Debate Transcripts

LB 149 (1999)

General File

February 3, 1999


PRESIDENT MAURSTAD:  Thank you, Senator.  Any discussion on the advancement of LB 243A? Seeing none, Senator, you're recognized to close.  Senator Janssen waives closing.  The motion before us is the advancement of LB 243A to E & R Initial.  Those in favor vote aye, those opposed nay.  Record, Mr. Clerk.


CLERK:  25 ayes, 3 nays on the advancement of 243A.


PRESIDENT MAURSTAD:  LB 243A is advanced to E & R Initial.  Mr. Clerk.


CLERK:  LB 149, introduced by the Education Committee and signed by its members.  (Read title.) Bill was introduced on January 7, referred to the Education Committee, advanced to General File.  I do have committee amendments pending, Mr. President.


PRESIDENT MAURSTAD:  Thank you, Mr. Clerk.  Chair recognizes Senator Bohlke.


SENATOR BOHLKE:  Yes, thank you, Mr. President and members.  This morning, the Education Committee is bringing LB 149 to the floor because an error doesn't become a mistake until you refuse to correct it.  (Laugh) That was just to see if I was getting your attention.  (Laugh) As we try to solve a problem, I think it is important to review how and why we arrived at the problem, and also to remind ourselves of our original goal and, on my own part, focus on that goal still to be attained.  To my newly elected colleagues, we are asking you to absorb a great deal in a short amount of time.  And to those of you who have to hear school finance one more time, I ask for your patience and your understanding as we endeavor to solve the current funding problem in our schools.  I will, in my opening, give a brief review of the past years of school finance, explain the current dilemma, present solutions recommended by the Education Committee, and discuss the necessary time line.  LB 1059 was enacted by the Legislature in 1990, prior to a large number of us being here.  It was enacted into law to provide equity and property tax relief.  As a part of that formula, schools were put under spending lids of 4 to 6.5 percent.  The formula set in place a lesser reliance on property and a heavier reliance on




sales and income for financing education.  From 1059 until 806, the reliance was generally 60 percent from property and 40 percent from sales and income taxes.  Throughout the ensuing years, the people of this state became increasingly critical of what they determined was an overreliance on property tax and a belief that it was necessary for schools, as well as other political subdivisions, to reduce their spending.  Traditionally, farmers and ranchers had always pushed for reduced reliance and dependence on property tax, but in recent years they were joined by homeowners in our urban areas.  The Legislature realized the need to develop a legislative agenda that would respond to the demand for property tax relief, or face a petition process that, in many individuals' minds...opinion would have created havoc.  The process was set in place with LBs 1114 and 299.  The process was continued with LBs 713, 806, 271, 989, and several other measures.  On December 1 of 1998, the result of all of these initiatives intermingled in unexpected ways.  How they impacted one another triggered the need to analyze the problem and develop solutions.  The dilemma before us prevents ...  presents this question--what happened? In December of 1997, a year prior to that, schools received their certification of aid for the 1998-99 school year.  December of '97, they received their certification for this school year right now, and they began to plan their budget based on those numbers.  As we know, staffing and salary decisions are based on the December information.  During the budget process, the local boards of education also determined what course offerings, they will be able to offer and, if-necessary, what cuts they need to make.  It is important to remember that prior to 1114, after notification of their state aid, schools were able to set their local property tax rate to make up any gaps.  With 1114, the ability to access that resource is limited.  If schools need more than $1.10 will generate, they have to go to a vote of the people for a levy override.  And so, from December of 1997 until the budget was set, schools reviewed their amount of aid, what they could derive from local revenues, and not their budgets for this, the 1998-99 school year.  Now, on December 1, when schools found out their certified aid for next -ion was done called the "respin", year, an additional calculation just as it is done every year.  Rather than looking forward -to what schools should get for the next year, the "respin" looks back at the past year to see if the amount of aid schools




received was justified.  There are always some corrections to be made and this is an important point.  The formula is meant to react, but the "respin" this December resulted in an overall loss of 22 million to school districts.  Unless we react, schools will have to pay that back by debiting the aid they will receive next year.  Part of the problem is that schools are today, and have been since their doors opened last fall, spending the amount of aid they were told they would receive December 1 of 1997.  Schools are always prepared for some adjustments and actually should be able to anticipate some type of prior year corrections from the "respin" due to increases or decreases in students, or corrections in data coming in from local resources.  But the 22 million was unanticipated and, therefore, budgeted to be spent.  The problem is one created in the Legislature and it is not a fault of the schools.  I have handouts that will demonstrate the technicalities that cause the reduction, but in broader terms let me explain it in the following way.  A floor for the local effort rate was amended in LB 806, which kept it at a dollar this past December when actually it should have been 96 cents.  This created a gap of 22 million.  The reason the local effort rate tried to go down was because the calculated needs of the districts went down.  Because we do not have complete data by December 1, it is necessary to use estimates.  As we were estimating how much spending was growing, and remember there will always be some spending growth even as schools are cutting costs, we based it on a three-year average.  So far so good, but, lo and behold, the actual growth was atypical because of the forced cuts in 1114, as well as the lids in 299.  All of a sudden, the per pupil costs for the standard cost group was reduced by $138.  We can stabilize this impact for the future by moving the certification date to February 1 and eliminating the estimation procedure.  Another stabilizing move is to set the local effort rate looking to the future at 10 cents under the maximum levy, essentially, filling that 10-cent gap with state aid.  This will provide the stability that is desirable.  It is true that when the maximum levy decreases to a dollar, this change will further ensure the estimated gap of 84 million will be filled with state aid.  However, that is an issue that will be debated when we discuss the proposal of the Governor to have the maximum school levy at $1.10.  If both proposals pass, and this is an important point, the local effort rate will simply stay at a dollar, and




the additional 10-cent gap will not need to be filled, but will be filled from property tax.  In other words, 11 ...  in other words, LB 149 is not in conflict with the Governor's proposal, but does meet our mutual goal of adding predictability and increasing stability.  There is one last complication that the committee had to deal with--revenues from the new tax structure for automobiles and their impact on schools.  On December 1st there was no data available on how much schools had collected under the new procedures, and automobiles had been removed from the valuation.  Eight months of receipts can be available for the April I certification.  If we would wait until next year for that data to be reflected in the "respin", there will once again be large swings in state aid.




SENATOR BOHLKE:  As you can see, it is not just when we change the formula, but whenever a piece of legislation regarding business incentives, TIFs or auto taxes is passed, they all impact schools.  The committee decided it was better to include the eight months of auto tax in LB 149 so that we would be moving toward a goal of stability.  This will make the printout more difficult to analyze, but predictability and stability are worth the extra effort.  These three things--letting the local effort rate float on the "respin", setting it at 10 cents under on the maximum levy when certifying the aid for next year, and changing the date for certification from December I to February 1, April 1 this year, we will produce greater stability and predictability.


PRESIDENT MAURSTAD:  Time.  Senator Bohlke, you're recognized to open on the committee amendments.  (AM0007 is found on page 272 of the Legislative Journal.)


SENATOR BOHLKE:  Thank you.  I will finish this and fold the committee amendments in.  At the same time, the department is going to try to correct for errors by school districts and other officials.  I know how critical that is for a number of schools, and if they have to wait a year for the correction they do not know where they will get the necessary revenue.  This is a solution summarized on the yellow-colored sheet, entitled "LB 149 - What the Bill Does".  The time line:  Why was it




necessary to get this to the floor so fast? As you know, we waited an extra week because we do not want any of you to feel that you've been rushed.  But schools must determine their staffing needs and, by law, if they're going to rif any teachers, it must be done by April 15th.  That translates into us needing to recertify no later than April 1st That still gives schools only two weeks and, in order to get this to the Governor for his signature, we will need an emergency clause.  And because the Appropriations Committee does not bring their budget to the floor until mid to late April, we will have to suspend the rules to consider Final Reading of LB 149 prior to passage of the budget.  The Department of Education has begun to recalculate aid and will do their best to produce a printout by mid-March.  I do not plan to debate this bill again on Select File until all senators have had a chance to see the printouts and ask questions.  This time line can only be met if there is significant amount of cooperation between the Governor, the Department of Education, and the Legislature.  The Education Committee is dedicated to this effort.  Time is of the essence.  I recognize this gives education a priority in the budget and that we will be asked to make some difficult choices with regard to the budget and reducing spending.  I believe education should have that priority.  Much like budget setting that we may...that may take place in any individual home, when times are lean we first direct resources to the needs of our children.  We don't like surprises and often, when unintended consequences arise, one is tempted to point a finger at those they wish to blame.  An usual, that doesn't work-because, as we know, that when we point one finger, we have a number pointing right back at us.  The number of senators and staff members who worked on LB 13.14, 299, 713, 806, 271, and 989 could not anticipate the intricacies of their symbiotic relationships.  How about the Department of Education? You have heard me speak in the past of how we put so much emphasis on getting printouts that there is little time for a working analysis of legislation and the impact it may have on the school finance "reformula"...formula.  Remember, during 806 there were 52 requests from this body for printouts.  Additionally, some schools hire consultants to specifically analyze the impact of 806.  No one foresaw the problems and the blame can be easily spread around among a large number of us.  But, by and large, it is our mess, not the mess of children sitting in our classrooms.  I hope to demonstrate to you that if




we do not act, those students are the ones who suffer the consequences.  What is impact if we do not restore tile 22 million? What implications will that hold for school board members preparing budgets for the 1999-2000 school year? The amount of aid that was certified in December of 1997 was 591 million.  If we deduct the 22 million, that amount certified for 1999-2000 school year will be 574 million.  Our basic support for education has actually decreased.  If schools have to work for ways of making up the $22 million lose during their next budgeting process, it can be...  only come from further cuts or by asking for an increase in a levy that produces higher property taxes, which is counter to our original goal.  The goal of the initiatives...




