proposed levy limit of ... for LB 1114 and then the estimated dollar impact per the lid, which would be the third and fourth columns over. The bottom line total is $324,475,000-plus. The estimate is that if we had had the levy limit and the lid in 1995, property taxes would have gone down or have been ... there would have been 20.48 percent fewer property taxes collected. It's a tax cut if you... if you go back and apply it after the fact. A tax cut can come from giving money back or by not collecting it. This would have been that much less tax collected. In other words, it would have been a 20 percent-plus drop in property taxes to the individuals if we'd have had these two in place. That number includes motor vehicles, for your information. In 1996, it would have gone down $267 million, approximately rounded, or a reduction of 16.23 percent. That also includes motor vehicles. If you take a look at 1997, it's $207 million-plus which would be a reduction of 13.41 percent. Any enterprising soul would say, well, I don't understand why it would have been more in 1995 than in 1996, and trending down into 1997. The answer to that is that valuations have increased in that period of time so that the levies, the levy limit by itself, simply would not have had the impact that it would have otherwise had if we froze, if you will with a lid, spending. That's why the two are necessary. And I'd ask Cathy to maybe fill in anything that I have given a broad brush that needs something specific painted in.
CATHY LANG: The only technical point I'd like to discuss briefly is the 1995 data as well. Because the bill was introduced and adopted in 1996, we were looking at the 1995 CTL. In those years. we did not have all bonds taken out for all subdivisions. We did for schools, but not for everyone else. So the estimate in 1995 does include bonds in those numbers. But from there forward, '96 and '97, we have developed the CTL to abstract out all bond information, and so that is not then, therefore, included in that lost fiscal, capacity number, so bonds are then still out there, voted on by the people and are not part of that $267 million
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January 22, 1998
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loss. The other handouts that were given, just very quickly for your information, the long sheet is basically just the historical information from which we calculated the percentage reductions, so those numbers are there, should you want to look at those and look at the other history information that we have. Again, I'll be going through that in detail with you tomorrow. Then the chart shows the trends of property taxes, property tax rate, valuation and state aid to local governmental subdivisions. Unfortunately, at least for my purposes, the only line we can't put on there for you is a picture of overall spending by subdivisions, where has overall spending gone over that same period of time because we, at the property tax division, do not have any information about the total spending of the subdivisions of the state of Nebraska, but %a can tell you about their property tax portion of their spending, and that again is just information for you to look at to help understand the dynamic that we're facing as we look at what happened when (LB) 299 came into place, what happened with spending during those years, and estimating perhaps where that line might go once LB 1114 is in place in 1998.
GOVERNOR NELSON: If the lid had been put in place, together with levy limits, in... applicable to 1995, there would have been a 20 percent drop. Because valuations have continued to increase, expanding the base upon which levies can be applied, you can see that levy limits by themselves will not give the relief. We have to address the spending side, period. Now some have said that's quite gratuitous of you, Governor, to suggest this to local governments. I don't hear you saying anything like this about state government ... government spending. If we go back and take a look, as I indicated in my State of the State message, to the operation budget of state government, excluding state aid, it's averaged 3.4 percent over each of the last seven years. We could have lived with this lid that we're talking about here. We're not asking anybody else to do anything that we haven't been able to do and imposed upon ourselves, so I don't think we ... we're setting double standards in this process. If they want to go ahead and apply it to state aid, and direct that from the local level, that could be the equivalent of cutting your own...your own income because 60 percent of that ... of our budget goes back to local governments, roughly 20 percent, 17.5 plus capital budget
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January 22, 1998
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comprises the other 20 percent, and the remaining 20 percent goes to state operations. So, we're not asking anybody to do anything that we haven't attempted to do and do together, sometimes willingly and sometimes a little less unwillingly, on some of the spending, with budgets that I vetoed and/or overrides, but we have, in spite of all of those efforts, have been able to live within that. And I think there are some folks out there that are going to talk about a ... a spending lid for state government, as though that's something that would be foreign as far as I'm concerned. I don't see it foreign, I see it as something that we've already done, and if a constitutional effort of that type develops, as I just heard news of today, it is not something that scares me in... to one degree whatsoever. I am concerned when you move beyond state spending, to ... to state aid because if we put limits on the growth in state aid at the same time, we can create other problems. So what we need to do is focus on what this particular bill does and not let ourselves get distracted by any noise from the outside. This is a spending lid cap on local governments that emphasizes local control. Local individuals have the ultimate decision. If they don't like the lid, it doesn't suit their needs, they can vote to get out from under it. This is a democratic way of government, and this will facilitate that. By the same token, if we don't see this happen, levy limits by themselves will not accomplish what it is we intended a year ago and what we intend into the future, so that's why we need it. I'll address the valuation spikes in just a minute, or on some other time when you permit me., I'd be happy to answer questions.
SENATOR WICKERSHAM: Are there any questions for the Governor?
SENATOR COORDSEN: Not a question.
SENATOR WICKERSHAM: All right.
SENATOR COORDSEN: Governor, only to reemphasize this. We hear, here in this committee and otherwise throughout the Legislature and you've stated it several times in your presentation, and that is, again, that state government's actual General Fund operating costs have not grown nearly as much as local government ...
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January 22, 1998
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GOVERNOR NELSON: That's correct.
SENATOR COORDSEN: ... over the 12 years I've been here in the Legislature, and I only wanted to comment on that because that, and certainly in an election year, we're going to hear comments that indicate a great depth of misunderstanding with respect to what the state budget is made up of.
GOVERNOR NELSON: There may have been one of those this morning.
SENATOR WICKERSHAM: Senator Schellpeper.
SENATOR SCHELLPEPER: I wasn't going to, but I think I will. I agree, Governor, it's nice to have you here, and that this is something that probably needs to be done. I guess my concern is that people in the rural area are not going to have property tax relief that they've been wanting for so many years because of the high taxes that they... they have out there.
GOVERNOR NELSON: Well, we'll ... that ...
SENATOR SCHELLPEPER: My county went up last year about almost 13 percent, our property tax. We were the highest in the state.
GOVERNOR NELSON: How could it ... if we'd had a spending limit in place, how could that have occurred?
SENATOR SCHELLPEPER: I think it would have helped, but I think with the...
GOVERNOR NELSON: Well, I don't even know...well, anyway, go ahead, I didn't mean to cut you off.
SENATOR SCHELLPEPER: I think it would have helped, but I think probably one of our problems is that we're trying to do too many things with property taxes. I think that's my concern, is that we're trying to do ... we're trying to run schools and local governments and cities and counties with property tax'. I think that's my concern that we need to do something else in this state.
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January 22, 1998
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GOVERNOR NELSON: Well, we just...the Legislature last year just gave $110 million of state aid back to local schools, to take over some of the impact of (LB) 1114, and it would undoubtedly have some impact with the numbers we're talking about right here. For example, for 1997, if you factored in $110 million, and you say that there's a spending lid, that you can't go back to property taxes and get more of the money, that would have driven down property tax even more, so you could have had a bigger tax cut than 13.41 percent. I'm assuming that you get state aid. I mean, there is that assumption, and with LB 180, one way or another, I know we're going to get to $20 million of property tax. I don't know what form it's going to take, maybe you do, I don't, but that's going to also, with a lid, drive down property tax. Now what I'd like to ask Cathy Lang is whether or not people in rural Nebraska generally can expect property tax relief coming from a spending lid as well?
CATHY LANG: I think, as with all of the information that we have regarding how both LB 1114 or a spending limit will affect each and every subdivision out there, it's really difficult to make generalities. What we are suggesting is we get calls from taxpayers regarding what they can anticipate, is that they need to go back and look at their tax statement that they got six weeks ago, and look at those levy amounts that each of those subdivisions have, factoring in what (LB) 1114 limits are, to see if, in fact, in their subdivision, in their consolidated tax district, what subdivisions, if any, will see a reduction in their fiscal capacity because of (LB) 1114. We ... as we looked at the data that came in on '97, we had some counties that had, on county average information, substantial increases in value, and some of those, as well, had substantial increases in taxes well above what any of us would have anticipated, given the fact that we had (LB) 299 in place. And I think what it goes to is some of the issues that we know are out there such as bond,,;. They may have voted in a bond, they have unused budget authority that they utilized that year. It's impossible for us to know, but we have the data to dig into it to see, on. a specific case-by-case basis, what happened.
SENATOR SCHELLPEPER: Oh, I agree. I think it just gets back to what... to my other comment, that we just are trying to run too much government off of property taxes, and that's
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January 22, 1998
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my concern.
