Debate Transcripts

LB 1059 (1990)

Select File

March 20, 1990

SPEAKER BARRETT: Thank you. Additional discussion on the adoption of LR 274. Senator Schellpeper.

SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members. I also rise to support Senator Johnson on this resolution. it seems like a lot of the legislation that we passed in this body was for large industry or the large cities. And I think that any time we can do anything for agriculture we should do it. I want to just thank Senator Johnson for bringing us this resolution. Thank you.

SPEAKER BARRETT: Thank you. Any other discussion? Senator Johnson, would you like to close.

SENATOR R. JOHNSON: Thank you, Mr. Speaker. Briefly, again, I want to thank the Department of Agriculture, George Beattie, Stan Garbacz and others who put together this basket of Nebraska products for us to consume here in the next few weeks, probably, because there is a lot in this particular basket that are going to take a while for us to eat. But we want to make sure that they know how much we appreciate the work that they do at the Department of Agriculture. And, again, we honor the men and women who contribute so much to so many in our state, in our country and around the world by providing us with an abundant supply of clean, safe food to consume. And I think we should recognize the contributions that those individuals make to our society and to our economy. So I would ask for the adoption of the resolution.

SPEAKER BARRETT: The question is the adoption of LR 274. All in favor of that motion please vote aye, opposed nay. Voting on the adoption of the resolution. Have you all voted? Record, please.

CLERK: 22 nays, 0 nays, Mr. President, on adoption of LR 274.

SPEAKER BARRETT: The resolution is adopted. The Chair is pleased to note that our doctor of the day is with us again this morning. He was with us last week, I believe. Dr. Mike Adams, formerly of Spencer, Nebraska, that would be Senator Dierks' district, now of Lincoln, Nebraska. Dr. Mike Adams, would you please stand and be recognized. We're pleased to have you back with us again today, Doctor. Mr. Clerk, to Select File, LB 1059.

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CLERK: Mr. President, the first item on LB 1059 are consideration of Enrollment and Review amendments.

SPEAKER BARRETT: Senator Withem, would you be so kind as to offer the E & R amendments.

SENATOR WITHEM: I would move the E & R amendments to LB 1059.

SPEAKER BARRETT: Thank you, sir. Is there discussion? All in favor of adoption of the E & R amendments please say aye. Opposed no. Carried, they are adopted.

CLERK: Mr. President, Senator Labedz would move to amend the bill. Senator, your amendment is found on page 605 of the Journal.

SPEAKER BARRETT: The Chair recognizes Senator Labedz.

SENATOR LABEDZ: Thank you, Mr. President. The amendment to LB 1059 provides an income tax deduction for tuition and related educational expenses for sending a dependent to a private elementary or secondary school. The deduction is limited to $1,100 for each dependent enrolled in grades K thru 6, and $1,700 for each dependent enrolled in. grades 7 to 12. The income tax deduction is available to all income taxpayers, and you don't have to itemize. It is assumed that the deduction would not be available immediately, since there is no implementation date. The amendment, which permits parents or elementary and secondary students, whether in public or nonpublic schools, the opportunity to claim a tax deduction for payments for tuition. it also provides for school transportation and nonreligious textbooks. It is an amendment that provides an equitable opportunity for all parents to receive tax relief for -certain educational expenses. It is important, I believe, to recognize that the amendment is a change that will benefit only... is not an amendment that will benefit only the parents of private schools, but it will also include the nonpublic school children. Because of the increasing cost of education, and the parents of public school children are also faced with the ever-increasing cost of fee structures and other extraordinary educational expenses, this amendment will address the needs of those parents and their children, also. So, it's not just for the private schools, it's also for the public school parents. I think it's more than a

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March 20, 1990 -- LB 346, 1059

half century ago that the United States Supreme Court recognized the fundamental right of parents to direct the upbringing of their children. And in 1983, the United States Supreme Court upheld a Minnesota statute which allowed taxpayers to claim a tax deduction for tuition, transportation and nonreligious textbooks. This amendment to LB 1059 is patterned after that very same statute. In Nebraska there are more than 34,000 students that are enrolled in the approved nonpublic schools, and these students and their parents fulfill every educational requirement of the state. They also make great financial sacrifices so that it's possible for them to choose an education for their children in conformity with their religious beliefs.This amendment would help alleviate the double burden borne by parents of nonpublic school children. When I was approached to co-sponsor LB 1059, 1 declined because of the fact that for at least the last two sessions we have been trying to get tuition tax credit for private schools. And I took this opportunity, on LB 1059, because, if you recall, LB 346, which was a bill that Senator Hall and myself and I believe Senator Lindsay and a few others introduced. And I cannot see increasing the sales and income tax without providing some relief for the parents of the children that are going to private schools. I have here, and I'm sure you have, too, and I would like to just hold those up, approximately three, four, maybe even five hundred letters here that I have received since LB 346 was introduced. I'm sure that many of you have received the same amount of letters. it's ironic though that most of these letters I receive ask me to support LB 346. And, in fact, I had to write back and say that I was a co-sponsor and a very strong supporter of LB 346. 1 have ten minutes for opening? I believe that there might be.... Senator Crosby, did you want some of my time? Thank you. Not the rest of my time, I would like to have the last minute.

SENATOR CROSBY: I'll just take about... I'll just take about one minute, because in...

SPEAKER BARRETT: Senator Crosby.