SENATOR BOHLKE: to reduce reliance on property tax and reduce spending.  The Education Committee believes 149 will keep us on that course.  It was certainly not my desire to be before you with such a bill as 149.  As much as I regret it, I can tell you it doesn't hold a candle to the undesirable effects our superintendents, board members, and teachers will suffer, and, most of all, the children in the classroom.  Life can be understood by looking backward, but it must be lived by looking forward.  We have an opportunity to understand what happened to schools by looking backward, but I feel our opportunity this session is to look forward and to ensure the future of the schools.  As discussion progresses, I will be able to present you with the facts on how schools have cut costs.  It is up to us to draw the line between asking them to be efficient and pushing them into being ineffective.  Personally, I believe the first draw on the state budget should be the proper funding of our schools.  If schools are underfunded next year, we will pay in enumerable ways in the future.  As you know, a child typically only has one chance to be in kindergarten, one chance to be in first grade, and one chance to learn the basics introductions in second and third grade.  If we fail to act and neglect our obligation, the result may be increased spending in later years, repairing the consequences of poorly funded schools.  Yes, this is a tall order, but one I know collectively we can meet.  The desire to reduce spending by underfunding our schools is foolish.  As you've heard me say', a Chinese proverb




states it is not economical to go to bed early to save the candles if the result is twins.  I do have two technical amendments to the bill that I can open on at this point.  They are both clearing up wording that...




SENATOR BOHLKE:  ...I don't need to do that.


PRESIDENT MAURSTAD:  First of all, you have four minutes remaining on the...  on the ...




PRESIDENT MAURSTAD:  ...  introduction to your committee amendments.  I incorrectly notified you of one minute.  Secondly, the Clerk informs me that those amendments are to the bill, and we are on the committee amendments.  So you may continue on your opening of the committee amendments, you have 3 minutes and 40 seconds left, if you would like to.


SENATOR BOHLKE:  Thank you.  As I was stating, the opening on the committee amendments, there are two technical amendments.  As we are looking at the bill, you will see that the committee amendments ...  the one committee amendment clarifies that the estimate the Department of Education provides to the Governor, Appropriations Committee, and the Education Committee, pursuant to the amended 79-1031, is for the necessary funding level for the next school fiscal year under the Tax Equity and Educational Opportunities Support Act.  In short, as you would have read the bill previously, it says that an estimate of the necessary funding level for the next school fiscal year under the Tax Equity and Educational Opportunities Support Act.  This just points out...  that clarifies that it is not just an estimate of what.  The other committee amendment is there was a drafting error.  There are a three places where changes related to the certification for 1999-2000 and future years would unintentionally be implemented in the "respin" of the 1998-99 state aid without the amendment.  The amendment simply makes changes related to the calculation of the transportation allowance, and the cost grouping per student take effect beginning with the certification of 1999-2000 aid.  There are




two places the effective date was needed in the transportation allowance calculation, and one place in the cost grouping cost calculation.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  We will now have discussion on the committee amendments.  Senator Suttle, you're recognized.


SENATOR SUTTLE:  Thank you, Mr. President, members of the Legislature.  These committee amendments are just technical and I really want to talk more about the bill, so I'll wait.


PRESIDENT MAURSTAD:  Sorry, Senator, you spoke.  Senator Wehrbein.  Senator Wehrbein waives.  Senator Brown.  Senator Brown waives.  Senator Redfield, on the committee amendments to the bill.  There are no further speakers.  Senator Bohlke, would you like to close on the committee amendments? Senator Bohlke closes (sic) on the committee amendments.  The motion before us is the adoption of the committee amendments.  Those in favor vote aye, those opposed nay.  Record, Mr. Clerk.


CLERK:  33 ayes, 0 nays, Mr. President, on the adoption of the committee amendments.


PRESIDENT MAURSTAD:  The committee amendments are adopted.  Mr. Clerk.


CLERK:  Mr. President, Senator Bohlke would move to 'amend with AM0164.  (See page 432 of the Legislative Journal.)


PRESIDENT MAURSTAD:  Senator Bohlke, you're recognized to open on Amendment 164.


SENATOR BOHLKE:  Yes, Mr. President, members, this is the amendment that I explained on the drafting error and the clarification of the dates.  It's simply a technicality.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  Discussion on Amendment 164.  Senator Wehrbein.  Senator Brown.  Senator Redfield.  Seeing no further lights, Senator Bohlke, you're recognized to close on Amendment 164.  Senator Bohlke waives




closing.  The amendment before us ...  the motion before us is the adoption of Amendment 164.  Those in favor vote aye, those opposed nay.  Record, Mr. Clerk.


CLERK:  36 ayes, 0 nays, Mr. President, on the adoption of Senator Bohlke's amendment.


PRESIDENT MAURSTAD:  The motion is adopted.  We will now return to discussion on the advancement of LB 149 to E & R Initial.  Chair recognizes Senator Brown.


SENATOR BROWN:  Mr. President, members of the Legislature , we have ...  we spend so much time talking about state aid and we...  last...  last year, I think it was, there was a statement made on the floor that we were going to...we were no longer going to legislate by printout, and I was absolutely delighted with that statement because I thought, well, at least we're going to talk about the policy that is directing what we're doing in terms of funding for education rather than constantly pouring over the numbers and seeing who wins and who loses and not having some sort of stable policy that guides us and that ...  that helps us know that what we're doing has some meaning besides whether it's a win or lose situation.  I'm going to concentra ...  there are three parts of the bill and I'm going to concentrate on Section 2, which is the aspect which reinstates what I consider a windfall that was created by overfunding that we did in 806A.  And if we believe that there is a policy that is more than just providing more money, then we have to look at what that policy is and, as I understand the policy, we have the needs of ...  the needs, as determined by the average cost per pupil, and we subtract the resources that a school district has to bring to it in terms of what they are receiving in property tax, and that equals the state aid amount.  What happened, in my estimation, is that the needs may have been down a little bit.  The resources were higher because of valuation increases and we had an amount that we had allocated for state aid.  So we had, in this formula, three sets of fixed numbers and SO Some...  some place it had to give because the amount that we had put in, the $130 million that we had put into the state aid formula, the 110 million that was a part of 806A, and the 20 million, around 20 million that generally goes each year into the state aid, because that amount was so high it had to drive down ...  drive up




or down one of those other numbers.  And so the number that drove down was the resources number where we had said that it was our expectation from a policy standpoint that if...  if this was going to be a shared responsibility with the state assuming a certain level of funding, which historically we were not, at the level of funding we needed to be, and we've made changes, policy changes, I hope, over the years, to get to a level of funding that was defendable on the part of the state, then there was the responsibility on the part of the local district at the shared responsibility, that that level was at ten cents below the...




SENATOR BROWN:  ...  the levy limit.  But what happened is it drove the number down to well below ten ...  well below the dollar figure.  And so in this bill we are talking about changing, on one hand, changing it so that...  so that we are giving the money back at where it was below a dollar, but we're saying in the future we're going to obligate the Legislature to keeping it at a dollar, and there are some...and that's another aspect of the bill which I will talk about more later.  But we can't have it both ways and we cannot talk about this without talking about the underlying policy and having an underlying policy that we allow to work; that we put in place and say we allow it to work and not constantly react.


PRESIDENT MAURSTAD:  Time.  Thank you, Senator.  The Chair recognizes Senator Redfield.