GOVERNOR NELSON: Well, I would agree with you, and that's why state aid has continued to increase, whether it's to aid to education, or to individuals, or to taking over responsibilities at the state level, as we did this past year, and we'll do with LB 180. That why ... but it doesn't do us any good to take those responsibilities at the state level from local governments and/or to give state aid back to local governments if property tax and spending can continue to go up, because all. we've... all we succeed in doing then is increasing the General Fund takings by the state, at the same time, property taxes go up. If we want property tax relief, we've got to put a cap on spending and let individuals in their own area decide how much they want, and we can assist as state aid continues to flow in or, in this case, the state takes over other responsibilities from local governments. To the extent that that happens, the only way you can be sure that property tax relief will go along ... will happen, unless there's a vote of the people otherwise, is to freeze the spending and make sure that property tax takings are frozen at that level. That's the only way I've been able to see it. LB 84, $110.9 million, one of the most well-intentioned efforts by the state to assist local governments, not that local governments don't have obligations, they do, they have needs, worthy needs; but that was supposed to be for property tax relief. In my opinion, it created more property tax grief because the next year, when you couldn't replace that $110.9 million from the surplus, what happened to property taxes? They went up, if you will, a double bump because they didn't have $110.9 million to take care of some of that additional spending. We don't have villains in this process. What we have is we've got a process that has to have some finality to it in terms of spending lids, unless people decide to do otherwise, or you can't get property tax relief. I hate to be walked into a situation where you can't get there from here. I think I did hear Cathy sort of say that, depending on the tax situation and spending situation of local governments, that you can... you can go district by district, and find out whether or not there will be tax relief. I didn't hear her say that there wouldn't be any for rural areas. There would be for rural areas as well as urban areas. It will just depend on the particulars of any one taxing district.
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January 22, 1998
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SENATOR SCHELLPEPER: Thank you.
SENATOR WICKERSHAM: Senator Raikes.
SENATOR RAIKES: Governor, a question concerning the 2.5 percent number. You arrived at that rather than 2 or 3 or a group of factors that maybe wouldn't be any one particular number in any given year.
GOVERNOR NELSON: I must admit, I did kind of look at what state government has done in that. I wouldn't say I backed into it, but I didn't want it to be asymmetrical. I wanted there to be some commonality between what we've been doing and what we were asking local governments to do; and also, looking at the cost of living index and inflation and things of that sort, so that it wasn't totally out of range. I think the latest numbers I've seen generally are somewhere... a little bit under 2 percent, and so this ... there were some people who said, really, it ought to be adjusted to inflation. I don't know that you want to go in and adjust it every year. I mean what...this may be difficult enough to do once, I can't imagine trying to do it every year, but that's really how we ... how we came up with a number. And we looked at the kinds of exceptions that ... there will be other people who will want to come behind me and testify there ought to be more exceptions. I ... I do not say that their suggestions don't have merit, but I do caution you that if we create too many exceptions, you won't call it a lid, you'll-call it a sieve, and. we've got to be careful that we're doing everything that we can to protect the growth in the spending, and limiting it to those areas where you shouldn't have to go and get a vote of the people. Bond issues, a long time ago the decision, was made that you go and get the vote of the public. I've suggested that when it comes to maintenance and ADA requirements and/or other ... asbestos requirements and things of that sort, that local governments could look at a five-year plan for that, and come back and get a single vote one time for a five-year program. That would facilitate planning. it wouldn't mean you'd have to go every year back and get a vote of the people, at some expense or some difficulty. So we I ve tried to look at what the exceptions are and what they should be, make it somewhat similar to what you've looked at before, and not have it completely out of line with things
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that have been done in the past.
SENATOR WICKERSHAM: Governor, if I might ask? You mentioned exceptions, and I think there are ... what, five exceptions to the lid.
GOVERNOR NELSON: I think that's about right.
SENATOR WICKERSHAM: And you also noted that we'll almost certainly be asked to make additional exceptions. Is there any standard or philosophical policy issue that we ought to keep in mind as we evaluate those requests for exceptions?
GOVERNOR NELSON: Yes, I think you should ask yourself the question, for example, why we put in emergencies. Well, emergencies aren't necessarily something you can plan for. Growth, I guess you could plan for it, but why would you not want to accept it because your costs are automatically going to be associated with growth. And so we've looked at planning, those things that you can plan for and said, those things should generally be included within the lid because what you can do is you can put a planning plan together and go and get a vote of the people if, in fact, it takes you outside the lid. That's the distinction we tried to make. I'm sure that other people will come along and say there are some things you can't plan for now that I've given the magic word. But that's what we've... that'll be for you to decide but that's where we've tried to draw the line. And once again, I say this because I mean it. This is not intended to frustrate local governments. I think it facilitates planning. I think it facilitates local control, consensus building, and those things that are positive to local government and quality of life standards.
SENATOR WICKERSHAM: And then, Ms. Lang, the data that we've had, and I can't tell on the summary sheets whether you've backed out motor vehicle values. I can tell that you've done that in the large spread sheet, but I think we need to be careful, particularly for members of the public who might try to evaluate this information. If you'd like to advise them of the changes that have been made in the tax base that might affect the ...
CATHY LANG: Right. What I would suggest,, as you go through the three pieces of paper that have the CTL data title on
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top of them, you ... I would not advise making a comparison from one year to the next, based purely on the lost fiscal capacity. The percentages that the Governor mentioned, which are a calculation of the total property taxes collected divided into the lost fiscal capacity to drive the percentage, are year-to-year. So in '97, when we did the 13.41 percent, it was using the total property taxes collected, which excluded motor vehicles, compared to the lost fiscal capacity of $207 million, which excluded motor vehicles, and so we're using apples to apples in that year. What you can't do is look at the $207 (million) and try to make a correlation to the $266 (million) because the $266 (million), as well as the $324 (million), have motor vehicle taxes accounted for in those numbers. So separately, individually, year-to-year ... within the year, excuse MO, within each year, you can make a correlation. You can't from year-to- y ear because we have a major tax policy change coming into 97.
SENATOR WICKERSHAM: Okay. Yes.
SENATOR COORDSEN: One brief question, if I can, and this is to Ms. Lang, and this is something I noticed even in the research that our own staff has been doing. Why is it so difficult to separate out the motor vehicle taxes in past years? It's been something I've been curious about because the comparability is then much more easier for people to do in a hurry.
CATHY LANG: And we can do that, so tomorrow during Exec Session, let's have a conversation about that because we can pull it out. We didn't in trying to get this information displayed and out there. However, just so that you know, the chart that has the line graphs on it has motor vehicle abstracted out of all of the data, except the rate, all of the value data, all of the tax data, so that is a comparison of similar tax policy from '92 to '97, and so those lines are relational to each other. We don't pull it out of the rate because we assume, in part, that, one, motor vehicles are spread everywhere. The average tax rate of motor vehicles is comparable, in a sense, to the average tax rate anyway, so there's no need to go through what would be quite a lengthy process to try and abstract it out of the rate. But it is pulled out of value and taxes on the chart. And I'd be happy tomorrow to have staff ... in fact, we've done
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some preliminary information pulling motor vehicles out of some histories and we could do it maybe on this entire history chart for you, but it would take us some time, but we could do it.
SENATOR COORDSEN: Well, thank you, because I had looked at it as a relatively simple mathematical effort on my part in years in the past, of taking that out, but I've often ... then that led me to the question in my mind, what is the accuracy of what I have left when I do that?
CATHY LANG: That's right.
SENATOR COORDSEN: Well, thank you for your explanation.
CATHY LANG: And if we pull it out of the sum totals, it's easy. My question for you, even tomorrow in our discussion, will be, would you like to see it pulled out of counties, cities, schools, NRDs, ESUs, or just sum totals?
SENATOR COORDSEN: Each time you peel off a layer, it gets more difficult to do. Thank you.
CATHY LANG: Yeah, but we can... we can work on that.
SENATOR WICKERSHAM: Okay. Any other questions?
GOVERNOR NELSON: If not, thank you very much, Mr. Chairman and Senators. I appreciate this opportunity.
SENATOR WICKERSHAM: Thank you, Governor. We'll look forward to seeing you again. Any additional proponents? Mr. Neidig, how are you today?
BRYCE NEIDIG: Chairman Wickersham and members of the Revenue Committee, I'm Bryce Neidig, a farmer from Madison and president of the Nebraska Farm Bureau Federation, presenting testimony today on behalf of the Nebraska Farm Bureau Federation in support of LB 989. The Nebraska Farm Bureau has stated many times that the solution to property taxes in Nebraska must contain three elements. It needs to provide indisputable significant property tax reductions, it needs to further balance and bring equity to the tax system, and it needs to fundamentally reform government to create efficiencies and reduce spending. The levy limits scheduled
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to go into effect next year have the potential to reduce property taxes and perhaps bring greater balance to our tax system. Reform of local governments, reduced spending and efficiencies have been more problematic, but we are making progress, yet despite other reforms brought about by the levy limits. So while in Farm... while we in Farm Bureau haven't In the past been enthusiastic about spending lid proposals, we believe flexible, constructive spending lids are worthy of the committee's consideration. State and local governments and Nebraska citizens must continue to examine which government services are needed, where they are needed, prioritize them and determine the best means of funding those services. Tough decisions must be made. Spending lids are a reasonable, workable supplement to levy limits to control spending, but not dismantle or threaten essential government services. We believe the spending lids in LB 989 are reasonable and constructive. Local governments and citizens will continue the dialogue initiated with the levy limits on needs, priorities and how beat to fund them. At the same time, the spending lids proposed in the bill provide flexibility by allowing for a population growth, overrides with majority votes of local boards, and even greater overrides with a public vote. For these reasons, we believe the spending lids contained in LB, 989 can continue to lead us down the path to property tax relief. We encourage the committee to advance the bill to General File. Thank you very much for your consideration of these comments.