SENATOR CROSBY: ... in .... Thank you, Mr. Speaker and members. In general, I am in favor of LB 1059, 1 want to make that clear at the beginning, because I think that we talk about a tax shift, and we talk about relieving property tax, but we don't really do anything about it that is significant, nor long-term. And I think 1059 is a good beginning or attempt at least to try to address that problem. I think we have to be up front about

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it, that it is not going to end all of our problems with property tax, but we do need to begin a shift and an equalization across the state, which 1059 addresses. As to the tuition tax credit part of it, I do support that. From the very beginning of the United States of America, a lot of our schools were private schools to start with. People wanted their children to be educated, and they wanted to educate them in their own way. The public school system has evolved over the years, and we faced that obligation and we live up to that obligation to educate our children. It is in our Constitution of Nebraska, the State of Nebraska, that we are obligated to educate our children from 5 years old to 21. And the public schools do a wonderful job of that, and I do support the public schools always. But I think it's only fair, and in this day and age when we've passed the choice bill, that people do have a choice to send their children to other schools. It does cost them. They support those schools through their parishes and through other...the Lutheran schools, the Christian schools, the Catholic schools, and other private schools. And, so I think it's only fair that they are able to deduct some of those expenses that they entail by choosing to send their children to another school. And this amendment encompasses public school parents, too, for expenses that they face in activities and that kind of thing. So I do support the amendment and thank you, Senator Labedz, for having me ... giving me a little bit of your time.

SPEAKER BARRETT: Senator Labedz, approximately three minutes.

SENATOR LABEDZ: I'll do it on closing. Thank you.

SPEAKER BARRETT: Thank you. Senator Crosby, yours was the next light, do you care to make any other statement?

SENATOR CROSBY: Well, thank you, Mr. Speaker. I don't get this opportunity very often, because I never get my light on in time. But, since I have the opp... I will continue just one more little thing. I think we all recognize the amount of taxes that people who send their children to private schools pay. And also, in Lincoln, Nebraska,. for instance, if all of a sudden for some reason all of our schools closed, the private schools closed, the public schools would be pushed to take all those students in. So I think that we are in a... as we enter the twenty-first century, we need to start cooperating. And we do .... Over the years there has been a lot of cooperation between private

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schools and public school districts. And this would be a way to feel that we really are cooperating, and we feel we have the same goal, and that is to educate our children. Our schools live up to certificated teachers... and to make our schools as strong as possible. A lot of our schools turn out graduates that are sought after in the job field. And so I just feel that from the point of view of fairness and for the amount of money that we do contribute to the tax pool, and we support our own schools and don't use up that tax money, that we, in fairness, should have this small ability, it's very... comparatively speaking it isn't a large amount. So, I just thank you very much for listening to me, and I hope that you'll vote for the amendment. Thank you.

SPEAKER BARRETT: Thank you. Senator Nelson, on the Labedz

amendment, followed by Senators Hartnett, Byars and Landis.

SENATOR NELSON: Mr. Speaker, members of the body, again, I guess about the same debate that we had before, the same discussion. I don't think that there is any one of us doubt or do not support the quality of education that we find in the private schools and so on. I pose the same question as I posed when this was discussed several weeks ago, is that... and I am aware for the bill to probably be constitutional that it does have to include public schools, too. I think that every one of us can sit down that have children, or everyone that would have in school, and we can add up two, three, four hundred dollars in school expenses,, or even maybe more than that. Multiply that times two or three children, I don't know what the ... what that amount would come to, but I can obviously see this as a very open-ended bill, very easy to add up those expenses. Now, this does come off the adjusted gross income. It does not come off as an itemizer, which it should, because it wouldn't hardly do any good if it did. Another question, in my hometown I checked with a couple schools, the tuition runs all the way from 200 to 900 dollars, based upon the ability to pay. Mostly this same group, if low income, have earned income credits, which do amount to a considerable amount of money. But my point is, with that graduation of tuition I'm not even sure I have a question there. And if they are nonchurch members then in one school it's $1,200, and $1,500 as nonchurch members. I have had, of course, not nearly the calls that I'm sure Senator Labedz has had. But, in fact, just a few minutes ago, from a party that they do send their children to a private Catholic school, as ,they say, our choice. I'm very much against this. I've also

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March 20, 1990 -- LB 346, 1059

had calls from people that belong to the Peace Lutheran and the Trinity Lutheran School, and this is my choice, and, Arlene, don't start down the road because then where do you start and where do you stop. If it. were for tuition only, I could certainly feel a lot more comfortable about the bill. But I realize why the others have to be included, and this is a very open-ended bill. I think I've been out speaking where Senator Langford has been speaking, and she's used the figure of $85 average. I don't know where that one would come from, but if you multiply 1,100 by 3.15 you're more 34, 35 dollars. Not a big amount. It is a help, but I' think it would take a lot of the families right out of the Nebraska tax. So, with that, I have no problem, if it was tuition, probably tuition only, but I am hesitant to start down that road, too. And I see this as a very open-ended bill.

SPEAKER BARRETT: -Thank you. Senator Hartnett.

SENATOR HARTNETT: Mr. Speaker and members of the body, I rise to oppose the amendment. I do favor the concept. I did in committee, I did vote for the bill, LB 346, when it was on the floor. But I think that, and I have had my children attend both public and private schools, and I think that is a choice, and I guess that's why I favor it. But I do not think that that is an issue that should be tied with this. I think it's a separate issue, and I guess I will continue to support the issue of providing tax relief to private students that make the choice to attend, as was introduced by Senator Hall and LB 346. But I really do not see that this is ... should be part of this issue. So I rise to oppose this amendment.

SPEAKER BARRETT: Senator Byars, please.