SENATOR REDFIELD:  Thank you, Mr. President, members of the body.  I don't know anyone in this body that shares my passion for education as Senator Bohlke does.  I admire her tremendously, but I also know that, as this body has worked very, very hard to provide property tax relief to the people in the state of Nebraska and tried to equalize the spending in the schools across the state, that they've been called nasty names.  And I've not shared that philosophy, but I come from a school board background and I've heard in those school meetings that you're not appreciated.  You've worked very, very hard and you're good-hearted people and your intent was correct.  And I ...  I really, as I've come from those deliberations, from the




school board tables.' and I look at putting together a budget and I look at calendar issues, I absolutely have to wholeheartedly support Senator Bohlke's move to change the dates for certification so that we're basing them on actual figures, not estimates, but real numbers.  I absolutely support that.  I also look at a very practical perspective on the $22 million in aid.  Yes, it was a mistake.  Yes, we are in our first year of not being able to adjust for that by raising property tax levels within most school districts, and so I can support that.  But what I do have to stand here and address today- is the third bullet on the yellow sheet which she gave us at our places today.  I have brought with me the "State of Nebraska 1998-99 Biennial Budget", and from this budget I can show you that the state of Nebraska poured $130 million in additional state aid into property tax relief.  This went directly to the schools and it's commendable on your part because you were listening to the people and you were trying to provide property tax relief.  When we looked at the budget figures that they came back in Revenue Committee, we saw that nonbond property tax relief that was granted by schools only amounted to $64 million across the state, so the people did not see that $130 million in their pocket.  They only saw half of it.  They got 50 cents on their dollar back.  Now that's a concern.  It's a very serious concern.  AM when we look at the third bullet on the yellow sheet and we talk about setting the effort rate at ten cents below the maximum levy that we're allowing them to charge, what we're going to allow school districts to do is actually double-dip.  They can charge the property tax payer that $1.10 and they can go back and they can expect the state to also give them, as if they had only charged them $1.00.  I don't think that that was your intent.  I think you really want to see property tax relief and, Senator Bohlke, while my heart is entirely with you, my head can't be, because the figures don't back that we are achieving what this body has been trying to do in providing that full property tax relief.  So I am looking at Governor Johanns' plan, I am looking at a different approach to providing that property tax relief, and I think we need to give it a chance.  So my heart's with you; my head will not be and neither will be my vote.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Wickersham.




SENATOR WICKERSHAM:  Thank you, Mr. President.  I was listening and thinking about what Senator Redfield had to say.  Presumably, if I understood her remarks correctly, she's going to vote against 149 because of objections to one provision in the bill.  That may be something like throwing the baby out with the bathwater or, in Senator Bohlke's analogy, maybe the twins.  I'm not sure.  But, Senator Redfield, I'll be happy to discuss with you the policy reasons for setting the local effort yield rate at ten cents below...  or the calculation for the state aid at ten cents below the local effort yield rate.  Those are rather technical.  They have to do with the fact that the local effort yield rate is based on adjusted valuations.  Local assessments are based on assessed valuations and those assessed valuations are at 92 percent of market, or thereabouts, for commercial, industrial, residential property; and in a range of 74 to 80 percent for agricultural property.  The adjusted valuations are based on a hundred percent, so they're two different systems, they're two different bases, and the ten cents roughly adjusts for those differences, but maybe enough of that.  The discussion about whether or not we should make a policy decision and not necessarily a numbers decision, although we're always attracted to numbers, it seems, I think is appropriate.  But what is the policy decision that we're making? Or what is the policy decision that we're discussing, is probably the more appropriate way to frame the discussion, because we've already made the policy decisions.  We made the policy decisions with 1114 and 806.  What were those policy decisions? Those policy decisions were that we would have a calculation of an amount that would support schools.  Needs, if you've seen the simplistic framework for the school aid formula, needs minus resources equals aid.  Simplistic, but a good framework to think about this issue.  In 806 we framed a means for calculating needs--average costs in two...  in three different groups:  standard, sparse and very sparse.  That's the framework for calculating needs.  In 1114 we set one of the important parameters for determining resources, and that was local property taxes.  How much can you use from local property tax sources to meet your needs? In 1114, we limited that amount.  Now, what is the variable in that formula? Needs minus resources equals X.  If the formula is to balance, aid becomes the variable.  We've fixed the other things.  We've fixed needs,




we've fixed resources, and the variable is aid.  We made those policy decisions in 1114 and 806.  Now, did we understand all of the implications and the way that the various proposals that we had to change taxing systems, and the amount of money that we put into 806 , would work out? No, and, in part, we couldn't.  But we do now and that's really what LB 149 is about:  ...




SENATOR WICKERSHAM:  ...  not changing that framework.  That framework, in my mind, is already decided and that is the framework that we have to use to decide whether schools are going to have adequate resources, because we've determined what their needs are, are they going to have the adequate resources to meet those needs.  If we don't put the right amount in on the state aid side, they don't.  If we don't put the right number in on the state aid side, they don't, because there's no way for them to go home and balance the equation.  We stopped them from doing that with 1114.  (LB) 149 allows them to balance, allows us to balance for the next school aid year.  It's as simple as that.  It is our obligation to balance and 149 allows us to do that.


PRESIDENT MAURSTAD:  Thank you, Senator.  Chair recognizes Senator Bohlke.


SENATOR BOHLKE:  Yes, Mr. President and members, I just wanted to respond to a couple of things.  I may have been the one that used the quote.  I didn't say we were never going to legislate without printouts.  I said I would find it a wonderful occasion and, actually, if we just want to go through this process on 149 without a printout that's fine with me.  But I have a feeling the rest of you (laugh) maybe would like to see those numbers.  Certainly we all would like to discuss the philosophy.  That's what I tried to get at in my opening comments--the philosophy of what we do, of what we do when we're setting budgets, of who we give priority to.  Those are certainly some of the philosophical discussions that we have in 149.  On the more practical side , and I've heard a couple of questions raised in listening -to some of the comments, I must reiterate that 149, and make this clear to you, is not in conflict with the Governor's plan.  (LB) 149 would just set that local effort rate at ten cents below where




the Governor is going to put his property tax.  And so they are not pitted one against the other.  It just is when you do that, what's the outcome for schools? And the Governor and I had, I think, a very good discussion in agreeing that we both want predictability and in agreeing that there will be a lot of things happening, especially with the automobile tax, when we get the numbers in mid-March.  And I reassured the Governor, and I think he felt very good about our conversation, that when we do get to Select File and we have those numbers, I don't have any difficulty of even having a day of discussion and debate and then pulling it off the agenda and then bringing it back up after a couple of days, three days, whatever your comfort level may be.  The Department of Education has said at that time they will have people over here and will do an analysis and walk through it with you.  And I see some people looking a little disgruntled but, remember, we will be using accurate data, we won't be using estimates, and so that will be a big difference in the numbers that we see.  We ...  what I'm trying to say to you is that we will do all that we can.  I do not think that we are in any pitted debate over one initiative against the other.  It's just looking at the numbers, when we get them in, and at that time, I think today may be more on philosophy, and I do think in mid-March we will have the numbers and we will have a discussion, but I do not see any reason to pit 149 against what the Governor has proposed and actually when we see those numbers the debate may be on how you fill the gap.  You have a gap of ten cents under.  With 149 currently, that potentially would be from state aid.  We will see what that gap may be when we get the numbers.  With the Governor's plan, if we have 149 in place, that gap is filled from property tax.  And so that's...that's the difference, but they can go hand in glove.  it's Just's up to us if we pass both proposals.  So I did want to make that clear in people's minds.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Raikes.


SENATOR RAIKES:  Thank you, Mr. President, members of the Legislature.  I know I'm going to be redundant, but I'll try to be redundant quickly.  There, it seems to me, is concern about foreclosing policy options by adopting this bill.  That is, if we adopt this bill we lock in the local effort rate and no




further policy manipulation or construction is available.  That simply isn't the case.  Senator Wickersham pointed out that our underlying policy for education is needs minus resources equal aid.  Well, there certainly are several available opportunities to work on the needs part of that formula and also, for that matter, the resources part of that formula.  So I think you need to be reassured that this is not locking us into something or foreclosing options that may be available down the line.  The other thing I'd quickly point out, there are some other very important advantages of this measure in terms of stability and predictability.  There's considerable improvement in our...  in our procedures along both those lines.  Finally, a quick comment on printouts.  Not having printouts is maybe not realistic, but certainly having printouts that are more simple and can be more quickly calculated is a possibility, and I think we can, realistically look forward to that.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator Raikes.  Chair recognizes Speaker Kristensen.