SENATOR HARTNETT: Any questions? Don't see anything, Bryce. Thank you very much. Other pro ...
DAVE NEWELL: Excuse me, I have copies here for the committee. (Exhibit 2.)
SENATOR HARTNETT: Okay. Other proponents?
DAVE NEWELL: Senator Hartnett and other members of the committee, my name is Dave Newell. I'm with the Department of Revenue, and here to kind of fill in some of the blanks and to anticipate some questions, and I'm not going to go through the outline that we've handed out, but I will kind of hit some high spots in order to kind of explain some of the reasons why some of the policy decisions were made. I guess the premise here that I would offer you is very
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simple. The Governor said that we needed to continue LB 299 and try to make some improvements so that it could be a long-lasting proposal to do ... to hold down property tax, it had to be flexible, and those are the kinds of things that the Governor tried to... to put into this bill. If you'll look at the proposal that I handed out, it says a summary, and then behind the summary is a section-by-section outline of the bill. And I'm just going to hit some high spots. We've separated this into two areas, and the two areas are all of the subdivisions and schools. And that happened because as we started to write the bill, schools came in and wanted to be treated separately, felt that they had a long body of law that allowed a certain amount of flexibility, and so the Governor conceded that point and tried to keep those two separate. The high points on the first part of this will be all things are ... most of the (LB) 299 was the predecessor of this legislation, and the restrictions are some ... was based on the restricted funds. Limitations were based on the fine work that the Revenue Committee did previously. We just sort of followed those, with a few exceptions. And those exceptions really are on gaming receipts for local lotteries. The Governor felt that those revenues have been around long enough that they were being used as a specific budget item, and that they could be reliable enough to be counted on as ongoing revenues. That's why that's in there. Some others will argue that maybe that shouldn't be in there. And that's ... that's pretty much the only major change in that area. Going down, capital improvements, retired, all those exceptions are in there. -There is nothing new in that area, not even... and I'll hope you'll notice this later...number 5 which says judgments against local governments other than the Court of Industrial Relations. That was the way (LB) 299 was written before. The base is 2.5. 1 think the Governor did a very good job of explaining that. In addition to that, you can have an extra 1 percent additional, with a 75 percent vote of the body. That's not unusual, that's not different from (LB) 299. However, the one thing that is different is is that if you want to...if you are trying to bank that authorization, that spending authorization... it's not money, but it's authority to spend down the road ... and you don't spend it, you get all of the 2.5, but everything above that, you only get 75 percent that is banked, carried over and can be expended at some later date. I think...I think those are pretty much...I'm trying to hit just the high spots because
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I know that there's a whole lot of other folks here. one thing that the Governor did want to add, and that is the setting up of sinking funds. Local governments do not have, other than schools ... schools were allowed to set up sinking funds ... and the problem was that you could have ... a sinking fund was an expenditure after you saved up the money. So what the Governor has basically said is is that we're going to allow a one-time, for this year only, an additional 4 percent that would be considered a restricted fund, but when you spend it, then it would not be a restricted fund. And I guess there may be some need to clarify that it is considered a restricted fund, and it's a one time only 4 percent, for the creation of those. And that's really to give parity with schools and also to kind of deal with one of the problems, some of the smaller subdivisions like fire districts had...had a difficult time buying equipment and so firth, so it allows them to do that, and that may make a big expenditure, that one time when they finally use those .funds, so they should be ... the use of those funds should be outside the lid. I think...I think that everything else is fairly easily understandable. I'd be glad to answer questions if... and I'll be around later, if that'll be of any value to you. You'll be tired out, hopefully...,no, I will be here and ... and answer any questions that might come up.
SENATOR HARTNETT: Any questions of Mr. Newell ... Senator Newell. Senator Will.
SENATOR WILL: Yes, Senator Newell ... no. Dave, just clarify one thing for me, with respect to the gaming receipts from a local lottery. In that ... as I read your summary, that is included under restricted funds.
DAVE NEWELL: That is correct.
SENATOR WILL: So...so any fluctuation, any expansion of, for example, you know, locations, would... if that increased revenue, that would... that would fall under the restricted funds as far as LB 989 goes?
DAVE NEWELL: That's the way it's written, and it is an addition from last ... from (LB) 299 and the reason for that is because the Governor believes that those funds have been around, that he didn't want to sort of make that look like
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free money, that if it was ... if a subdivision was going to add that activity, then it would produce property tax relief. That was the rationale and the logic.
SENATOR WILL: So the reasoning is...I'm just restating maybe what you just said, that you don't want ... you don't want to have a situation where the local subdivision is looking at maybe some more free money by, you know, expanding locations, keno locations, or something like that?
DAVE NEWELL: That's part of it. The other part of it is is that ... that, in fact, some of these have been around for a long time. They're waning, especially in the eastern part of the state, and that if people were expecting to use that money, then it would be ... it would be considered part of the budget, or could be considered part of the budget.
SENATOR WILL: Thank you.
SENATOR HARTNETT: Senator Peterson.
SENATOR C. PETERSON: Thank you. I have a question, if you could just clarify for me a little bit more on the section that says that the exceptions for the limits, and then it says, judgments against local government other than the CIR...
DAVE NEWELL: That is correct.
SENATOR C. PETERSON: ... the philosophy behind that.
DAVE NEWELL: Well, the ... (laugh) ... the wisdom of. the Revenue Committee, back when (LB) 299, about three years ago when (LB) 299 was passed, that was in there at that time. The Governor looked at it again and decided that it should stay, it should not be separated out, and in part, I think the rationale was he thought that that might distort the collective bargaining process.
SENATOR HARTNETT: Any other questions? Thank you.
DAVE NEWELL: Thank you.
SENATOR HARTNETT: Senator Coordsen.
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JOHN BONAIUTO: Senator Hartnett, members of the committee, John Bonaiuto, representing Nebraska Association of School Boards. We appear in favor of the Governor's bill with ... with a few reservations. The Governor, I believe, is very sincere in his intent to provide a framework that will not be terribly restrictive, and we have a standing position that talks about supporting lids that are flexible. So we do support the direction that this bill is going. School boards are not, by tradition, wild-eyed spenders. When they do spend money, it is for specific reasons. There are a few areas that... that we are not sure, in the overall context of what will be happening with (LB) 1114 and with the budget lids, are going to be as workable as the Governor thinks. The student population growth area is an area of concern because, in the Governor's bill, it is more restrictive than what is in law currently, and for growing districts, the students are going to arrive. And they're going to require the board to make decisions that will ultimately cost more money. The other area is a restriction on carry-over funds from one year to the next, if you've accessed the additional 1 percent. If boards are planning for a specific purpose to use that money, restricting it to 75 percent may not be workable for long-range planning. But the intent of that may be more to restrict districts that are carrying it over for other reasons, that they are trying to accumulate a pot or a pool of money, for whatever. I just think that these are a few areas that need to be looked at but, overall, the concept is something that we believe that boards can live with and support.
SENATOR HARTNETT: Any questions? Senator Raikes.
SENATOR RAIKES: As far as allowing for student growth, a couple of questions. One of them, allowable growth range from 2.5-4.5 percent, linear transition based inversely on per pupil cost. Yeah, I think I understand roughly what that means. It does say, though, that growth above 2.5 percent requires 75 percent of the school board vote so, in effect, there's no growth allowed without ... or no additional growth allowed without some extra support or consent on the part of the local government. Your comment on that. One other thing is that growth of students and, for that matter, population changes are not treated symmetrically. You... you might, for example, argue in a lid bill that if the population base goes down, the lid would
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actually decrease, or if the school population goes down, the spending would have to decrease. Your comment on that.
JOHN BONAIUTO: Well, I think that the spending would and should decrease if ... if the ... if sufficient population change occurred. What happens many times is that the changes that occur do not warrant necessarily a reduction in the number of teachers as far as a reduction in student population might be spread over several grades or several areas. What happens, though, with growth in population, you tend, with class sizes, to get to a certain point where you have to add staff, and so it's ... we find it's ... there's more demand many times to add staff with growth, but as you don't have that dramatic increase ... decrease that you have with districts that are growing as far as districts that lose students. They lose some population but we've seen districts grow dramatically, hundreds of students in one year to the next, and in the population growth calculations that would be in the Governor's bill, there are some districts that could grow several hundred students and still not reach the threshold that they could increase their spending. And so that's the concern, is that if you have a growing district that is unable to reach the ... the magic line or the number, that they are still going to have those students but they will not be able to access that population growth.