SENATOR BYARS: Thank you, Mr. Speaker, members of the Legislature. I'm really not standing to oppose the amendment, because I have supported this concept on General File in the form of the bill. But I'm going to stand to ask you to oppose this amendment on 1059. I-think that we're dealing with a piece of legislation that obviously is going to have a tremendous impact on the State of Nebraska for many years to come. And, I think, if we call the bill fragile, I think it would be appropriate. And anything of this sort that we add to this bill I think is going to endanger its passage. So I would urge you, please, not to support this amendment, not because the amendment is bad. I would support the concept of the amendment, but not

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March 20, 1990 -- LB 346, 1059

in this form, not on this bill, not at this time. I would yield the balance of my time to Senator Labedz

SPEAKER BARRETT: Senator Labedz.

SENATOR LABEDZ: Thank you. Thank you, Senator Byars, I appreciate the fact that you relinquish some of my (sic) time and for your words of encouragement that you will support LB 346 in the future, if it should ever come up again. I respect each and every one of you on this floor. And I know that many of you that are supporting LB 1059 have come up to me privately in the last couple, two or three weeks saying that they will support tuition tax credit on an amendment to any other bill or to LB 346, but they don't want it on LB 1059, and I can understand that. I'm sure that the parents of the children that go to the private schools, the accredited private schools, will be terribly disappointed that I am withdrawing the amendment to LB 1059, because I feel that it should be here inasmuch as you're asking us to pay an additional sales tax and income tax. I cannot and will not support LB 1059 until we recognize the fact that the parents of the children that go to private schools should have some relief also, because you have to remember, they have been paying the high property tax now for as many years as we've had it. Way back in '67 and '68, I've said it many times, I worked for the Department of Revenue. We promised them, at that time, property tax relief. But I think it is the wrong way to go on LB 1059 to increase the salts and income tax at such an enormous amount and not give any tuition credit, tax credit to the private school, to the parents of the private school children. I respectfully ask to withdraw the amendment, only because I respect everyone on the floor that is a co-sponsor of LB 1059. Thank you.

SPEAKER BARRETT: Thank you. It is withdrawn. Mr. Clerk.

CLERK: Mr. President, the next amendment I had was by Senator Hall who is excused until he arrives.

SPEAKER BARRETT: Next amendment, please.

CLERK: I had a second amendment from Senator Hall,

Mr. President. The next amendment I have is by Senator Warner. I' have a note on this one, Mr. President. Senator Warner is excused until he arrives, but I have a note that he wished to withdraw.

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March 20, 1990 -- LB 905, 1059

SPEAKER BARRETT: Withdrawn.

CLERK: The next amendment, Mr. President, again, by Senator Warner. I have a note on this one as well that he wishes to withdraw.

SPEAKER BARRETT: Withdrawn.

CLERK: A third amendment from Senator Warner, again a note that he wishes to withdraw, Mr. President.

SPEAKER BARRETT: Withdrawn.

CLERK: Mr. President, the next amendment I have is by Senator Warner.

SPEAKER BARRETT: Pass over it, Mr. Clerk, momentarily. Go on to the next amendment, please.

CLERK: Mr. President, Senator Dennis Byars would move to amend the bill. Senator Byars amendment is on page 1198 of the Journal.

SPEAKER BARRETT: The Chair recognizes Senator Byars.

SENATOR BYARS: Yes, Mr. Speaker. As all of you know, Senator Lowell Johnson has introduced LB 905, which I have made as my priority bill. This bill, basically, is a bill to reimburse the local subdivisions for funds they lost because of the Enron decision. And what I am asking in this amendment, very simply, is to make sure that these counties that will be receiving reimbursements, once LB 905 is passed and placed into law, that they will not have to put these funds back in their budget, and they will be excluded from the lid provisions. It is... it's only really common sense and just, fair and reasonable to do so, because these funds will have already been budgeted once, and this would, in effect, make-it a double penalty if we would leave these within the lid provision. It's really quite simple, and I would move the amendment.

SPEAKER BARRETT: Discussion on the amendment offered by Senator Byars. Senator Moore, would you care to discuss it? Senator Withem.

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SENATOR WITHEM: Yes, I would, Mr. President. I'll take this opportunity to not only speak on behalf of-the Byars amendment, but begin an explanation of what I would like to do with the next amendment that comes up. Since the time we have discussed 1059 on General File, a number of points have been brought to our attention that need addressing, as there are with any major piece of legislation that comes through. This is one of those. And, as I understand the Byars amendment, it is to exempt from the lid any court ordered repayments of property tax refunds. I think that makes good, good sense. That, if the court comes in, as they may in some school districts, particularly down in Senator Byars district, and order the school district that they must pay back dollars, that should not have to come out of existing school programs. Teachers should not have to be riffed to pay this back, and technically the way the bill is being written that would happen. So I support Senator Byars amendment. And also, if you'd bear with me, Senator Byars, just a second here, let me explain the next amendment I have up is amendment 2821. 1 have passed out to you an explanation of amendment AM3066, which is on your desk, your desk now, carrying a number of clarification amendments. When that time comes up, I'm going to ask to substitute 3066 for my amendment; 2821, and we'll deal then with a lot of these technical sorts of cleanups at that time. And this is one of those that Senator Byars is bringing to us, and it's one which I support.

SPEAKER BARRETT: Thank you. Senator Moore, did you care to discuss the Byars amendment?

SENATOR MOORE: Only to say that I support the Byars amendment.

SPEAKER BARRETT: Thank you. Senator Chambers, did you care to discuss the Byars amendment?