SPEAKER KRISTENSEN:  Thank you, Mr. President, members of the Legislature.  I heard this morning a little bit of discussion and I want to draw us back.  If we're going to talk about policy and philosophy this morning, I at least want to make sure that I put in what I believe that history was and try to get us on at least some agreement as to where our policies, in the past, have been.  We started off with state aid.  State aid has been a fight in this state since the day it was designed.  It is not a constant.  But, prior to 1059, we had a pot of money in this state.  We appropriated so much money and we created the pot and we did it for a couple of reasons.  One, we wanted all of the students to share in some state monies and not property tax monies, and we call that foundation.  We're going to give a state foundation to students.  And so we gave each student, per pupil, some money.  And we had a second pot of money that was called equalization.  That was to help some schools that needed it a little more than other schools, but we never put a whole lot of money into that equalization pot because it was hard to agree on who got that money.  So it was much easier just to come out and may, look, we're going to give a little to everybody and do it on a per pupil basis.  What happened during that period of time? Well, around the country that was commonly done and




people started to become ...  they were subject to suit, because you would have a rich district who had property tax values that were very high, they could have a very low levy and riot tax property tax very much and spend more money for their students.  And you had other school districts who didn't have the property tax values and they couldn't spend.  They couldn't raise that money and so they spent less on their students.  And you had this huge disparity about opportunities; rich districts versus poor districts; high levies, low spending; some had high levies and high spending.  They were all over the board.  Why 1059 came into being was we were afraid of being sued and so what that formula was designed to do was to bring people in and try to equalize and put more money in and give it to those school districts who needed the money and so we could try to form people into a more uniform opportunity.  The state gave money through equalization for students for education.  There wasn't enough money in the pot to do that because there was a whole lot more needs and there was a whole lot more money needed to make the equalization work.  So what did we do when 1059 passed (LB) 1059 was not a property tax bill.  (LB) 1059 was all about trying to keep us from being sued in this state and about equalization aid.  So we raised the tax rates to help fund this.  We put more money into that; we raised the sales tax a cant, we raised the income tax rate, and we got more money put into the system.  And what happened with that? Obviously, it was put on the ballot.  The state, the citizens of this state accepted that concept.  Now, to sell it politically during the time of the referendum to remove that there was the cry of this is property tax relief, this is property tax relief, and when that didn't all happen, when all that money that was raised didn't go and have immediate dollar-for-dollar property tax relief, people jumped to their feet and said, well, this is so flawed it's terrible; It didn't give us property tax relief.  That's not the purpose for it.  The purpose was opportunities and equalize those, and that has worked.  We're one of the few states in this country that's not been sued.  Where did property tax relief come about? Property tax relief came about with 1114, when you took...




SPEAKER KRISTENSEN:  ...  the levy limits and you reduced those




levy limits down and said, we're going to squeeze people at the local level and you're not going to get to raise as much property tax.  And what we really wanted to do was go down to a dollar, but to do that we're going to phase in.  We're going to give you a couple years to got used to that idea, we're going to go to a dollar ten and then ultimately down to a dollar.  That was property tax relief.  Then became, and Senator Bohlke, she'll tell you these stories, that became a huge source of contention between the Revenue Committee and the Education Committee.  The Education Committee brought in 806 and said, here's the gap of money we're going to lose.  This is what schools are going to have to eat with this property tax relief, and we need to make a policy choice ere we going to do it.  (LB) 806 was about filling the gap that schools had.  (LB) 806 was not about property tax relief.  Property tax relief was 1114.  (LB) 806 was about aid, giving money to schools to fill the gap.  So when I hear people talk about 806 was a property tax relief and we didn't get any property tax relief from it, that was not its purpose.


PRESIDENT MAURSTAD:  Time.  Chair recognizes Senator Brown.


SENATOR BROWN:  Mr. President and members of the Legislature, I...I support changing the date of certification.  I think that all of us recognize that we were far too aggressive in looking at the December certification and we didn't have the adequate data to be able to do it, which, you know, calls into question why we arrived at that decision when we made it, but...but I agree that we need to fix it.  I intend to deliberate a great deal more later about the aspect of whether we lock in an obligation and abdicate our responsibility, in terms of state aid, of making it an appropriation.  But that I will argue about later.  For me, the question is whether somebody can convince me that what we are doing with the amount that we call the 22 million is more than just being reactive to something that happened as a result of us ...  of our policies and then of us overfunding the state aid in one year.  And I ...  one of the things that I need to know is whether, since we're ...  since we have more solid data in terms of the needs, whether we can say right now absolutely that it's 22 million.  And I'd like to ask Senator Bohlke if she can say absolutely, in light of knowing, having the data right now, that the impact of the




recertification is going to be 22 million.


PRESIDENT MAURSTAD:  Would you yield, Senator Bohlke?


SENATOR BOHLKE:  Yes.  Senator Brown, I have said on a number of occasions, no, 22 million, it may be less.


SENATOR BROWN:  But if we know the numbers now, if we have...  if we have solid data on the needs and we know the valuation and we know the local effort rate of a dollar, then how can we not know what the number's going to be? And if this unpredictability...  I mean even if you have those fixed numbers in hand and you still can't predict it, then aren't we always going to be in a position of reacting? Senator Bohlke, I mean how ...  how...  if the for...  if you have these numbers in the formula, how can we not know?


SENATOR BOHLKE:  Senator Brown, part of recertifying is putting those numbers back through the formula, and so you have a number of numbers you're putting back through and putting back through the formula.  And so, until we have those, I ...  we do not know that it will be exactly 22 million.


SENATOR BROWN:  Wall, then it becomes clear to me that we cannot make the decision based on...  I mean that we are going to continue to be making decisions being reactive to whatever the impact is rather than allowing the actual numbers to drive our decision making.  Because what ...  what that response says to me is that we are ...  that, you know, if the impact is positive then everything is fine; if the impact in negative then we have to find some way to respond to it.  But there's nothing ...  there's nothing stable that I'm...




SENATOR BROWN:  ...  hearing that ...  that makes me understand either what happened or what we're doing that is more than Just reacting to the fact that ...  that because we put so much money into the formula in one year that the next year that the formula would not accommodate it.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  Chair recognizes




Senator Cudaback, followed Schellpeper, Coordsen, Schmitt, Wehrbein, Suttle, Bromm, Kristensen, and Engel.


SENATOR CUDABACK:  Mr. President, members, I won't reiterate, but so many times our constituents say, just do it, and we should do this.  You know why? Because we told them we would do it.  We told our school systems that they would be receiving so many dollars and they were counting on it and some of them may have perhaps even spent some of those dollars.  Now we say the money's not there.  So I don't see any other way but to keep our word and do what we said we would do back when we were contemplating and doing and passing 806.  It was the message we sent that it would be there; the money wasn't there.  They're in a predicament.  We must do what we said we would do, and I don't see any other way out of this here.  And I don't see it in direct conflict with the Governor's bills or this (inaudible).  I think th13 system will work.  I think that it will work in conjunction with his program, with his plan, but first things first, and this is certainly first.  And so I don't see any other way but just simply to keep our word, if nothing else.  And I will give the rest of my time to Senator Kristensen, if he's ....  I don't see him here, so I guess I'll give it back to the Chair.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Schellpeper.


SENATOR SCHELLPEPER:  Thank you, Mr. Chairman and members.  As most of the senators in here know from...of the older senators or they have been here awhile, I was not a strong supporter of LB 806, but it passed.  (LB) 806, to me, is a very complicated formula, but we're stuck with it.  We have to live with it.  And I think it's not fair to our schools now to go back and say, oh, sorry, we're going to have a whole new formula.  We need to let them know that this is the formula that we're going to live with.  We're going to move forward.  This is probably one of the most important bills this session for a lot of small schools.  In my district, I have 14 small towns and almost every town has a small school.  This is very important to those small schools.  Without this, they're going to have to raise property taxes, and you know how popular that is into the rural area, in fact any place.  This proposal may not be important to some of the larger




schools, but it is to small schools.  This is either they're going to have to vote to override, vote to merge, or else close.  It's a very serious situation.  But I don't see how this body can come in now and say, oh, sorry, we're not going to do what we told you we were going to do.  Through no fault of their own, they're being cut back on their state aid.  This body in past years has stated we're going down this path and you're going to get state aid and it's going to be this much.  Now we're coming ...  we came back and said, oh, sorry, you're not going to get that much.  We can't do that to our schools.  So I think this body needs to get real serious about what we're doing with education in this state, get on a course, stay on that course, and fund education like we should be funding education.  There's nothing more important in this state than education.  We need to fund it properly and I think 149 helps do that.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes, Senator Coordsen.