SENATOR HARTNETT: Any other questions? Would you... what ... are you saying that you would prefer the language that was in (LB) 299 or, a percentage' that is below 2.5 percent, is that what you are saying? That's the big part of this proposal that bothers you ... or school boards the most?
JOHN BONAIUTO: And I think that you'll hear from other speakers, similar issues but maybe they will say it a little better than I have, and more concisely possibly, but in law right now, there is a population growth provision that was used with (LB) 1059, and not everything about (LB) 1059 needs to be wiped away. And districts have used that population growth calculation, it works They've planned with it, and I, you know, I believe that that would serve what the Governor is trying to do, quite well, without putting something new in place of what is being used.
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SENATOR HARTNETT: Any other questions? Thank you.
JOHN BONAIUTO: Thank you, Senators.
SENATOR HARTNETT: Further proponents?
CHRIS NELSON: I have a handout (Exhibit 3.) Senator Hartnett, other members of the Revenue Committee, my name is Chris Nelson. I'm the business manager for the Beatrice Public Schools. I'm here today to speak on behalf of the Nebraska Council of School Administrators in support of LB 989. We believe this bill reflects a fair and even-handed approach to address the needs of schools, while assuring responsible administration of the funds entrusted to us. It's for this reason we are willing to support this proposal. There are, however, some concerns with this proposal that we would like the committee to consider, namely, three. The first one is student population growth. As was discussed a little bit earlier, under this bill, schools can increase their budgets beyond the 2.5 percent limit if they are experiencing student population growth. The threshold for schools to increase their budgets for student growth has been increased with this proposal an additional 1 percent from the current growth formula. We believe this places an undue burden on schools with growing enrollments. As an example, the Omaha Public Schools could see their enrollment grow by 800 students and not receive any additional budget authority. If this change is due to concern about inappropriate budget growth, I would note that there are two separate security measures in place. First of all, the $1.10 levy limit will prevent schools from large increases. Schools do not receive state aid for student growth until the following school year. Without this additional revenue, most schools will have a difficult time even accessing any student growth authority. Also, under the current formula, schools have to submit. a written application to access this additional authority. As a double check, the following year a review of the actual increase is compared with the authorized increase. If the authorized increase did not materialize, the additional budget authority is removed. We are asking the committee to consider leaving the current student growth provision intact. Second, budget lid exceptions. LB 989 provides, some of the same budget lid exceptions as previous lid exceptions. Items such as special ed and natural disasters
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are listed. It doesn't, however, list special grant funds such as federal grants or the state lottery grant. It is our concern that if these items are not specifically listed, that we may lose this exception. We are asking the committee to consider adding specific language, listing special grant funds as an exception to the budget lid limit. However, I would again emphasize this is not asking for something that's not already in place. Unused budget authority is the last one. Under this proposal, any unused budget authority created by the additional 1 percent vote of the board would be reduced to 75 percent of the budget authority created. It is our concern that, by limiting any unused budget authority, long-term planning may be impacted. As an example, the Kearney Public Schools opened a new middle school recently. It was with the help of unused budget authority created over a period of time that they were able to implement a one-time use of additional budget authority to purchase the necessary items to equip the new school. As I've noted before, with the $1.10 limit, there are security measures in place that further limits schools from attempting to use this privilege. We are asking that the committee consider allowing schools to keep 100 percent of all unused budget authority created so as to assist with long-range planning. In summary, we believe this proposal's intent is to be responsive, both to the taxpayer and the schools' needs. We would appreciate your support for the considerations we have presented. Thank you for your time. I'll be glad to address any questions you have.
SENATOR HARTNETT: Any questions? Don't see any, thank you very much. Other proponents?
VIRGIL HORNE: Senator Hartnett, members of the committee, my name is Virgil Horne, representing the Lincoln Public Schools. We support this bill; however, we would like to have the opportunity to work with the committee's legal counsel on some items that we think need to be clarified immediately, and a couple of things that I'd like to just mention to the committee as well. We, too, think you have an excellent growth provision in (LB) 1059, that people have been working with and trying to use, and to change that now would be very difficult, and puts school boards in a position of not knowing how to operate, really. And this Legislature has been gracious enough to, in some way, say, if you plan down the road, you can ... you can do things more
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efficiently. So we would certainly ask that you leave that growth in place. As an example, the Millard Public Schools have grown in the last three years the equivalency of the Chadron Public School system. That amount of kids have moved into Millard School District. Under the proposed bill, they would not meet the guidelines required for growth and, yet, those kids are there and they're requiring teachers and requiring the kind of expenditures that go with them. As far as the unused budget authority, a couple of years ago the Lincoln Public Schools came to an agreement with their teachers on a two-year settlement. We think that was more beneficial to our taxpayers because our board could give itself unused budget authority one year which would be used the following year, and in allowing us to settle a two-year contract, we could make a better position for both our board and the people that they represented. When we start eliminating that, it's a concern that will get to the "use or lose" mentality, which is not really what we would like to see happen. We think we saw some of that this year in selected school districts around the state, and perhaps this is one of the reasons why this type of legislation is being proposed. So as I say, we ... we are in support of this bill. We have some very real concerns about some nitty-gritty kinds of things that we'd like your permission to work with your legal counsel on. We also have some concerns about the growth and the ... the obvious thing that I'm not addressing is the lid limits. There's a mixed bag about this. As I work with other school districts around the city ... around the state, excuse me ... there are those that would indicate that...that the 2.5 and a majority vote is a concern. Speaking for the Lincoln Public Schools at this time, we don't choose to address that issue at this time. We think that we can live within that and work with you. But if the other things that we talk about, the growth and the carry-over is restricted, that makes it even that much more difficult. And I won't even talk about the building fund now because I know that wouldn't be appropriate. (laughter) Thank you.
SENATOR HARTNETT: Any questions? Senator Will.
SENATOR WILL: Yeah, Virgil. Has ... is it your experience that the ... the growth provision that we have in current statute, and I don't...I don't have it in front of me right now, but in ... are they conceptually or practically, or both
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or either, is it well constructed at this point? Is it ...
VIRGIL HORNE: We think it is because it addresses actual student growth, and it works in a fashion that allows the school district to grow because they have a need to grow. As you recall, at one time we had a rapid student growth that Lincoln worked very hard to get, and that was done away with. And basically, we said we wouldn't come back to that issue, as we were working with the people last year, because we felt like this growth provision would provide that adequately.
SENATOR WILL: Thank you
SENATOR HARTNETT: Senator Schellpeper, I think, has a question.
SENATOR SCHELLPEPER: Yeah, Virgil. The Governor mentioned that if we make too many exceptions, we're going to have a sieve. Would the schools basically support the bill in its present form, with only minor changes, nothing major?
VIRGIL HORNE: First of all, Senator, I can only speak for one district, and minor changes...if you're talking about leaving what's currently in the growth factor and in the carry-over legislation, I think the Lincoln Public Schools could support it, yes, air.
SENATOR SCHELLPEPER: Thank you.
SENATOR HARTNETT: Any other questions? Thank you very much.
VIRGIL HORNE: Thank you.
SENATOR HARTNETT: Senator Wickersham, I'll turn it back over to you.
SENATOR WICKERSHAM: Are we ...
SENATOR HARTNETT: I'll turn it over to you.
SENATOR WICKERSHAM: I take it we're on opponents here?
SENATOR HARTNETT: Proponents.
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SENATOR WICKERSHAM: Proponents? Okay, well, proponents?
Any additional proponents? Any opponents?