SENATOR CHAMBERS: only briefly to say that I'm not going to vote for it, or any other amendment, but to use this opportunity to say, especially to Senator Scott Moore and some of the others, that when the Governor was out of town her back was turned, the Legislature advanced this bill. And I stood on the floor then and said, I can't wait for the Governor to get back with her whip and whip some of the people off this bill. I think the whipping has begun. I believe I'm going to have a day to gloat, and I don't think this bill is going to get 30 votes, and it shouldn't. Not just because the Governor will whip people off the bill, but because it is basically unfair and

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unjust. I've been ribbed a lot by some of my colleagues because some of the positions that I took on the floor exactly paralleled those that the Governor took when she gave her press conference. So, for especially those in this general neighborhood, where I'm forced to reside, I did not write her speech, she did not consult with me, however she does have access to newspapers, she can read. She was wise enough, in this instance, if she picked some of my good arguments out, to select the wheat and leave the chaff alone. The wheat was constituted by my arguments. The bill, itself, is chaff. I do understand all of the points that people are making when they say they want to equalize taxing, they want to equalize educational opportunity. But at no point-when I've been in this Legislature has any of these types of bills talked about what the curriculum will consist of, how they will go about recruiting teachers from different cultural backgrounds who can minister to the needs of children who have been passed over and overlooked by the education system at large, and specifically that in the City of Omaha. The largest school district, but it's the one where I think the most overt and covert racism can be found, not only in the offerings to the students and the mistreatment of the students, but in the hiring of teachers, the granting of advancement in that system, the placement of people in administrative posts where they're viewed as enforcers, you will find a lot of instances where black people are named assistant principals, and they are there as high class, quasi security guards, and it's made clear to the students, it's made clear to the one who gets the position, so when that is done, there is a diminution in the value of the position. There is a degradation that automatically attaches to a person in that position when, in some instances, it should not. Not every assistant principal is a security guard, but that is the way they are viewed when they are black. I think it's unconscionable. There is a school in the heart of the ghetto, and that's what they used to call it, and I saw this white lady principal talking about the need for role models for black youngsters. The best role model would be to have a black principal. Let these children see the persons running the school as being people of their own kind. White children don't have to have these appeals made in their behalf, because the majority of schools that they go to have white principals, white assistant principals, white teachers, white counselors, white administrators, the superintendent of schools is white, the majority of the school board members are white. But when it comes to the black children, people like to use that buzz

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phrase, role model. But when the opportunity comes to place people in that position who are qualified, it will not be done. The Omaha Public School system, down through the years, has had a tactic of going to other parts of the country to find what they call black teachers. They will find people who may not be able to cut the mustard, they bring them into the school system and tell them, you're not really qualified, so you're not to rock the boat; ...

SPEAKER BARRETT: One minute.

SENATOR CHAMBERS: ...don't you get involved in any efforts that would embarrass the school system, because you're holding this job only through our sufferance, not through qualification. And some of these people are not competent as teachers, and our children are cheated, they are doubly cheated. They don't have the best in qualification, in terms of a teacher, and they don't have those people who would be strong role models that we always talk about. Until bills like 1059 address those issues, there is no way I can support it, because I see no benefit for those in whom I'm most concerned, and that's the children. The schools don't exist for the administrators, they don't exist for the teachers, they supposedly exist to provide free, quality education for all children who have to attend public schools, and that is not upper most in people's minds. It is a travesty when people can graduate from the eighth grade and not know how to read, not know how to spell-, not know anything about geography, in fact don't know the difference between geography and geology and have some teachers who are...

SPEAKER BARRETT: Time.

SENATOR CHAMBERS: ... in that situation. So, this bill is a political time bomb. If it's passed, there's going to be no improvement in education. When the statement is made that it's not going to change too much the amount of taxing that goes on, that might be true, but it changes who is going to pay the taxes.

SPEAKER BARRETT: Time has expired.

SENATOR CHAMBERS: As Huey Long used to say, don't tax me ... don't tax you, don't tax me, tax that fellow behind the tree. Well, what is being done with the slight of hand here is to say that somebody else is going to pay the taxes without

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March 20, 1990 -- LB 905, 1059

specifying who those somebody's are so that each person is left with the belief that he or she is going to have a tax burden lifted....

SPEAKER BARRETT: Time.

SENATOR CHAMBERS: ... and somebody else will pay. Time?

SPEAKER BARRETT: Time.

SENATOR CHAMBERS: You didn't give me my minute warning. Did you give me my minute warning?

SPEAKER BARRETT: The Chair announced time, this is the third time. I don't believe you heard me the previous two times.

SENATOR CHAMBERS: Oh, thank you.

SPEAKER BARRETT: Thank you. Senator Schmit, please.

SENATOR SCHMIT: Mr. President and members, I'm always curious about these bills we introduce, I believe it's LB 905, which wants to hold an entity or a subdivision of government harmless from the actions of this Legislature. If, in fact, a subdivision has been receiving funds from a tax which has been declared not legal, then why should we extend the benefits of that illegal action one additional year? Why should, in fact, this exemption be allowed from the lid, since, in fact, they shouldn't have been allowed... should not have been income there anyway. I'm not going to talk a great deal about it at this time. I just wanted to say that so many times on this floor we talk about these type of bills as to what they are going to do for education, what they're going to do for the children. Ladies and gentlemen, all it does is boil down to a tug of war, a tug of war between various entities to determine who shall pay the tax. And you can believe whomever you want to believe. We know... it's kind of ironic that when we discussed this bill previously on this floor I said it was going to be the largest single tax increase ever enacted by this Legislature. That has now since become the rallying cry for a number of groups and individuals who have chosen to oppose the bill. I did not intend, at the time that I made the statement, that it would be that way, but that's the way it turned out. But the basic inequities in this bill are not going to be corrected, no matter what you do with a dozen or more amendments. I have some

