1988-1989: Introduction

At the conclusion of the 1987 Session, it was clear the Legislature left unfinished business with regard to public education, particularly on the issue of consolidation.  "Education seems adrift," said Senator Dave Landis of Lincoln, referring in part to the issue of school consolidation.¹  Senator Dennis Baack of Kimball seemed to agree with Landis' assessment.  "I think we'll be right back in the middle of that issue," Baack predicted, noting that the issue was "too emotional" to find an easy solution.²  And the prospects were no better on the general issue of school finance.  The 1987 Legislature once again reduced state funding for education by 2% to $122.6 million for FY1987-88.  This was a continuation of a downward trend in state aid since FY1983-84 when the level of appropriation was at $133.7 million.³ To make matters worse, the education groups representing teachers, administrators, school boards, and specific school district classifications were at odds with one another on a range of educational issues, consolidation and school finance certainly not the least among them.

It became necessary for someone to pull the sides together and make sense of the issues that needed to be addressed.  And someone did.  During the summer of 1987, Senator Ron Withem, chair of the Education Committee, brought various groups and key individuals together to work toward an "educational enhancement package."⁴  This, of course, required the parties to bury the hatchet and declare a cease-fire long enough to accomplish something of substance.  "What I asked them to do was explore whether or not we could do a concentrated effort toward an educational enhancement package, as opposed to fighting each other," Withem said.⁵

The meetings called by Withem in the summer of 1987 actually served as the initial stage for an interim study on the issues of school organization and finance.  Following the agreement between Governor Orr and Senator Withem to hold off a final vote on LB 444 (1987), Withem filed a study resolution, LR 180 (1987), to research "alternative methods to accomplish an improved school district structure in Nebraska."⁶ Resolutions for interim studies are typically filed during a legislative session to examine a particular issue for possible legislative action in the following regular session.  LR 180 was no exception, and it was clear, particularly by his attempt to bring parties together, that Withem meant to achieve some form of resolution to the issues.

The actual text of LR 180 properly captured the essence of the problem facing the state in just one sentence:

Historically, and especially during recent sessions of the Legislature, school district reorganization has been a divisive and emotional issue, yet in recent years, changing demographics and agricultural adjustments have caused an even greater need to address this issue in an objective and equitable manner.⁷

The study set out to address "various alternative strategies to accomplish an educational structure which promotes educational opportunities, assures tax equity, and retains a legitimate role for local school boards."⁸

The specific objectives of the study were carefully constructed to provide a sweeping examination of all related issues to school organization in Nebraska, including:

1. Revisions in statutes which pertain to the procedures for organizing school districts of all classes;
2. Structural changes in the school foundation and equalization formula;
3. State aid and tax incentives to promote and encourage the organization of all property into school districts which offer kindergarten through grade twelve;
4. Appropriate levels of state and local support for schools;
5. Revenue sources for support of the schools;
6. Establishment of consistent, flexible, and challenging standards for all public schools;
7. Transportation of students, including the cost to consolidated districts and state requirements for aid support; and
8. Any other factors reasonably related to the issue of school district structure.⁹

The majority of these objectives, particularly (2) through (5), should have served to put everyone on notice that the current school finance formula was at issue in the overall discussion of school organization.  It should have put the education community, and the various groups that represent it, on notice that change was in the near offing, and to not be "at the table" for such discussions would be a mistake.  They noticed.

John Sullivan, lobbyist for the Nebraska Rural Community Schools Association (NRCSA), said Withem is "bringing people together rather than building moats and putting alligators in them," referring once again to the divisiveness of the education issues of the day.¹⁰  Herb Schimek, lobbyist for the Nebraska State Education Association (NSEA) said, "People are saying we want to make sure if it's a 'year for education,' we want to make sure it's not all higher education."¹¹  Schimek was referring to the interests of public education versus postsecondary education since the University of Nebraska was also experiencing a financial crisis at the time.  June Remington, lobbyist for the Nebraska Council of School Administrators (NCSA), seemed to agree with her colleagues in the lobby and noted her organization's willingness to pursue a broadened tax base in order to fund public education.  "I think there's fairly uniform cohesiveness on the fact that we're going to have to broaden the tax base," Remington said.¹²

In fact, by the end of the fourth meeting of Withem's ad hoc study group, on August 12, 1987, the idea of broadening the tax base to fund public education was one of several official recommendations of the group.  One possibility, the committee suggested, was a general income tax rate increase coupled with an income tax rebate to school districts to enhance state support for schools.¹³ However, state funding for education was not the only area of discussion.  The group also addressed one of the cornerstone issues of contention between small and large school districts, the issue of a common or combined levy on real property.

One of the often criticized aspects of Class I (elementary only) districts was that the residents of such districts typically paid a much lower property tax levy than those living in a district containing a high school.  Some even referred to (or sometimes defended) Class I districts as "tax havens" in contrast to other school districts.  The remedy, many suggested, was a common levy whereby all residents of a particular area or county would pay the same property tax levy.  The problem, in part, was to determine which Class I districts were "affiliated" with a particular high school district in order to establish which property tax rate to charge residents.  Supporters of Class I districts opposed such a scheme for obvious reasons.  First, the residents would pay higher property taxes, and, second, there would be a substantial risk of losing autonomy and control over the Class I district.

Following the August 12th meeting, Withem reported that representatives of large and small Nebraska school systems agreed all property in the state should be taxed for the support of high schools, essentially agreeing to a common levy.  Withem said representatives reached a "general agreement that we should be moving toward a system where every piece of property is in a K-12 system."¹⁴  This general agreement would eventually lead to the affiliation bill in 1990 whereby Class I districts were required to affiliate with a high school district (either a Class VI district or a K-12 district).¹⁵ Over a period of years, other issues addressed at the meeting would eventually be addressed in legislation, including the idea of linking state aid payments to reorganization, encouraging early retirements in consolidated districts, and ensuring that two districts would not lose state aid by the act of merging.  In all, the meeting was one of considerable historic importance even though the concepts promoted at the meeting took various lengths of time to materialize.

The LR 180 interim study did not result in any specific recommendations concerning the existing school finance structure and how it could be changed.  But this was certainly not due to lack of effort or desire on the part of some members of the ad hoc committee nor Senator Withem himself.  The problem encountered had more to do with the overly broad scope of the resolution, and, from a more practical perspective, the lack of resources to conduct such a study.  LR 180 was awarded no special funding for research, and legislative staff possessed only so much expertise in areas such as school finance.  Nonetheless, LR 180 did produce many valuable ideas and perhaps also some intangible goodwill on the part of the players to continue talking.  LR 180 was an important first step that would eventually lead to the drafting and passage of legislation embodying the most comprehensive school finance reform since 1967.