JIM GRIESS: Senator Wickersham and members of the Revenue Committee, I'm Jim Griess. I'm representing Nebraska State Education Association. Bills like LB 989 present organizations like ours with a dilemma. I think it's true for school boards, administrators, cities, counties. To be politically correct, does one testify in support with reservations, or do you just be honest and say, we don't like the bill, and testify in opposition? Our organization has chosen to oppose this bill because we have a number of serious concerns about it. It's not that NSEA opposes reasonable limitations on growth and spending, or that we oppose reasonable limitations on property tax growth. And like Senator Schellpeper, we think we're trying to do too much with property taxes and not enough with state revenue sources. The Governor said we could save a considerable amount of money in property taxes if thin lid had been in place. What he didn't address so was what impact would that have if it had been in place, on the quality of education, the quality of services that local governments provided to their patrons, and the impact on quality life that we have at the local community level. And those things, I believe, are equally important to how many dollars we might save in terms of property taxes. We talk about state aid to education. State aid to education ought to imply that we're trying to promote the best quality educational program that we can for the children of this state,' not that we're simply trying to save bucks. Efficiency is important, but so is effectiveness. And so that's why we appear here today in opposition to the Governor's lid as it's written. We believe that LB 989 in its present form will place school districts and other governmental subdivisions in a financial straitjacket and that, as a result, public services, including the education we offer the children of Nebraska, will stiffer, and our children will be the ultimate losers. Two years ago, the Legislature passed (LB) 1114 and NSEA supported that passage, and it placed a levy cap of $2.10 on property taxes assessed against any particular parcel of property, for general fund purposes. As a result of that levy cap, beginning in school year 1998-99, property tax levies will drop significantly in many school districts around the state, and revenue available from property taxes
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will be significantly restricted. With revenue from property taxes capped off, beginning in school year 98-99, the only other source of revenue for public schools is the money school districts receive from state aid to education. That, too, is a cap because the Legislature has already decided how many dollars each of the specific school districts will receive under LB 806. School districts, therefore, cannot spend money they do not have available to them. The property tax revenue has been capped off by (LB) 1114. The state revenues have been capped off in the amount of a specific dollar amount districts will receive under (LB) 806, and so the revenue that school districts receive is already strictly regulated and they can't spend money they don't have. In our opinion, the financial constraints needed to control school spending are already in place because all revenue streams available to schools are already capped off and regulated by state government and state law. The concepts that increases in assessed values will create gigantic windfalls for some local governments is not a legitimate argument to support the need for the lid contained in LB 989. If the assessment process were done correctly, and if it were done on an annual basis so that assessments grew gradually over time... and that's the problem... the problem is with the assessment process, then it would be tied to actual market value increases or the construction of new homes and other real property. And new construction brings with it increased demand for services. When you build more homes, those homes have children in them. There's a demand for increased educational services. When you build new subdivisions, there's a demand for sewer and water and streets and utilities and police and fire protection. If local governments are denied the use of this revenue, then either the services that those governmental citizens receive must suffer. In order to maintain the same level of quality, state aid must be increased. Either you have fewer services or you have to pick up the costs at the state level. And I don't believe it's in the best interests of the state to allow growth and assessments not to be used, to pay for the increases in the demands for services because if that's true, citizens will be back asking for more money from the state because they can't use the available resources they have because of normal and legitimate growth in assessed values. LB 989 is also too restrictive in several other respects. I We have the same concern about student population growth. If you get 25 new kids at the
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first grade level, you have to add a teacher. If you get 25 kids that are spread across five or six grades, you can absorb those children very easily. The same is true in terms of going down on the other side. A typical classroom teacher ought to be able to handle roughly 20-25 kids, but if you have declining populations, at what point do you lose the teacher because they're going to go down gradually grade by grade by grade, unless, of course, that entire loss of population came out of the first grade, and then, yeah, you could get rid of a first grade teacher. So those kinds of potential growth mechanisms must be flexible enough to actually reward the school district when they have to add that full class unit in order to accommodate for the student growth. We believe LB 989 is too restrictive in other areas. The bill sets a spending cap base of 2.5 percent per year for each governmental subdivision. When inflation is roughly 2 percent, as it currently is, one could argue that such a spending cap is reasonable. But what happens when inflation goes back up to 4 percent or 5 percent or 7 percent, and we've seen inflationary rates even higher than that. If a spending lid is necessary, then we argue... and we argue that it is not, but if it is, then at least the base should be tied to legitimate economic indicators so that growth in spending and available revenue will grow along with the legitimate needs of government. This week Senator Raikes has introduced LB, 1254 which ties base spending caps to the consumer price index and other legitimate increases in costs faced by local governmental subdivisions. If a spending lid cap remains inflexible, -when costs rapidly increase, programs will suffer and that will have a negative impact on educational quality for children. We, therefore, urge that if you intend to report LB 989 out of committee, that you amend the concepts of LB 1254 into the bill, to provide for a flexible cap that will grow with the economic needs of local government dictated by CPI increases. LB 1254 provides an orderly process for annually reviewing any base spending lid number and would examine...or rather eliminate the inflexibility that's created by (LB) 989. And it places the final decision for adjusting the spending lid base in the hands of the Legislature. LB, 1254 will create budget flexibility based on real need without giving away the farm because the Executive Board of the Legislature will adjust the spending cap based on real economic indicators on an annual basis. Including (LB) 1254 as a part of LB 989 would be a
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significant improvement in its design, without eliminating the concept of a spending lid. From our perspective, LB 989 is flawed in another critical area. For a number of years prior to the passage of (LB) 1114 and (LB) 299, the lids that were in place under (LB) 1059 allowed wage settlement orders of the Commission of Industrial Relations to be exempt from the lid. That was changed two years ago, and LB 989 continues that current language. While LB 989 allows low-spending school districts to increase their expenditures by a vote of the board, and we believe that flexibility Is important, it is the high-spending districts, in many cases, that need more flexibility. And let me explain. When you measure cost of education using per-pupil expenditures, it's many of the highest-spending districts that are, in fact, the smallest districts in the state. They are, by the Legislature's own definition, small by necessity, because of sparsity of population across many parts of Nebraska. And if you look at Nebraska Department of Education data on those kinds of schools, that data clearly demonstrates that these high-spending districts have some of the lowest teacher and administrative salaries and the highest rate of turnover. In some cases, that turnover rate borders on 20 percent per year. flow will these districts ever be able to attract the brightest and best in terms of teachers and administrators if they are never allowed to compete with other districts for the employment of high caliber professional employees. If CIR orders are not exempted from the spending lids, then these districts may have no choice but to cut staff or reduce programs in order to pay a comparable le wage. Either way, equal access to a quality education is denied to the children who attend those districts. The typical pattern now is for the brand new college graduate to begin their teaching career in these kinds of schools, make their mistakes by experimenting on the kids in those small communities and then moving in three or five years to a much higher-paying district down the road. And since one teacher is the math department, or one teacher is the science department, where is there any kind of continuity of instruction, and what does that have in terms of its impact on kids? In order to ensure equal student access to a quality education, and to allow districts to compete on a relatively equal footing for qualified staff, we believe that it is critical that CIR wage orders be exempted from the lid. The amendment to LB 989, which is attached to this testimony which I've
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submitted to the committee, (Exhibit 4), would accomplish that goal by simply reinstating the language that was already in the law two years ago, and for many years prior to that, and language which in fact worked well for a number of years. In closing, let me reemphasize our opposition to LB 989. Because both property tax revenue and state revenue are already limited by statute, we do not believe that LB 989 is necessary. When the Revenue Committee designed LB 1114 two years ago, it was designed to reduce property taxes. It has, and will continue to do that, but it was never the intent, I believe, of the Revenue Committee to squeeze the lifeblood out of local government or to ratchet down the quality of our public schools. While it may be politically expedient, we believe LB 989 Is bad public policy and should be indefinitely postponed. However, if the Revenue Committee believes that such a bill needs to be enacted into law, then we would urge the Revenue Committee to amend LB 989 to include the concepts contained in LB 1254 and the language we have proposed which would exempt wage orders of the CIR. Thank you in advance for your consideration of this testimony.
SENATOR WICKERSHAM: Thank you. Any questions? Don't see any. Thank you.
JIM GRIESS: Thank you very much.
SENATOR WICKERSHAM: Next testifier, please.