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March 20, 1990 -- LB 361, 1059

amendment which I ought to offer. I'm not going to offer them. We're going to consume hours and hours of time. And I have a respect for the individuals who have worked on this bill, I know they have worked diligently. I know they have tried to make an equitable piece of legislation out of this bill. But, ladies and gentlemen, if you have faulty premises, you're not going to have an equitable bill. I've told you before, the premise upon which wealth is determined is faulty. When you only include a portion of the wealth you are setting up a system which is inequitable to begin with. Let me tell you what's going to happen. When LB 361 kicks in, next year, you're going to see a dramatic improvement in the valuation of farmland, which is going to increase the wealth of rural districts, which is going to decrease substantially the amount 'of state aid those districts will receive. Number two, we saw a 65 to 70 percent decline in rural land values, from 1980 until 1990. It is reasonable to assume that those land values will gradually escalate again. They declined much more dramatically than did urban values, and they will come back up. As those values go back up, it will once again decrease the amount of state aid that goes to rural areas. Now, another inequity, the tier system, and I'm not really familiar with it. But as I look at it, it would be very simple for this Legislature, in future years, to blend the first two tiers of the lower tiers, which will mean again rural areas, rural districts will receive less revenue. Now, what's going to happen elsewhere? As the cities and counties realize that this has taken place and they have lost some of their avenues for revenue, they're going to look around, they're going to need more revenue. Going to get a sales tax on services? I think not. So, what's going to happen? The passage of this bill will guarantee the reimposition of the personal property tax. Why? Because it is not going to be, at that time, a major burden to the business man. But it will be a major burden to rural taxpayers.

SPEAKER BARRETT: One minute.

SENATOR SCHMIT: That is the only way that the cities and counties can survive, if they broaden their tax base by the reimposition of the personal property tax. Ladies and gentlemen, in your personal life and in your business life you make mistakes, you pay, those mistakes cost yourself. If we make mistakes on this floor, ladies and gentlemen, the taxpayer pays. Ladies and gentlemen, you better review the bill, review those inequities which I have outlined and, if there are any

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answers to those inequities, I'd like to have them explained here on the floor. I oppose the amendment, I'm going to oppose all amendments because I do not believe the bill ought to pass into law.

SPEAKER BARRETT: Thank you. Any other discussion on the amendment? Seeing none, Senator Byars, would you care to close on the adoption of your amendment.

SENATOR BYARS: Briefly, for the sake of time, thank Senator Schmit for his discussion and ask that you please vote for the amendment.

SPEAKER BARRETT: The question before the body is the adoption of the Byars amendment to LB 1059. Those in favor of its adoption please vote aye, opposed nay. Have you all voted? Record, Mr. Clerk.

CLERK: 27 ayes, 2 nays, Mr. President, on adoption of Senator Byars amendment.

SPEAKER BARRETT: The amendment is adopted. Next item.

CLERK: Mr. President, the next amendment was offered by Senator Withem. Senator, am I correct in understanding that you wish to withdraw and substitute AM3066?

SENATOR WITHEM: That is correct.

SPEAKER BARRETT: If there are no objections, so ordered.

CLERK: Mr. President, Senator Withem would move AM3066. (Withem amendment appears on pages 1462-63 of the Legislative Journal.)

SPEAKER BARRETT: Senator Withem.

SENATOR WITHEM: Yes, Mr. President, members of the body, the explanation of AM3066 is on your desk, with the exception of originally we were going to include AM2845 of Senator Hall's, that's on your outlying ... under capital letter A, item number one, that is not included in this amendment. Senator Hall wished to run that on his own. I certainly honor his request. Secondly, we ... by voting for this amendment we will be doing, once again, Senator Byars amendment. That was included in this

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because we put together a list of amendments we thought would ... needed to be done, but are relatively noncontroversial. So, what we are doing with the following, let me explain those, at least the major ones. If you have any questions about any of them, please raise them. obviously, if there is one that you don't think ought to be included within the bunch and needs more discussion, you have rights, under the rules, to ask that that be set aside. AM2821 is in your Journal on page 1198. 1 am going to be, frankly, working very directly from my handout here, if you want to follow along. If you remember your explanations of the budget limitation, under LB 1059, there is a range from 4 percent to 6.5 per-cent. Those districts spending at or above their per pupil average for their tiers are capped off at the 4 percent range. As a school district ratchets away from ... downward, in per pupil expenditures, from the average, they get increased spending. Under the current bill, if they spend 50 percent below the per pupil average of their tier, they can go up as high as 6.5 percent. We wrote this before we had all of the printouts done. When the printouts were done we did analysis to it. We find that there are virtually no school districts in the state that would be as high as the 6.5 percent on the budget limitation. The intent of the commission's report was to allow some additional room for those lower spending districts to catch up with their spending. We are, saying that from looking at the analysis, 20 percent of variance from the per pupil average is probably more appropriate. There still, frankly, won't be nearly as many districts spending at the 6.5 percent budget limitation as I thought that there would be. There will be some with the way this is... amendment is adopted. The other thing is that... the next amendment concluded within in this is, if you remember that Senator Hefner took a one-year budget limitation, made it a three-year budget limitation, both Senator Hall and Senator Warner had language drafted as amendments that say that the budget limitation will stay in effect until it is changed by the Legislature. So that really, probably, is a strengthening of the lid requirement, even beyond what Senator Hefner had done on General File. Under nonfiled amendments, some things that we are talking about doing that need to be done. Many of them are primarily clarification, like B(1), clarification of the budget limitation is based on General Fund budget of expenditures as opposed to operating expenditures is a clarification of terms. Clarification of receipts from private foundation, individuals will not be counted as an other actual receipt of the school district, thus reducing state aid. We thought we did that on General File. This is a clarification