SENATOR COORDSEN:  Thank you, Mr. President, members of the body.  I am probably one of the least qualified members of this Legislature to get up and speak to the issues contained within 149.  I was not a supporter of 806.  Even today, I think it was not sufficiently thought through, although there were parts of it that worked.  I have yet to be able to see in 149 a tax policy issue, and I'm telling you that as a long-time member of the Revenue Committee, and that's what we do, is tax policy.  (LB) 806 was, on the face of It, a restructuring of how state aid was distributed and how much was distributed to compensate, as other speakers have talked about, for the effects of a property tax reduction package that fundamentally concluded ...  it was a several-year, several-bill-long approach, but it concluded with the establishment of the levies contained in 1114, as you've already heard.  The funding enabled the state of Nebraska to continue to provide to the children across the state an opportunity for a quality education by someone's definition, which was somewhat dependent upon where you live, but that's for another day.  (LB) 149, in its simplest form and the form we have before us today, is fundamentally an adjustment for ...  to a formula that didn't work in the way it was anticipated to work.  The tax policy has already been established.  This is an attempt by the Education Committee to effect a better impact than what




happened with the distribution as it worked out by the formula on December 1 of '98 for the subsequent" yet-to-come year.  if we are going to have debates on this floor about tax policy, and this floor is going to be divided dramatically, I rather suspect, in debates in other issues on tax policy, this is not the place nor the issue for tax policy to be debated.  This is a correction formula to correct for unintended consequences, to distribute funds already appropriated, that we've already allocated, to make the system work in the way that we determine it should work.  Even as I said though I was not a supporter of 806 even after weeks and weeks of massaging, but I do think that 149 is what we need to do this morning for the very purposes that 149 was introduced--to correct the very problems that came to notice when the state aid distribution notices were sent out--and that's all it is from this person.  And I'm not about to talk, Mr. President, on all of the ins and outs of school finances.  A very, very recent addition to the Education Committee, I can't even begin to tell you that I understand the intimate impacts.  But I believe I do understand the intent of 149.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Schmitt.


SENATOR SCHMITT:  Yes, Mr. President, I think I'm probably less familiar with this than Senator Coordsen, but I have a question for Senator Bohlke, if she would yield, and maybe...




SENATOR SCHMITT:  ...I've missed something here this morning that's already been answered, 'cause I wasn't here when the debate first started.  And I do support your bill, Senator Bohlke, but do we know...


SENATOR BOHLKE:  That starts the conversation out the correct...


SENATOR SCHMITT: we know which one of the schools or how many of these schools are actually going to benefit from this bill the most? I know you had some in your district that lost quite a bit.  1 had some in my district that lost considerable amounts.  Is this bill going to help those? And I guess this is




the information that I'm looking for Senator Bohlke, and after you have answered these, if you would like time to discuss this or some other, you can have the rest of my time, so....




SENATOR BOHLKE:  Thank you, Senator Schmitt.  Approximately.  65 percent of the schools lost aid and those were in ...  mainly in the standard cost group.  If you look at what we did for very sparse and sparse, they were less impacted, so a large majority of the schools in the standard cost grouping.  What we will do is schools will benefit, but what I was trying to point out and I think you weren't on the floor, Senator Schmitt, when we talked about including the new automobile tax revenue when we do the numbers...




SENATOR BOHLKE:  ...and we'll all have that..  that will change and have a different impact on different school districts in a different way.  We could have not done that and that would have probably made this easier, but then a year from now we would have been right back to looking at what that impact would have on state aid.  So I can't say that...what will happen to individual districts at this time, but, really, when we get the printout, using the accurate data and using, what, eight months of automobile revenue should really give us a pretty realistic picture.  We will have four months that we haven't put in, and we actually talked about estimating what those four months may be and just going ahead and doing it now, but we thought we really have said we want to stay the course on stability and predictability and so we didn't put the extra four months in.  A year from now, those four months will be in on the automobile tax revenue and that I'm anxious to see.  I don't know how district by district that will work.


SENATOR SCHMITT:  Okay.  Thank you, Senator Bohlke, and if you would like to have ,-he rest of my time, you may have it.  Thank you.


PRESIDENT MAURSTAD:  Senator Bchlke, you would have 2 minutes and 15 seconds, if you'd choose to exercise.




SENATOR BOHLKE:  Right, I need to clear up that the automobile tax will not be in the "respin" side but in netting the certification ...  recertification in the future, so ....  Remember, we're doing two things with state aid when we certify it.  We're always looking to the future and we're always looking over our shoulders.  Those are two separate things that we have to keep in mind.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  Chair recognizes Senator Wehrbein.


SENATOR WEHRBEIN:  Yes, Mr. Speaker and members, I wanted to state at the outset that I support this bill, but I do want to try to give a perspective as related to the budget issue and it's sometimes going to be a little bit difficult to do when we do things this early.  one of the reasons that we wait until later In the spring, and in this case May, to do budget is so we have a better understanding of where we're at in the budget process.  Right now, we're about ...  we're probably ...  we're well over halfway through our budget.  We're probably maybe one-third on, just a big guess, one-third through the process in terms of the dollars that we're spending.  We're now into the bigger agencies where the dollars ...  where we're examining the dollars going to agencies.  The reason I say that is that we're still in an estimating stage and we won't know for about three weeks, when you will have more information, exactly where the budget status will be.  So what I'm saying in all of these are still going to be estimates and it's going to be difficult to really know how this is to fall into place until we get later on in the summer...  spring.  on the other hand, we have to make some decisions and I would urge that you move this bill along, even if you don't understand it, till at least we know where we are...  closer to when we need to make a decision, which I'm assuming is around March lot.  Part of the difficulty is, so you're clear, the way the Governor's done the budget, allowing 25 million this next year to go to property tax relief, this is about the 22 million, we are talking about the same amount and the same dollars.  We have in the status, it's true it's not appropriated, but it is in the status at the $22 million level.  The Governor did not recognize the $22 million, but he does have 25 million in for property tax relief, which carries over into




the next year, the fall of 2000, when you would get a check, adding some more money from, as I understand it right now, General Fund plus some from the Cash Reserve.  If I am clear, there's not room for both of the...  there is room for both in the budget, but you're going to have to acknowledge it.  You're going to have to acknowledge it somewhere else if you want to do both of these and ...  because the Governor doesn't have it in his budget.  On the other hand, as I started out to say, we're still working with a lot of estimates and we have lots of work to do between now and spring to know exactly where our differences are with the Governor's budget, which is the only whole complete budget you have at this time.  We, ourselves, will have the best idea here in about three weeks.  And so I don't want anyone to be misled.  If you do both, there will be some other adjustments going to have to be made.  If you want to do both, it probably can be accommodated, but many of those difficult decisions are going to be down the road and we're going to have some major decisions, by the way, in NETV, in some information technology issues in other areas and those kinds of things that are going to have to be yet to be understood and resolved.  And so I just want to be clear on that at this time about the process more than anything.  on the note of the LB 149 itself, I have supported it.  I think we've made a commitment to the schools.  I think you can make the case that it was an error that we made.  It puts them in the unfortunate position of having to pay for it if we don't keep our commitment, but there was errors made in the estimate.  It's part of the difficulty in having the estimate made so early, in this case was November 1st, the "respin" came in December.  We're looking now at February when the numbers are going to be accurate.  So, as we make these transitions, some of it has to do with the motor vehicles change that we made, we had many things happening in the last two years, it ought to really indicate that we have made a lot of changes in the last few years ...




SENATOR WEHRBEIN:  ...and it's not always difficult to get them fine tuned, but I think you ought to look at that in that light as we make some of these decisions in these transition areas.  Thank you.




PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Suttle.


SENATOR SUTTLE:  Thank you, Mr. President.  I yield my time to Speaker Kristensen.


PRESIDENT MAURSTAD:  Chair recognizes Speaker Kristensen.


SPEAKER KRISTENSEN:  Thank you, Mr. President...  members of the Legislature.  Thank you, Senator Suttle.  It's tough to talk in five-minute bursts and be effective and so that's part of the hazard of debates like this, but one of the other -things that I want to talk a little bit about is the money and where we get to and, ultimately, we're going to have to make some decisions.  But before we got to LB 1059 we had about $131 million in this state that we put into that pot.  And then when we enacted the tax increases and the voters approved that, we built that pot substantially.  We added in a few other things like the insurance tax premium and I don't remember what all those other ones were but there was a few other items, but basically we got down to $481 million of state aid and that's what we ran through the mid-nineties with.  When 806 came, we added another $110 million in and I, if my math's correct, that's how we get the $591 million.  That's what's in the statute today and that's what is certified to the schools.  When Senator Bohlke talks about the $591 million, that's...that's roughly how you get to it.  That's what they're at today.  That's what's been certified to them.  That's what they're ...  they're looking at.  I do the formula a little differently.  I don't sit on the Education Committee, and I read education statutes and they're Chinese to me.  I come at it from a little different way, and the only way I can understand it, the formula kind of works like this; that there's several factors that go into it but the easiest way is that you take all the needs that the schools have.  Everybody starts with that.  That's easy.  You take out their other revenues and their other resources.  Well, what are those? The biggest one, the reduction that we've had, has probably been the motor vehicles.  We.  changed motor vehicles from being a property tax to a fee-based sorts of things.  Now we did that so we didn't get sued and lose our personal property tax base.  That wasn't done to mesa with education.  That was done to protect the tax base.  That reduced the amount of other resources.  The,




next thing you take away from the needs is ...  and the way I had looked at it is, you take the value of all the property in the state times the local effort rate and that gives you what ...  what resources you have from property tax.  So you take that away and then you get to the amount of aid that you need.  But what we do in statute is we set the amount of aid by statute.  We've got this $591 million so we set...we freeze the aid factor.  The needs are out there and are always set.  What ...  what gives? What part of the formula fluctuates? The valuation of property is set, so that doesn't fluctuate.  The only thing that fluctuates is the other resources.  In this case, we had less of those resources, which means you need more aid, and the local effort rate.  That's what fluctuates.  That's what, in this case, fluctuated down.  It went below a dollar.  The statute says you can't go below a dollar, so what do we do? That's the problem.  It was fro...  the statute says it's at a dollar, so if you change the local effort rate and allow that to go down....  When we talk about the $22 million, and, Senator Bohlke, if I'm...  correct me if I'm wrong, $22 million is what happened last year.  We're talking about this year.  I don't know what that number's going to be.  Twenty-two million dollars is easy to talk about because if everything was equal like last year that's what the figure would be.  If you're going to allow that local effort rate to fluctuate, who knows what that aid figure might be.  As long as you've got the aid figure set over here in atone...