LYNN REX: Senator Wickersham, members of the committee, my name is Lynn Rex, representing the League of Nebraska Municipalities. We're here in opposition to this measure. And first I'd like to emphasize that this measure represents a major shift from the philosophy of LB 299 and LB 1114, and I think it's reflected in legislation passed last year where, for municipalities on the equalization fund, in order to assist the smaller municipalities that are going to, I think, will real)-.: be struggling with (LB) 1114, at least some of them will be, that indeed there is a provision now of you have to have at least a 40-cent levy on the property tax side; otherwise, you will be penalized in the amount of state aid that you receive as a municipality in the state of Nebraska. Now originally,' the alternative that we had placed before the committee last year was LB 831, and that bill would have extended additional levy authority, or the
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capacity for it, for smaller cities and villages in the state of Nebraska. And the reason is because those will be the folks that will be most impacted and, having said that, I will also emphasize that where most of the citizens in the state of Nebraska live which are larger cities, Lincoln, Omaha,. cities of the first class, with the exception of a few of them, and those few being those with local option sales tax; in fact, they're not at 45 cents. Most of them are not even at 40 cents. We have many at 10 cents, 12 cents. I think, Senator's...Norfolk in what, 12, something like that. So the point is, we were told last year, with LB 831, that in fact, that in terms of the levy, the whole theory of (LB) 1114 and (LB) 299 was LB 299 will be in effect for two years, to control the spending side, and then the public policy of LB 1114 would take place, and that public policy being that there would be a uniform levy, if you will, across the state. That was the plan. What you're saying today is, now that's not really the plan. The plan here is,- now we're going to be looking at some other things. And I'm just suggesting to you that we do not support lids, but inasmuch as last year when additional levy authority was asked for, for the smaller cities, again the message was, and that was a bill by Senator Maurstad, no, that is not going to happen. We want the uniform levy. Indeed, one of our cities, in a conversation with one of the members of this committee, was told, well, increase property taxes. That's what you do to accommodate the situation that you'll be placed in when LB 1114 takes effect, and because you're a larger city and because you will be having reduced state aid because you're not at 40 cents, that is what you're supposed to do. The plan is, uniform levy, that is the plan. Now we're looking at something fundamentally different, and with that I would just suggest that with the state of Nebraska or the state Legislature and the kind of spending that I understand in terms of ... in the state aid that the Legislature has given to local governments, specifically to municipalities, which we have $17 million in state aid to municipalities, but we also have gas tax and some other things, but the most useful, of course, being the authority for local option sales tax, and we certainly you that we would take 3.4 percent with growth on an annual basis in a millisecond. We'd be happy to have that kind of a lid. When asked whether or not the 2.5 would be really difficult for municipalities, the answer to that is, for some
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municipalities. For many, it will not be, for this reason... in terms of an overall lid. There are some fundamental problems that I'll get into with respect to (LB) 989, in terms of technical issues and some policy choices. But my point is that when you're looking at these kinds of issues, most of our cities haven't gone up that much. So the point is, when you look at what the implications will be, it's important to also consider other policy choices and it's very hard to put everybody in the same position and assume everyone is in the same position. Let me give you some ... and I think Senator Will probably knows this and Senator Schellpeper, with their service on the General Affairs Committee, when it comes to the public policy choice of whether or not lottery monies ought to be included within the definition of restricted funds, we oppose that. The reason why we oppose that is that, as you know, there was local elections In order to have keno or lottery local gaming. With respect to that, many, if not most, of those localities did It, and on the ballot question they did it with the understanding that it would be dedicated ... not just understanding, a commitment to the voter, it would be used for specific purposes. Never, not ever, was it done to lower property taxes, and the reason Is this. one never relies on gaming revenue to determine how you're going to use operations. You don't pay police officers with that. You might buy a few police cars, but you don't use it in terms of doing certain kinds of things in the nature of operations of salaries or anything of that nature, and the reason is because of the tremendous flux. And I would s tronly suggest that you ask the Department of Revenue to provide for you, for those 'municipalities that have local option gaming, that you give ... that they give you in the last five years the amount of revenue that those municipalities have received, because you will see tremendous swings. Now what does that mean? That means that if your keno monies go down, and that has happened in some cities, especially on the eastern side, that would mean in order to have the base, that your property taxes would go up, if you're going to have the same base, which is why we have recommended ... and I frankly know of no city using gaming or keno money for the purposes of general operations. They use it for specific purposes. Many cases, it is used to help fund charities, many kinds of different charities, locally. So that is one policy choice we strongly suggest that you look at. In addition, we would suggest to you the
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whole concept of not being able to have unused budget authority carried over is, quite frankly, if youre going to have a lid the wrong policy choice to have any kind of a limit on that because, in fact, the purpose of having unused budget authority carried over is so that, indeed, you can have it for planning purposes and so that there is some stability in how local governing bodies are going to be making their choices locally. And in order to do that, you can't say, well, one year you can carry everything over, the next year you cannot. In fact, short of some minor changes, which this bill does not ... this bill represents major changes, not minor changes ... if it was minor changes to (LB) 299, we would not be looking at what undoubtedly will be probably the most complex lid, and although that's for the municipal clerks and others and city councils to have to deal with, not the Legislature, I do encourage you to look at the size of the form that will be required in order to really put on paper what's necessary here. And I'm not suggesting well, so what if you add a few more pages, that that's a reason not to pass a lid. I'm not suggesting that. I am suggesting, though, that you need to seriously look at what kinds of things need to be done in terms of going back and reestablishing based on every time you change the base, every time you change what's in the pot of restricted revenue, that means someone back home is going to have to go back and redo last year's budget in order to determine what they're going to be doing in the future. That's what it means. Even though it is prospective in order to establish the basis, one needs to do that. Now that takes time and effort. I understand that those supporting this may not have that particular concern about it, but I am saying to you, it is a concern, and it is a major concern. In addition, just in terms of the technical issues, I would strongly suggest that the committee either request or get from the Auditor's office a list of how they're going to rule on a number of choices. For example, one of the things, if you look on page 4, line 1, there are questions regarding an ... one sinking fund. It looks like one sinking fund. It's not just one sinking fund so the question is, do they mean just one sinking fund or do they mean to put in place what has been there and to try to make it work within the context of what traditionally is known as local government budgeting, and how people have actually tried to comply with that. There's some technical issues of that nature, that if you're going to pass a lid, it's extremely
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important to know what that means and how it would be applied. And I would suggest to you that the reason I suggest the Auditor's office is that even now we have municipalities calling them, trying to determine how, in fact, would this work. Why are they calling now? They're calling now because we have cities involved in the budgeting process now for the next fiscal year. In addition, CIR. I underscore everything that Jim Crises has said, with respect to CIR, and we don't agree on almost anything when it comes to CIR ... (laughter) ... I ... as Senator Coordeen knows, having introduced several measures for us. I would suggest to you that when you're dealing with the Commission of Industrial Relations, it meets the test that Governor Nelson outlined for you, and that in, you cannot plan for it. You cannot plan for emergencies, you cannot plan for 20 percent increase that the Commission of Industrial Relations may give a city. You cannot plan for it. It is mid-budget year. You have all kinds of concerns, you cannot plan for it. And I would suggest that, indeed, you cannot deal with property taxes in the state of Nebraska until the Nebraska Legislature is prepared to look fundamentally at some consistency on the municipal cases in CIR. I realize that teacher cases are different, but as it applies to these issues, it is extremely important to look at that. I would also suggest that having the flexible kind of ... that I think Jim has outlined for you, by having the Legislature's Executive Board look at some kind of a flexible factor on what that percentile ought to be, that seems to make some sense if you feel you have to have a lid. But I underscore the fact that this is a fundamental change from what municipalities across the state were told by state senators and by others, in terms of the plan of LB 299 and LB 1114. This is not just a continuation of LB 1114. That is not what this is. This is riot just a continuation of the plan, this is not the plan. This is different from that. obviously you're elected and you can make those decisions, which brings me to closure, which is the issue of local control. This is not a bill that embraces local control. Local control is representative government. It is electing local elected officials, people with whom you meet when you go back home for your eggs and issues. Those are the people that are locally elected, those are the people that determine local decisions. Now, when you have a direct vote of the people, that's fundamentally a different thing. And if you want to talk about a direct vote, it allows a local
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vote ... say it allows a local vote, but it's not local control. Local control means something fundamentally different. And one of the other issues that I would just close with is this, that there is some irony, and it's between laughing or crying, that (LB) 1114 in the 1998 session would say that you don't have to pay property taxes for the first three years if you come to the state of Nebraska. So the kinds of choices that are being presented to local governments are quite confusing, and as one city administrator told me the other day, as he's preparing his budget for FY 99, is that similar to cosmic legos, you never know where the pieces are going to be, how they stack up, and basically, how you can tell your employees that you're going to be providing them with salaries and the public with services. This is a very important piece of legislation. And I agree with the Governor that, in fact, when he said this is one of the most important pieces of legislation ... I'm sorry, Senator Coordsen said that. I agree with you. It is a fundamental change from (LB) 1114 and (LB) 299, and we didn't support those either. But I am suggesting ... as you know, but because we actually do believe in local control. We believe you elect the people and they make the decisions. In the same way, we would never support suggesting that the citizens of the state of Nebraska vote statewide on what the sales and income tax rates ought to be, and that you don't have that decision. I'd be happy to respond to your questions.
SENATOR WICKERSHAM: Senator Will.
SENATOR WILL: Yeah. Very specifically, Lynn, your remarks on the ... on the use of local gaming revenues, I ... and I totally agree with your premise that they should go for, you know, not only on the local level but on the state level as well. You know, I was the sponsor of the state lottery, and I've always been an advocate that gaming money should go for specific projects because it's not a particularly reliable source of revenue, although it can be lucrative, as we well know. I did want to ... want to ask you one thing to clarify. My recollection, and correct me if I'm wrong, is that in... in Omaha, I think that the ... the Omaha keno money goes into the general fund, doesn't it?
LYNN REX: That, I don't know. I'm not aware that it does.
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SENATOR WILL: I believe that it does, and I just wanted... because, you know, you did...
LYNN REX: I ... yes, I said it does not ... if they do, I'm not aware of that.
SENATOR WILL: And I think that it does, and I may be wrong. I see Lou is standing tip there and probably has some comments ...
LYNN REX: If it ... if he's not here ...
SENATOR WILL: ... to make about that.