11444

March 20, 1990 -- LB 259, 1059

of what we thought we did on General File. A provision clarifying that appropriations of income tax rebate money for payment to school districts will be based on amounts certified by the tax commissioner as the total actual identifiable income tax liability of individual resident taxpayers for the second preceding tax year; the remainder of the total 20 percent income tax receipts dedicated for schools goes to the Tax Equity and Education Opportunities Fund for distribution as equalization aid. This is a request made, I think, by the Department of Revenue to make this all flow properly. There is ... number four, there is an ongoing Department of Education representative on the ongoing School Finance Review Committee. The current bill says that person will be appointed by, the Governor. The Department of Education is a constitutionally separate organization and should be able to provide their own. Item 5, B(5), this is one you may want to pay a little more attention to, because this one does deal with a little more significant change than the last ones talked about. But federal government allows a 25 percent ... when they distribute impact aid for school districts that are primarily... residents primarily residing on Indian land, they do receive additional impact aid benefits to the tune of 25 percent. The way our current bill is written, those Indian reservation students will be discriminated against, if this bill were to pass in its current form. We need to count them at a 25 percent higher rate in order for them not to be discriminated against. Number six, also an impact aid situation. Impact aid flows into school districts not in an even flow year after year. But it does flow... it does come in in large sums some years, lower sums some years. Those impact aid districts would like to be able to count that in their reserve. They don't want to spend anymore of it. This is not a lid exemption, but they would be able to put that in their reserves. Frankly, they're going to have to have that exemption, either that or send money back to the federal government, which doesn't make sense either. Number seven, is a clarification with the enrollment options program. Senator Baack just stopped walking quite... out the hallway there. Provision assuring that -the State Department of Education has authority to verify data used to implement the act. The ongoing School Finance Review Committee will be directed to harmonize LB 259 with LB 1059. Some of the very specific sorts of things will need to be addressed in that. And, finally, number ten, provisions suggested by the bill drafters, moving a necessary fall school district membership report from the School Foundation Equalization Act, repealing the statutes, setting up

11445

March 20, 1990 -- LB 611, 1059

the School Finance Review Commission, and repealing the intent sections of LB, 611 to harmonize our statutes. Most of that is clarification in nature. If you have any questions on any of it, be happy to try to answer them.

SPEAKER BARRETT: Senator Moore, please.

SENATOR MOORE: Thank you, Mr. President and members. You know, as Senator Withem outlined, this is the package of somewhat technical amendments that we will offer to this bill today. Now, obviously, as we embark on our voyage of debating probably the biggest, one of the biggest bills that we ever dealt with in the Legislature, there is going to be a lot of discussion this afternoon. And I think, as there has been a lot of what I'll call strawman, bogus complaints, criticism of this bill, I think there is going to be attempts, through these amendments and others throughout the day, to try and answer them. We're going to have amendments offered up that deal with impact aid. We may have amendments offered up that deal with special education. We may have amendments offered up that deal with some sort of minimum levy, an ongoing hold harmless, things like that that this body can discuss and see what it is that they want to do. We're even going to have one that says, point blank, that the money that school districts receive under this, that is not spent on their allowable budget growth, will go for property tax relief; we're going to say that, if that is a concern to people. I think you will find out, if you listen closely, most of those arguments against the bill, whether they be from the northeast corner, to the state chamber, to some others that have been nervous about this bill, we're going to answer them today. We're going to allow you some opportunities to... some options to how you want to answer them, nonetheless. I encourage people to listen closely and bring yourself and your district into the discussion, because we do have answers for all those questions. And I know in the last two weeks there have been bullets fired at us from all around, and we've been ducking. We have answers to those questions, because there are some reasonable concerns. There are some things, quite frankly, I think Senator Withem and I have been working on this for two years, are obvious to us, but maybe we need to spell it out a little bit clearer. Some of those things are the things that are included in AM3066. So, with that, I urge the adoption of this amendment and urge the body, as a whole, to pay some close attention today, and pay close attention to the arguments that Senator Schmit gives, and others that give, and pay even closer attention in how we answer

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those concerns, because those concerns can be answered and will be answered within our amendments.

SPEAKER BARRETT: Thank you. Senator Hall, on the Withem amendment. Senator Kristensen, please.

SENATOR KRISTENSEN: Thank you, Mr. Speaker and members. I would like to ask Senator Withem a couple of very quick questions to try to put some things into the record on his nonfiled amendments, if I could.

SPEAKER BARRETT: Senator Withem, would you respond.

SENATOR WITHEM: Yes, I would.

SENATOR KRISTENSEN: Thank you. Senator Withem, one of the points, I believe it's B(2), on your handout, talks about clarification from receipts from private foundations, individuals, et cetera. Many times schools will create their own foundations as a way to collect funds in other words gifts, so they can be tax-deductible and that it just wouldn't be a gift, if somebody left something in a will, if somebody wanted to have a fund raising drive. They wouldn't necessarily get a tax exempt donation, if they give it directly to the school, so the school builds a for... or has a foundation created. Is it your intentions that these are public, private, all sorts of foundations and gifts that could go-to a school district, those will not be counted into the need or as an actual receipt for the school district.

SENATOR WITHEM: Yes, as gifts that come in, apart from... there is no tax money been raised to pay for them, and they don't appear in the General Fund, would be excluded is my understanding.

SENATOR KRISTENSEN: Okay, and this would also include direct bequests, for example, if somebody died, gave a gift to the school district, that doesn't become a receipt and thus reduce the amount of state aid.