SPEAKER KRISTENSEN:  ...  you're going to have to have some things give in the formula.  And so I think what the problem here is going to have to be is, and if there's a factor, for example, for facilities that there's talked about, that's going to affect the need.  So that's over on the other end.  That's going to mean more need.  So if you have more need, that means more aid at the other end.  And if you allow that local effort rate to fluctuate, you may be ....  And that's the reason I want to see some numbers before I make too great a commitment.  You may have a lot more aid that you need.  I don't know.  I don't know that anybody knows that.  And so as we begin to talk about this, the policy is important, but I keep going back...these bills are not property tax bills.  These are state aid bills dealing with what




are you going to give for opportunities and the fairness of funding.  We're going to have plenty of time to talk about property tax.


PRESIDENT MAURSTAD:  Time.  Chair recognizes Senator Bromm.


SENATOR BROMM:  Thank you, Mr. President.  Really appreciate the discussion and debate this morning on this.  I think it's very, very helpful to all of us to go through this discussion.  There are some questions that I have and a couple points that I'd like to try to make with the body.  As a backdrop to all of this, we need to be reminded that we have some lids in place on spending that affect each school district.  And if I could impose upon Senator Wickersham, I'd like to query him just a bit on that.


PRESIDENT MAURSTAD:  Senator Wickersham.


SENATOR BROMM:  Senator Wickersham, would you remind us all, with respect to school spending and this coming fiscal year, what lid we have in place with respect to those school districts.


SENATOR WICKERSHAM:  Well, there are two lids, one is a levy limitation, which is tax rate, and the other is a spending limitation.  The spending limitations were the product of 989 that was passed last year.  There are variable rates of growth...  spending allowed in school districts, individual school districts., Those are calculated by the Department-of Education.  They range between two and a half to four and a half percent allowed increases in spending.  The rates of increases are determined on an inverse ratio.  If you're a high-spending district, by the definition set in the parameters, then you have a lower rate of growth allowed.  If you're a low-spending district, then you're allowed a higher rate of spending under the calculations of 989.  But the rates of growth are between two and a half and four and a half percent.


SENATOR BROMM:  And that would apply to every school district, no matter what...


SENATOR WICKERSHAM:  Yeah, if they...




SENATOR BROMM:  ...cost grouping they fall into.


SENATOR WICKERSHAM:  Yes, the calculations are made on a school district by school district basis by the Department of Education and certified to them.


SENATOR BROMM:  Thank you, Senator Wickersham And hopefully, before Select File, we can detail those spending limitations for you and have a sheet in front of us that at least lets us look at that and realize that there are some other parameters of what our schools can do.  Let me say that, in a way, I feel somewhat personally responsible for the mesa that we're in.  We were hearing, in this Legislature, complaints from school districts about the lack of time to make decisions when they would get the certification for state aid and personnel decisions that they would have to make.  Myself and a couple of other senators introduced a bill which would have moved the notification date for employees from April 15th to May 15th, to give schools at least a month and a half before they would...  so they would know their state aid certification before making personnel decisions.  At that point, a bill moved through this Legislature with the speed of light which changed the certification date back to December 1.  So we no longer felt any need to change the personnel notification date.  I'm not sure why we went as far back as December 1, but it, was pretty hard to argue with at the time in terms of giving schools an opportunity to plan.  And hindsight is always wonderful, but I think we precipitated something there that in hindsight we certainly would have hoped to have done differently.  Be that as it may, it's time to make a change.  I'm not 100 percent comfortable.  I don't understand 149, wouldn't pretend to, but I'm wanting to advance the bill because I think we need to do that.  I think above all I do agree with the Governor in respect that the thing I hear most from schools is the need for stability, stability in what resources we decide we can furnish to them.  If they know...




SENATOR BROMM:  ...  the resources are going to be more limited and they have an opportunity to plan for that, many districts will do...they will all do that.  But it's the surprise,' the late notice, the after the fact "reepin", if you will, in this




case that really frustrates them and the management of their systems.  And so I appreciate the effort, Senator Bohlke, and the committee, and the goal that seems to be overriding 149, and that is to put some stability into the system.  And whatever the components are, if it doesn't have some elements of stability, on Select File there are going to be many, many questions raised, I'm sure, by many in the body.  So thank you for the hard work.  And there's a lot of trust involved in this state aid to schools situation, and I trust the Education Committee to advance the bill to Select File and continue to work with us all on it.  Thank you.


PRESIDENT MAURSTAD:, Thank you, Senator.  The Chair recognizes Senator Engel, followed by Senator Redfield, Janssen, Brown, Stuhr, Beutler, and Quandahl.


SENATOR ENGEL:  Thank you very much, Mr. President, members of :he body.  I have a couple questions of Senator Wickersham, if he would respond.


PRESIDENT MAURSTAD:  Senator Wickersham, would you yield?


SENATOR ENGEL:  First of all, we realized last year that some of these monies disbursed where they...  some received more than they needed, and many received less than they needed.  Of those districts that received more than they needed, some of them, I realize, spent that money.  The question I have, that those who were unable to spend the money, they did not need the money, I'm making an assumption but I want you to verify it, they can put that money in reserve? Is that correct?


SENATOR WICKERSHAM:  Senator, if I could respond to a couple things.  One, you said that some school districts received more than they needed and some received less than they needed.  I take it you're basing that comment on the calculated needs under 806, not what their personal or their local definition of what they need is.


SENATOR ENGEL:  Oh, I'm talking about dollars, they received more dollars than they...


SENATOR WICKERSHAM:  Well, but ...  but against ...  but against what




measure of need? The measure of need set out in 806? Yes, some of them received less than...  or more than what they were calculated to need,...




SENATOR WICKERSHAM:  ...  because of the extra distribution.  None of them received less under the calculation of 806.


SENATOR ENGEL:  Okay.  Well, I guess, what I'm ...  what I'm really concerned about are those that received more.




SENATOR ENGEL:  Those are the ones I'm interested in at this point in time.


SENATOR WICKERSHAM:  Okay.  Yes.  And if they had not budgeted, or if they had not spent those dollars, yes, they could be in cash reserve.  But, If you made assumptions that that was the level of state aid that you could expect to see in the future, and you budgeted that, and you put those dollars into programs, rather than saying, this thing is so uncertain, I don't know what the next year is going to bring, and I'm going to put everything I can got into cash reserves.  Those would have been choices at the local level.  And I...I ...  knowing which one they made and why they made it Is, I think, beyond what...beyond the information we would have now.


SENATOR ENGEL:  Okay..  Well, another comment I want to make then as far as the...






SENATOR WICKERSHAM:  ...  and I should make one other remark, cash reserves are limited by statute.


SENATOR ENGEL:  Okay., Okay, well, another question I have then, I know the Board of Education, they don't have their General Fund operation funds for '97-98.  I don't believe they're out




yet.  I'm not sure.  But what I'm also wondering, will that information ...  will that information provide the changes in the cash reserves of the different school districts in the state from the year prior to last year and last year, showing those that will have these excess funds in their reserve balance?


SENATOR WICKERSHAM:  Senator, I don't know if that information is on the AFR.  My instinct is to say that it is not.  The February 1st certification date will allow us to use, as a part of the calculation of the formula, the expenditures for '97-98 school year.


SENATOR ENGEL:  But what I'm leading up to is one more question.  If some of these school districts do have excess money in their reserves, now you're trying to come up with this $22 million to make them whole again.  Can that amount of money in their reserve then be deducted from the amount they need, in their particular district, to make them whole? In other words, not add to their pot.