LYNN REX: ...Senator Will, I can take ... I can take that question back to the city of Omaha and get an answer for you. But I can tell you, fundamentally, in the workshops that we do across the state, in training workshops, we have always suggested to municipalities and highly recommend, as their auditors have ... their local auditors, not to use it for operations.
SENATOR WILL: Okay, thank you. I guess, Senator Wickersham, if we could at ... at whatever point is appropriate, I would appreciate hearing from Mr. D'Ercole who I see is back there, and he might be able to clarify that. If this isn't the appropriate time, that's fine; otherwise, it's up to you, obviously.
SENATOR WICKERSHAM: Sir, are you going to testify separately? All right. We'll take him when he comes up and testifies.
LYNN REX: Thank you for the opportunity, and I do hope that you do receive some kind of an outline from the Auditor's office of how they would apply it because, as you know, whenever the Legislature passes a bill, and assuming that something like this or some kind of lid passes, if that does occur, it's the Auditor's office that will be interpreting it. It is the Auditor's office that applies it, and so it's critical for us obviously to know how they read this and also the kinds of efforts that they'll be making in terms of compliance: and also that the form is something that people can live with.
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SENATOR WICKERSHAM: Okay, thank you.
LYNN REX: Thank you, Senator.
SENATOR WICKERSHAM: Any additional opponents? Any neutral testimony?
LOU D'ERCOLE: Senator Wickersham and members of the Revenue Committee, my name is Lou D'Ercole. I am the finance director of the city of Omaha, and I am appearing in a neutral position because we have just one point that we'd like to make on the bill, and it was the one that was just referred to as far as the inclusion in the definition of restricted revenues, or restricted funds. You've heard testimony here earlier that the reason that that has now been included as, unlike LB 299, is that those revenues have been around for a few years now and they are considered mainstream revenues in the city's mainstream budget. That is absolutely not the cane. It is not part of the general fund, they are separate from the general fund. The keno lottery revenues are in a separate designated fund. They are being used in a way that is consistent with the state statute that allows municipalities to conduct a keno lottery. Not one...as Lynn said, not one police officer is paid, not one firefighter is paid, not one snowflake is removed, and not one blade of grass is cut, with keno lottery funds. Let me be a little more specific. Keno lottery in Omaha is used as an operating subsidy to the Henry Doorly Zoo, which is not only a major attraction in Omaha, but is a major facility for the state of Nebraska. It is used for the Humane Society, it is used to fund the LaFern Williams Recreation Center for Low Income, it is used for the Women Against Violence program, and it used for a program called All Our Kids. Now those are all activities which are very worthwhile and very deserving of funding. They are certainly not part of Omaha's mainstream revenue, nor are they part of our normal budget process or our mainstream expenditures. So it is ... certainly it should not be characterized as part of mainstream budgeting, they are certainly outside of that. And you also heard testimony earlier that keno revenues are decreasing, primarily in the eastern part of the state, and that is true. The last couple of years, revenues have decreased about 2-3 percent a year, which means that those agencies that we are funding,
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which we believe are very worthwhile and very necessary for our community, are going to feel a crunch because of those declining revenues, and to include those now in the definition of restricted revenues would further impair those ... the city's ability to financially aid those agencies. So that is my only purpose for being here today, is to urge you to remove the lottery proceeds from the definition of restricted funds. Any questions that you have, air?
SENATOR WICKERSHAM: Any questions? Senator Will.
SENATOR WILL: Yeah, Lou, just to clarify what ... what you're telling us. If, as keno, proceeds have dropped and the designated projects that you're talking about are affected, then what you're telling me, I assume, is that they're in no way, shape or form, are those going to be made up with general ... general fund revenues, that it ... simply if keno proceeds go down, then those projects just suffer because they are designated for keno funds and that's ... and that's the policy of the city at this point. Is that right?
LOU D'ERCOLE: That's right. And to give you an example of how that's ... that's actually occurred is ... I can't give you the exact year, but I think it was 1993 or 1994, the gross keno handle in Omaha was $52 million. Last year, it was $36 million, so it is declining and, as a result of that, the net proceeds to the city of Omaha are declining, and we have had to drop several agencies. that used to receive funding. The Metro Arts-Council was one of them that we've had to drop funding for because of those declining revenues. So if, as those revenues continue to decline, like I say, it puts the squeeze on us to be able to fund those agencies and, again, I don't mean to be redundant, but including those revenues, now within LB 989, would even further restrict our ability to fund those ... those agencies.
SENATOR WILL: And there is literally no property tax offset as those revenues drop?
LOU D'ERCOLE: That's correct.
SENATOR WILL: Thank you.
LOU D'ERCOLE: Yes, air.
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SENATOR WICKERSHAM: Any further questions? Thank you. Additional neutral?
SENATOR COORDSEN: Wonder which sign this is.
LARRY BARE: I didn't bring my sign with me. Senator Wickersham, members of the committee, for the purpose of the record, my name is Larry Bare. I'm the administrative assistant to Mayor Johanna at the city of Lincoln, and the finance director for the city of Lincoln. I don't underestimate the difficulty of the task involved in writing a lid. I had some exposure to the development of LB 299, and I will just point out a couple of points and then offer to work with the committee, should the committee feel that would be appropriate. Lids and mandates don't work very well together. We've heard that, particularly as it relates to the CIR. I think enough has been said on that. One thought that I would propose to the committee for its consideration, at least from municipalities and counties where population is a very difficult number to get ahold of, look at the concept of growth, real growth in the tax base, rather than population, not revaluation, real growth, new houses, new buildings, new plants. That might be a concept that has some merit, rather than population. There aren't very many communities in this state that are talking abut 2.5 pop... 2.5 percent population growth in a year but, for example, the city of Lincoln has had in the vicinity of 4 or 4.5 percent growth in real tax base growth which is our ... our basic budget policy is to not take advantage of any revaluations, but do look at taking additional property taxes at the current levy from new growth. We think that's appropriate, we think that's why we try to encourage growth in our community. Secondly, I would reiterate what Lou and others have said about keno. I believe that's bad public policy. In the city of Lincoln, we don't spend the money in advance, we spend it after we get it. It goes for parks and it goes for additional resources to our libraries. If it doesn't come it, it doesn't get spent. And I don't think it's appropriate to include it, plus in the big dollar areas, you're probably looking at an increase in property taxes, if you include keno in restricted funds because as that goes down, property taxes can go up. But that ... I'm not ... still not sure what the purpose is. if we're trying to give a property tax cut, don't put a revenue source
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that's going down in there because that allows it to go up. The insurance premium tax also creates an interesting dilemma. By including insurance premium tax within restricted revenues, in the city of Lincoln's case, where we had not planned to increase our property taxes to offset that approximately $1 million loss, because we didn't think (LB) 299 was going to be around and we weren't planning to do that anyway, but the inclusion of insurance premium tax for the city of Lincoln and the city of Omaha, since we're not going to be getting any of it any more after next year, would allow us to increase property taxes since it's part of restricted funds. You can leave it in if you want, I don't think it makes much difference to us. The flip side of that, though, is a problem, as Lynn was saying. That insurance premium tax is going out to help soften the effect, through the municipal equalization program, to smaller communities and now you're not allowing them to have 'he benefit of doing that. If ... since you're taking away the benefit of doing that, we'd suggest you just put insurance premium tax back the way it was, and we'll take our million dollars back and say thank you. (laughter) The exclusion for emergencies is a difficult one, and I ... I need to work through that. We just experienced a disaster, and a disaster declaration. We're taking money that we had budgeted for cars, for computers, for capital outlay and for a whole variety of other things, and we've frozen it. We're going to have to spend it for trimming trees and doing other stuff. So how do you get an adjust ... I've got to make that change this year. I can't budget for an emergency. I've got to take that money out of this year's budget and so do I have to reformat my whole budget to get a new number for restricted funds? Am I violating, somehow, some policy if it was restricted funds and now I'm using it for an emergency and it's not restricted funds? I'm pointing out the difficulties of doing lids. I...not to say we shouldn't have one, but to say, please, let's try to work together and figure out how to make this one work. When (LB) 299 was written, there was a two-year exclusion ... or the exclusion for interlocals, lasted for two years. Well, that was all the bill was going to last. That two-year exclusion still remains in this bill. I don't know how you go back and retrofit your restricted funds or what kind of problems that creates for you going forward. I think if you're going to exclude interlocals, or ... interlocals from restricted funds, it ought to be ongoing. It shouldn't be for just two
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years because I think, then, you get these kinds of crazy jumps. The motor vehicle changes that you made last year, on the tax and the fee, the fee is not included as a restricted fund in this bill, yet it was property tax last year. So you need to address that, plus you've heard my complaint about that before. You've taken what was an unrestricted ... not in the terms of (LB) 299, but in terms of how we could use that money when it was property taxes on motor vehicles, and by the separation of it into a tax and a fee, the fee of which can only be used for roads, you've restricted my flexibility in how I use that money. Now, under (LB) 299 an originally written, capital improvements, capital outlay, whether funded from a sinking fund or a ... the sinking fund wasn't in there; whether it was from bonds or any other source, was excluded. I didn't worry about it because if it becomes a restricted fund, fine, I'm using it for a capital outlay, it's not a problem. You've now tweaked that around and I think goofed it up, perhaps. How do you reformat this year's restricted funds, the point that Lynn was making? I think you can't just use the restricted funds from this year because the restricted funds from next year are something totally different, so we'll have to figure out a mechanism to reformat the ones for this year to develop a base going forward. The other minor technical point, I looked at it again this afternoon. I think your sinking fund, the language says you can have up to 4 percent of your budget, I mean, 4 percent increase in their budget. There's no definition of budget. Is that your budget of restricted funds. Is that my total budget from all funding sources, including federal funds? So that...the sinking fund needs some work as well. As I believe this committee knows, I try not to just bring up problems. I would be happy to try to work with the committee in fashioning some languages. I would ask for that opportunity again. You were very gracious on (LB) 299, and I would extend my offer of assistance on this. I'd be happy to answer any questions you might have.