SENATOR WITHEM: That is correct.

SENATOR KRISTENSEN: Okay, thank you very much, Mr. Speaker, that's the questions I wanted to put onto the record for that.

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SPEAKER BARRETT: Thank you. Senator Hefner, would you care to discuss the amendment?

SENATOR HEFNER: Mr. President and members of the body, I would like to ask Senator Withem a question, if he'll yield.

SPEAKER BARRETT: Senator Withem.

SENATOR WITHEM: Yes, I would, Senator Hefner.

SENATOR HEFNER: Well, Senator Withem, I get kind of nervous when you strike my amendment, AM2385, that was the lid that went for three years. As I understood at the public hearing the lid would go on and on, but yet as I read it was only for one year. And where in this amendment do you say it will go on, and on, an on?

SENATOR WITHEM: It's item four. Let me read the amendment itself to you, is on page 2, point nine, line... on page 23, line 11, in the bill is where we changed this. It is our clear intent to, basically, you're right, it was one year, your amendment made it three years, this makes it in perpetuity. Obviously, with your amendment at three years it could have been changed by the Legislature at any time, any way. You can't bind future Legislatures. But this makes it on into perpetuity...

SENATOR HEFNER: Okay.

SENATOR WITHEM: ...as opposed to even the three year limitation that you had.

SENATOR HEFNER: Okay... Senator Withem, I'll just read this for the record then. And in line 11, strike "four" and insert "beginning with" and after "1990-91" insert "and each school year thereafter".

SENATOR WITHEM: And each school year thereafter is the operative language.

SENATOR HEFNER: Okay.

SENATOR WITHEM: Yes, actually adds to, doesn't strike your amendment, it adds to your amendment.

SENATOR HEFNER: Okay. Okay, so it really doesn't strike my

11448

amendment, is that right?

SENATOR WITHEM: It extends it.

SENATOR HEFNER: Okay, I believe in number one of the amendments to LB 1059, AM3066, you say strike the Hefner amendment, AM2385.

SENATOR WITHEM: Yeah, you have to strike it to do it that way, but the language you inserted will continue to be used.

SENATOR HEFNER: Okay, I guess that's a little confusing, but I'll take your word for it and work with you and your counsel on that.

SENATOR WITHEM: Okay.

SENATOR HEFNER: Thank you.

SPEAKER BARRETT: Senator Schmit, please.

SENATOR SCHMIT: I'll pass at this time.

SPEAKER BARRETT: Senator Hall, would you care to discuss the amendment?

SENATOR HALL: I would. Thank you, Mr. President and members. Senator Withem, would you respond to* a couple questions?

SENATOR WITHEM: Yes, I would, Senator Hall.

SENATOR HALL: Would you explain what amendments, and I apologize for not being here, but would you explain what amendments are in this amendment? What combined amendments are in this, and which ones are not?

SENATOR WITHEM: Yeah, I'd be happy to. First of all, Senator Hall, as I understood your request,...

SENATOR HALL: (Response inaudible.)

SENATOR WITHEM: ... it's 2845...

SENATOR HALL: Ron, I was unaware of the fact that we were going to consolidate all of these, and I apologize for that, I didn't know, and then I heard your introduction. It sounds like some

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of the ones that are listed here aren't in there.

SENATOR WITHEM: Yeah.

SENATOR HALL: And just for clarification purposes...

SENATOR WITHEM: Okay, the only one on the handout, the only one that is not included is AM2845, which was your amendment. The others are included. AM2847 we just adopted and, if you vote for this, you'll be adopting that one more time. But the only thing that is not on this... it's on the sheet of paper as a handout that is not included is A(1), which is your amendment, which we'll take up in the near future, I'm sure.

SENATOR-HALL: Is...AM2949 number four under heading A is also included?

SENATOR WITHEM: That is included, yes.

SENATOR HALL: Thank you.

SPEAKER BARRETT: Any other discussion? Seeing none, Senator Withem, would you like to close on the adoption of the amendment.

SENATOR WITHEM: Yes, I would. I apologize to Senator Hefner and to Senator Hall, communication 'on this have been rather frantic, as you might imagine. When we thought, because of the fact that there are 20 plus amendments filed on this, at this point, with more coming up, if we could consolidate some and save the body's time, that that would be preferable. And we, evidentially, didn't get all the communications done that we should have. If Senator Hefner has problems with what we're doing with the budget limitation, after looking at it, we can certainly address that again in the future. Same with Senator Hall, I believe he had an amendment similar to what is in here. Otherwise, I think this is ... makes the bill better, it deals with some of the clarification points that we needed to deal with, and I would urge you to adopt it.

SPEAKER BARRETT: The question before the body is the adoption of the Withem amendment to LB 1059. Those in favor please vote aye, opposed nay. Have you all voted? Record, please.

CLERK: 30 ayes, 0 nays, Mr. President, on the adoption of

11450

March 20, 1990 -- LB 931, 1059, 1241, LR 11, 322-330

Senator Withem's amendment.

SPEAKER BARRETT: The amendment is adopted. Anything for the record, Mr. Clerk?

CLERK: Mr. President, I do. Study resolutions. (Introduced LR 322-330. See pages 1464-69 of the Legislative Journal.) That will be referred to the Executive Board. Enrollment and Review reports LB 1241 and LB 931 to Select File with E & R amendments. Senator Hartnett has amendments to LR 11CA to be printed. (See pages 1469-71 of the Legislative Journal.) Mr. President, the next amendment I have to the bill is by Senator McFarland. I have a note, Senator, you wish to withdraw 2792.

SPEAKER BARRETT: Withdrawn. Withdrawn.