SENATOR WICKERSHAM:  It is possible that, on an individual basis, school districts put their portion of the extra 22 million into reserve, and they would have that available to carry them forward to the next year.




SENATOR WICKERSHAM:  But knowing whether they did that or not, I .  And there are obviously some constraints on some cases, constraints on their ability to do that.


SENATOR ENGEL:  Well, those are the questions I have, because I think making them whole is one thing.  Making them beyond whole, when other people are short, is another issue, and that's why I asked those questions.  And, if possible, I'd like to get the answers.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Redfield.


SENATOR REDFIELD:  Thank you, Mr. President and members of the




body.  I have had a long discussion with Senator Wickersham.  And in the course of that discussion we have discussed all of the formulas that go into calculating the valuations from different perspectives.  And one of the things that he has explained to me is the fact that by policy this body has set a course on separating those two valuations by choice.  And I believe that he has really given me his assurance and his word that they're going to stay separated.  And as such, if they maintain that separation, we are not going to see double-dipping.  I'm going to hold him to his word.  I'm pleased that I can support the bill.  And I will follow my heart.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Janssen.


SENATOR JANSSEN:  Thank you, Mr. President, members of the Legislature.  I thought I might as well get my two cents worth in this morning too and follow suit.  You know it's tough to tell a school district that they've lost over $500,000 in aid they were assuming that they were going to get.  And then to be told, well, I guess you were a little too efficient, you did too good of a job, you're going to lose a little money here, that's pretty hard, hard to swallow.  And I hope I am assuming this right.  Senator Bohlke, if I'm wrong, would you please correct me, that this is not a shift of any kind.  If we put back in the money that we had allocated for the schools, that will not mean that someone else is going to lose any money.  Would you...  could I have you answer that, Senator?




SENATOR BOHLKE:  Senator Janssen, you are correct.  But let me interject one more time, when we add in the automobile revenue, there will ...  some districts will look differently.  But without that, without doing that automobile tax revenue, you're correct.


SENATOR JANSSEN:  All right, okay.  So, now when we ...  we will get a notification earlier, earlier in the year so that the schools who are going to be in ...  in...  in a hurting world will be able to adjust with their staff and so on at an earlier date.  Is that correct?




SENATOR BOHLKE:  Senator Janssen, currently, they get that December 1.  Actually, now, with what we are doing, they will not...they will get that in February.  This year it will be April.  So ...  but it will be using actual data.  And co they will have that time to develop their budgets.  So they're losing a little ground, actually, in the time that they receive it as far as how early it is.  But, from every school I've heard from, they're willing to give that up because we'll be using actual data and they would prefer the more predictability with that.


SENATOR JANSSEN:  That's right.  Of course, some of the schools thought they were getting close to actual data last year, too.  Although they were told it was an estimate, but because of actually no fault of their own, and by running an efficient school, they did lose dollars.  Am I correct in that assumption?


SENATOR BOHLKE:  That's correct.  And some of the schools had not remembered, by moving to December 1, we were using estimates.  Even if they remembered that, they could not have seen the ramifi...huge ramifications from using those estimates.


SENATOR JANSSEN:  The way I feel the money has been allocated.  We did it last year and there were, I'm sure, some people who didn't think that we should put that money into education, but there again, if we claim that we want the best education in the Midwest, then we should complete what we started and not try to pull the rug out of programs that are already in place and need to be funded.  I, for one, am going to support this.  I think it's the right thing to do.  We made the commitment to do it.  It's no extra money, the money is there, and so I will support 149 to the end.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Brown.


SENATOR BROWN:  Mr. President, members of the Legislature, the more that I listen to how...  to the ...  the technical aspect of the formula that got us to where we are, the more confused I am.  And the more confused I am because I ...  I still think that resulted from us overfunding the state aid part of the calculation when the needs were not ...  the needs as defined by us




were not that high, and that drove down the number for the local effort rate below the floor that we had set, which was a dollar.  And so it leads me to...  to...  I mean I'm very confused about some of the motivation behind 149, because on one hand we're going to correct the situation by giving back 22 million, or whatever the figure is, which nobody seems to be able to arrive at, and we are at February 3rd, and we're going to put into the legislation that by February let all of this is supposed to be firm for the future, and we're going to be able to predict for future and assure school districts of exactly what they're going to have.  We've had a lot of discussion.  Senator Bromm talked about stability, and the Governor has talked about stability, and certainly all of us would like stability.  But I don't see that there's anything about this that is going to make things any more stable.  I'm even beginning to wonder whether the change to February 1st is going to make things any more stable.  I don't see that there is anything about 149 that has to do with stability, when we still can't even say what the impact is going to be for this school year that's already started, and then...  and...  and we're talking about motor vehicles, and it's my understanding that that change in motor vehicles is for the next fiscal year.  And it seems to me that on one hand, for the "respin" aspect of it, we're talking about ignoring the dollar floor, but then we want to put in the dollar for ...  as an obligation for the state henceforth.  And I don't see that we can have it both ways.  I ...  it...  there is something wrong here, and there is something wrong that we are at February 3rd, we're changing the date to February 1st so that everything is supposed to be predictable, and yet nobody can tell us what it's going to mean for this year, for next year, for....  And then we're worrying about how this is going to provide stability for individual school districts.  Well, there is no way that you can take the aggregate state aid formula and be able to say how that is going to play out to individual school districts.  Senator Schellpeper made a remark about how this ...  that he knows how it's going to affect districts in his district, school districts in his district.  I would really like to know how that ...




SENATOR BROWN: that is the case, because I haven't heard anything that tells me what this bill.  is going to do absolutely,




except that if the one aspect of it is going to lock us in without having discussions as to the amount of aid that we would be obligated to.  And I...I...once again, I will say I don't think we can have it both ways.  I don't think you can argue for the "respin" as a ...  where it's going to drive it below a dollar, and then argue for but henceforth we want it at a dollar.  And I really would like somebody to explain to me why we are on...  at February 3rd and we still have no better idea, from an aggregate standpoint, what the impact is of this.  And I'm not even talking about on an individual school district basis.


PRESIDENT MAURSTAD:  Time.  Chair recognizes Senator Stuhr.


SENATOR STUHR:  Thank you, Mr. President and members of the Legislature.  I stand in support of LB 149, even though I, too, were among some of those that did not support LB 806.  1 feel that we have had some unintended consequences; these need to be addressed.  It was pointed out that 65 percent of the schools have been impacted.  From one of the testimonies, I just gathered some information that, for instance, it says Kenesaw schools stand to lose 68 percent of their aid; Silverlake stands to lose 73 percent; Bertrand, 74 percent.  None of these are actually in my district.  But I think that many of us, that have many schools in our district, we are seeing some negative impact.  As was stated before, we do need some stability, we do need some predictability.  I do have a school in my district that went from $1.64 to $1.10.  They have been impacted negatively by about $160,000.  There simply is no further way for them to cut and not affect the quality of education.  I think that the Legislature has taken a track.  I believe that we need to stay on that track.  We all support quality education, we think it's the most important thing, I do, to the future of this state.  And I will turn my time over to Senator Bohlke, if she wants to answer any questions or make any comments.  Thank you.


PRESIDENT MAURSTAD:  Chair recognizes Senator Bohlke.


SENATOR BOHLKE:  Senator Stuhr, thank you very much.  Senator Brown, I understand that you say that you're confused.  And I don't know if I can erase all of that for you here on the floor, but I'm certainly willing to have myself and legal counsel sit




down with you.  The February date, and I don't know if you're able to listen.  Do you want to talk, or do you want to....


PRESIDENT MAURSTAD:  Are you asking to yield to Senator Brown, Senator Bohlke?


SENATOR BOHLKE:  Yes, Senator Brown, did you....




SENATOR BOHLKE:  On clearing up the question on the February let, you said, were at February 3rd, going beck to February 1st.  I think we need to realize that this ...  what we're doing...  the recertification that we're doing is we're doing it April 1 this year.


SENATOR BROWN:  I understand that.


SENATOR BOHLKE:  In future years we will be doing February.  And the reason, I mean the only reason this is February 3rd discussing February 1st is that we decided not to take the bill up last week.  I mean it has nothing to do with February 3rd today and discussing this.  It would have made no difference if the department would have had all of the data there.  When we ...  when they have to wait to get the actual data from the Department of Revenue and a number of other departments, if we're going to use actual data, there's a time line that they have to wait until they -have the actual data.' That's why they've been starting right now and working towards getting this done for us.  That's why they have looked at that and said from the time we get the information from all the departments, the actual data, and run that through, we believe we can certify by February 1.  Of course they'd like it closer, you know, to March or later.  But we have to get it ...  try to get it to schools so that they can develop their budgets.