SENATOR WICKERSHAM: Thank you. Any questions? Senator Hartnett.
SENATOR HARTNETT: With emergencies ... you know, we had in our city, too, this past year, the solution that you would propose to this committee, dealing with the emergencies?
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LARRY BARE: I'd have to think about it more. I really don't know how you're going to deal with that, particularly ... I mean, we can go back in and open up the budget and re ... readopt a budget and change it. But it's probably going to be if you are going to have to hit property tax, it's going to be the next year's budget that you're dealing with because nobody's going to change their property tax levy in the current year. Yet, we have to get to a balanced budget situation by the end of this fiscal year, so I just ... I would need to sit down and think and work on that. It ... it creates an interesting dilemma that I hadn't really thought about when we worked on (LB) 299 because I hadn't had to deal with an emergency yet. I got to deal with one this year to the tune of about $3.8 million of city of Lincoln local unreimbursed costs that we got to figure out somehow to get out of this year's budget.
SENATOR WICKERSHAM: Senator Raikes.
SENATOR RAIKES: You mentioned a distinction between valuation growth and real growth, and I'm not sure I understood how you're making that distinction.
LARRY BARE: We sit down, in the Auditor's office ... I mean the Assessor's office and say, tell us what the real growth in the tax base for the city of Lincoln was in your new valuations. And he can tell us, this is because of new houses, new additions, new plant, new equipment. This part is revaluation.' And as we develop our budget, we say we'll ... we'll spend the tax rate on new growth, we won't increase property tax asking for new valuation, just revaluation increase. That's our...our budget policy in the city of Lincoln. I can't speak for how other cities or other subdivisions do it.
SENATOR RAIKES: So if somebody puts a room on their house or something like that, which category is that in?
LARRY BARE: If somebody puts a room on their house and the assessor goes out and considers that as new valuation, not revaluation, that goes into the new valuation category.
SENATOR RAIKES: So these ... this distinction, these numbers, are already available?
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LARRY BARE: They are, at least in Lancaster County. Norm Agena has been very good in working with us. It's my understanding, and I...my history with city government doesn't go back as far as it did with the state ... I think at one point they were ... they were required to do that as part of an earlier lid, I think, George, but I ... I'm not positive on that, but I ... and I believe he's still doing it. I'm not sure that that requirement exists statewide.
SENATOR WICKERSHAM: Any other questions?
LARRY BARE: Thank you.
SENATOR WICKERSHAM: Thank you, and we'll certainly take you up on your offer. Mr. Secretary.
SCOTT MOORE: Chairman Wickersham, members of the committee, very quickly, for the record, my name is Scott Moore, Secretary of State of the state of Nebraska, and I'm here today in my capacity as the state's chief election officer, representing the state's 93 county clerks and election commissioners, In a neutral capacity on this bill, to only raise the issue which I raised in a letter to all of you folks yesterday. The bill, as written, has the 15-day window in the bill as written. Our concern is, I'm a can-do guy and I try to never say never, and say nothing's impossible. With 15 days, if you really want it to be 15 days, you got to change a whole lot of statutes, and I don't think it would really work very well. And I'm here to encourage you to take that back to 30, like in the bill yesterday, and also, as in the bill yesterday, put something in if you're... when it's done by petition, give us some guidance on how you want local election officials to verify those petitions, and don't start the clock running until after the petitions are verified. Put in a ... I don't know how long you want to put in it to verify the petitions, if it's 7 days, 15 days, the longer the better, and I will, you know... 30 days is difficult for these people; 15, I'm going to say, is close to impossible; 30, in and of itself is difficult; but we try and do what you tell us to do, and so I'm... that's the only suggestion I have.
SENATOR WICKERSHAM: Any questions for the Secretary? Thank you.
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SCOTT MOORE: Thank you.
SENATOR WICKERSHAM: Any additional neutral? Senator Coordsen, do you wish to make any closing remarks?
SENATOR COORDSEN: Thank you, Mr. Chairman, members of the Revenue Committee. I think it's traditional in closing to say, very briefly. Wouldn't that be an accurate statement? A couple of things I think it's important to respond to. There seems to be a misconception out there on the part of some people that (LB) 1114 ... (LB) 299/1114 and the other bills that were connected in the package were, in fact, the end of all ends, and nothing was ever going to change again. And that is somewhat, perhaps, an understandable misunderstanding, but somewhat of a misconception -because, as I indicated in my opening, we've been working on this bits and pieces for some 30 years and, if anything, the Legislature has learned about things that did not work. The Governor alluded to LB 84 which had the complete opposite effect of what the Legislature had intended that bill to have. As a matter of fact, Mr. Chairman, we've been so successful, and this is probably not an appropriate comment to make in closing, but in the years that I've been in the Legislature, my personal property taxes on property that really hasn't changed over the years, has grown from the fourth or fifth highest expenditure in the farm budget to, late in 1997, the second highest expenditure of all of the expenses of operating a farm. So it says that what we have been trying to do... to me, it says what we have been trying to do in the-Legislature has not had the effect that the members of this Legislature wanted to have. LB 299 was intended to cap off the growth, to reduce the growth of local budgets by some-$100 million a year. As I recall, the previous chair of this committee had taken a look at the financial statistics relating to this area, and then made a determination that if we could slow the growth of local property taxes by a sum that was represented by the two different lids, in the two years in (LB) 299, while at the same time, recognizing that at that point in time, three or four years ago, that sales and income tax revenues were growing about $100 million a year, that in two years the Legislature ought to have enough money to replace half of the difference in available resources from property taxes that local units of government were going to get, and then have to find half of the reduction by looking inwardly at
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their own systems. And so that ... that was the lead-in to (LB) 1114. It really has nothing to do with long-term tax policy, it had to do with finding the money to provide the state aid that was going to be necessary for (LB) 1114 to work. Over the years, we have seen valuation be the stone in the sack that has pulled down every attempt we've made in the Legislature to reduce the property owners of Nebraska's checks that they write for the payment of property tax, that primarily probably because of a fairly robust economy in the state, valuations have continued to increase and in the foreseeable future, will continue to increase. And as a general rule, not necessarily applicable to every unit of local government, local budgets have grown in the manner that was comparable to valuation increases, more closely than what they grew in comparison to the increases of the Consumer Price Index, CPI, inflationary growth. There were some comments made that I think notes were taken on, and certainly we're willing to look at, and that ... those were ... had to do with disasters; recognizing that the motor vehicle tax coming ... changes coming at the same time as other changes were made, do present some challenges. The keno question and those sorts of sources, I would suggest perhaps that local government budgets are a little bit like a forest. You may have oak trees and sycamore trees and elm trees and walnut trees, in all sort of individual categories, in the public expenditures. But when the leaves fall off, you have got a forest that is comprised of the total amount of money that is being contributed by the citizens of the state as well as that community, to the operation of that forest. And whether or not, and we've heard ... certainly we recognize that keno has varied uses, and rightfully so, but the issue becomes if what it's being used for would have been done without keno, then really whether you call it part of the general fund or not, it's not. If, as one of the testifiers indicated, without keno money, those monies go away, you don't spend them that's a little bit different issue. I appreciate the Secretary of State coming in, and noticing ... which I had not noticed, by the way, Mr. Secretary, the problem with the election which... I don't think he's here now, but I do recognize that, and we will, Mr. Chairman, have to make some changes by committee amendment in ... in the election process, for meeting the deadlines 'on the overrides on ... beyond what local boards do. With that, if there are any further questions ... thank you.
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SENATOR WICKERSHAM: Don't see any, thank you.
SENATOR COORDSEN: Thank you for your attention.
SENATOR WICKERSHAM: This will close the hearing on LB 989. We will open the hearing on LB 930. Senator Robak is the principal sponsor.