SENATOR BROWN:  My point was about predictability and stability, and if we don't...




SENATOR BROWN:  ...know it now, what good is it going...




SENATOR BOHLKE:  Well, the predictability and the stability comes by going to the actual data.  And that's a point that the Governor and I certainly agreed on in our discussions.


SENATOR BROWN:  But, if we don't have it now, we...


SENATOR BOHLKE:  Because now we aren't using actual data; (laugh) we've been using estimates.  When we get the printout, we'll be using actual data.  That's ...  that's the point of going from December to February, and then this year April, is to got the actual data.  And when we do that, we ...  that it will certainly be more predictable.  The other thing is to realize that when you do the "respin", the formula is to react to those things I mentioned in my opening.  There are always some things ;hat they...  that the formula should react to.  But the process and making sure that we use actual data, I think, is one of the strongest points in 149 in giving the predictability that...




SENATOR BOHLKE:  ...  not just all of us, but everyone in the state, I think, would appreciate.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Beutler.


SENATOR BEUTLER:  Lieutenant Governor Maurstad, members of the Legislature, I wish just briefly to support the bill.  And my commitment to the bill goes back to the question of trust, it goes back to keeping your word, it goes back to some things that have been said on the floor before.  But this is not just a simple matter of trust, it's at a higher level than that, especially considering this institution, the 49 of us and our relationship with our constituencies, and what we tell them, and what they expect from us, and what we expect from them.  There are even some situations where the law itself recognizes that when a moral obligation becomes so significant that the law actually translates what would otherwise be a moral obligation into a legal obligation, and that doctrine is called the doctrine of detrimental reliance.  And what it basically says is, it's an aspect of contract law, and what it basically says




is, if I'm remembering it right, and some of the young lawyers can correct me, but what it basically says is if someone says something to you and they say it with the expectation that you will rely upon it, and then you go ahead and do it , you do rely upon it, and it turns out that you're damaged seriously by that reliance, then there are a number of situations where the court will hold you liable notwithstanding the fact you may have not had a written contract or an ordinary contract, as usually defined in the law, in any event.  So what do we have here? We asked the school districts t follow a system, and that system involved reliance upon estimates.  And they did follow that system.  And as it turns out they're going to be seriously damaged, unless we make corrections, because they did follow a system that it turned out didn't work as well as we all would have liked.  And so I think that's the matter, that's the matter.  The thing that we should not be ding at this point is adding one more uncertainty to the matter, the uncertainty of our word.  That should stay firm.  That should be able to be relied upon, and it will be relied upon.  At least we can say, if we pass this bill, that we corrected whatever you might want to consider it, our own mistake, the differential.  Characterize it an you will, we need to correct it.  And I think that in this particular instance at this particular time stability is more important than any legal nicety.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Quandahl.


SENATOR QUANDAHL:  Yes, Mr. President, members of the body, it seems that, as one of the newer senators here, we're being asked to keep a promise that was before we were even here and able to make that promise.  And I'm being approached by many people and they're saying just trust us on this.  It appears that we have to give or that for the ...  before we can get the data we're going to have to wait at least three weeks.  And I guess I'm willing to do that at this point, but I must say that I do have many of the same concerns that Senator Redfield and Senator Brown has on this matter.  In particular, one of the problems that I'm having in trying to sort through my mind is the statement that 149 is consistent with the Governor's proposal.  And I guess I'd be willing to listen to more on that.  But at this point I would yield the remainder of my time to Senator Brown.




PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Brown.


SENATOR BROWN:  Thank you, Mr. President.  I think that we need to have a lot more discussion, especially about the consistency of this particular piece of legislation with proposals for property tax relief.  But I'm still back to...  I would like to clarify the conversation that I had with Senator Bohlke about the date.  My...  the point that I was making with Senator Bohlke is not that I don't under...that I don't understand that the way we got to February 3rd was by delaying the bill.  My point was that we are at February 3rd, which is after February 1st, when we are Baying that we are going to be able to certify to the school districts and be absolute and have everything firm as we have been unable to do, up until this point, by...on...with this magical February the lot date.  And yet when I ask the question about what the impact is going to be for the "respin" of this current year, when we supposedly have the data, supposedly should be able to say...  I mean we're talking about knowing that needs went down, we should be able to tell what the resource number and we...  and figure out what the impact is, we still can't ...  nobody can tell us what the impact is.  How can we talk on this floor about stability when...  and predictability when we can't even do it for some...  for a school year that we're already in? And we're talking about making changes that are supposed to cure this, and I certainly hope that it does, the situation for the future, but I'm just looking at the date, February 3rd, and we're changing to February 1st so that we won't ever have this problem in the future, and yet we cannot today say what the impact is going to be from this "respin".  And so I just really do not see how we are ever going to get any more predictability, any more stability.  And I believe that LB 149 is just a totally reactionary piece of legislation that says, you know, we've had ...  we said the wrong thing to the schools, and so we need to make good on the money.  But ...  but there's no underlying...




SENATOR BROWN:  ...  public policy about ...  about how that we're going to prevent this from happening.  And there's no...there's nothing about LB 149 that guarantees any more stability as to




what the impact is going to be to individual school districts.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The Chair recognizes Senator Schellpeper.  Do I see five hands? I see five hands.  The motion in to cease debate.  Those in favor vote aye, those opposed nay.  Record, Mr. Clerk.


CLERK:  31 ayes, 3 nays to cease debate, Mr. President.


PRESIDENT MAURSTAD:  Thank you, Mr. Clark.  The Chair recognizes Senator Bohlke to close on LB 149.


SENATOR BOHLKE:  Thank you, Mr. President and members.  I think we've had a very good discussion.  Again, I do, Senator Quandahl, recognize that we've asked our new senators to take on a great deal.  And I appreciate any hesitancy that you may have.  And let me commit to all of you that the Education staff and the committee will continue to work to clear up any questions that you may have.  You may come to a different decision in the end, but we certainly want to do everything that we can to help you in grasping all of this in a very short amount of time.  And again, I thank all of you for what I said in my opening, for your continued patience in this whole area.  I hope that the discussion has demonstrated to you the necessity for LB 149.  And I believe that the predictability that all of us have been talking about and the improvement of stability are absolutely key.  I have-told...  as we waited last week, I do not want anyone to feel rushed, however, I do feel that I need to caution you on the time line when we do get the printouts.  And if you work backwards to the April 1st date, when we need to let schools know, and putting it on the Governor's desk in five days, and the layover and all of that, when that happens we'll get the information to you as soon as we get it on the printouts.  But there may be more of a time crunch at that time.  But we're doing everything and the department is doing everything they can to get that information done as quickly as possible.  Now, when we get those printouts that I've said I would Just as soon go ahead, but I don't think that there are very many of you that would join me in going ahead with this bill, there may be, depending on the amount of revenue from the automobiles, there may be surprises to all of you.  There may be to each one of us




because we're going to be putting a great deal of revenue into the formula.  It may be a great deal less, that would be the reason it may turn out to be a great deal less than actually the 22 million.  And it may not be what everyone hopes for, because seldom does the formula work that way.  But we will know, when we get it, that we have used actual data.  And we will know that we have used eight months of the automobile tax revenue.  By using the actual data, by moving the date to February 1, April I this year, it does give a great deal of predictability.  And in the areas where it's not predictable, that's really those areas that schools should be able to anticipate.  And so I do believe that we're on solid ground when we say that 149 brings the predictability.  And, Senator Quandahl, the only other thing I would caution is I have said that this bill is not in conflict with the Governor's, I didn't say exactly consistent.  I'm learning from you attorneys to pay close attention to those words, so I wanted to clear that up.  But in the end, I do believe that this does prevent us ...  present us with the opportunity to work together.  And we do have a mess, I think it's our mess, as I said in our opening.  It's not the mess of schools and the children in those classrooms.  And I do believe that 149 allows us an opportunity to see that an error doesn't make a mistake, unless we refuse to correct it.  Thank you.


PRESIDENT MAURSTAD:  Thank you, Senator.  The motion before us is the advancement of LB 149 to E & R Initial.  Those in favor vote aye, those opposed nay.  Record, Mr. Clerk.


CLERK:  42 ayes, 0 nays, Mr. President, on the advancement of LB 149.


PRESIDENT MAURSTAD:  LB 149 is advanced to E & R Initial.  Mr. Clerk, any items for the record?


CLERK:  Yes, Mr. President, thank you.  Banking Committee reports LB 162, (LB) 290, indefinitely postponed; Revenue reports LB 87 to General File with amendments; Banking reports (LB) 323 to General File.  I have hearing notices from Natural Resources, from Health and Human Services, and from the Revenue Committee Mr. President.  I have new A bills.  (Read LB 293A and LB 291A by title for the first 'time.  See pages 433-436 of the Legislative Journal.)