CLERK: Mr. President, the next amendment I have is by Senator Warner. Senator, this is your AM2872. (See Warner amendment on page 1249 of the Legislative Journal.)

SPEAKER BARRETT: The Chair recognizes Senator Warner.

SENATOR WARNER: Mr. President, members of the Legislature, this amendment is filed in order that I can understand the funding mechanism. I don't have a lot of enthusiasm about increasing...an amendment to increase a tax for a bill that I have not decided how I'm going to vote on. But I also know that this decision becomes awfully simple if the funding is not there to meet the appropriation. As I understand 1059 at the moment, the income tax would take effect until, I suppose I should... I don't know whom I'm addressing the question to, maybe Senator Moore. As I understand the bill, the income tax which would be required would not take effect until January 1, 1991.

SPEAKER BARRETT: Senator Moore.

SENATOR WARNER: I believe the sales tax, I believe, takes effect July 1 of this year. I have two problems that I need to understand. The first is, if LB 1059 does not get 33 votes on Final Reading then I assume the sales tax would not be adjusted July 1, obviously, because three months after April 9th is

11451

July 9th. And I just simply do not know what the situation is for retroactively adjusting the sales tax, which I suspect it cannot be done. I assume it rolls over into another month, but I don't know that. The bigger problem is, as I understand it, based on the fiscal note there is about a $77 million gap, or thereabouts, for the first year funding. By increasing the income tax to be effective retroactively to January 1, that gap is filled and, as a matter of fact, as I believe it would probably generate the first year 23 to 25 million, somewhere in there, more than is needed. However, you could also have the effective date of the sales tax drop back to October 1, and then it would be balanced out, as far as the two are concerned, sources of revenue. There is no problem, as I read the fiscal note, after the first year, the revenue that is projected to be raised and the anticipated expenditure are fairly close the second year. The third year that doesn't come out quite as well, but.... So, the motion that I have filed is to strike the Section 14 that was in the Standing Committee amendment. As the bill was introduced, I believe, it was... the sales and income tax was to be increased retroactive to January 1st. And I believe by striking Section 14 it returns, of the committee amendment, it returns the bill to its original form with the income tax effective this year as retroactively, rather than waiting until January 1. And, as I understand, without additional revenue from some source the funding for the bill would be 77 or 75 to 77 million short- The purpose of the amendment is to fill that gap. And,* if it's not necessary, why that I'm very comfortable to learn. So I guess, Senator Moore, if you could address that issue for me, or whoever is prepared to, I'd appreciate it.

SPEAKER BARRETT: Senator Moore, you have a minute left, and yours is the next light, so go ahead and answer the question.

SENATOR MOORE: Yes, Senator Warner, I will attempt to answer your question. The first question about the effective date of the sales tax increase, quite frankly, I never thought of it until you mentioned it -like that. So, as usual, given your tenure in the Legislature you notice those things. Certainly not our intent to do that, but if that's a...I guess, quite frankly, Senator Warner, we need to look at how that works. Now, your second concern over the funding, now this bill, when it was drafted in December and early January, it was drafted with effective tax increases, sales tax July 1, income tax January 1. And, at that time, like the Governor, in her State

11452

of the State address, there was a certain pool of funds over and above... over and above what would already be spent in all likelihood. Now, obviously, as Senator Warner and myself are very well aware of, at the end of February the Revenue Forecasting Board came in and decreased those projections by a substantial amount, 77 million dollars. As far as an answer to Senator Warner's concern, I'm going to validate his concern that given what happened in the Forecasting Board, the present tax rates in the bill do not fund the bill its full impact in the first year. But I guess I would prefer instead of implementing a retroactive income tax increase to July 1, therefore having a double withholding of income tax in July 1 of '90, 1 prefer to fund the bill at a lesser level, phase the measure in, if it so be, if we're 30 to 40 million short, which I think when it's all said and done is what I project it's going to be, and I would prefer that method as opposed to Senator Warner's method of addressing the same problem of bumping up the income tax increase. You know the one thing that Senator Warner and I do not always agree on our priori ties on how we spend money, but we usually agree on the amount of money there is to spend, and we concur once again at this time. But we disagree on how to effectively deal with it in this bill. My preference would be to, if need be, phase the bill in at a somewhat smaller amount this first year, and then go into its full impact of 220 million, whatever it is. Senator Warner says, if you're going to fund the bill it's full impact the first year, you just correct... you would need to bump up that income tax increase to January 1. Now, that generates more than you need. But the problem is you cannot ... whereas the sales tax you can basically raise that in any particular quarter of the calendar year, the income tax is primarily done at the first of each year. And it would.... If you could, I mean if we could bump it up until October, I would support that. But, really, mechanically it does not work that way. And if we're bumping it all the way up to January 1, 1990, Senator Warner is correct, you would raise more money than you need then, and you could, you know,....One way to deal with that would be to delay the sales tax increase until October. But, once again, it would be my preference to keep the tax increases in at the time that they are, the sales tax increase effective July 1, the income tax increase effective January 1. Now, by doing that, quite obviously, there is a sales tax increase in effect July 1, so I don't think it would be a fair criticism to accuse anyone or anybody trying to skirt the issue politically, we are talking about a tax increase. But I think the simplest and most common sense way to do it would be

11453

to have... fund the bill at a lesser amount than to have -that income tax increase go into effect January 1 of this year, therefore generating more money than necessary to fund the bill for the first year. So I would oppose the Warner amendment. And I think... I've tried to answer your question, Senator Warner. If I haven't, I'm sure you'll ask them... ask them to me again.

SPEAKER BARRETT: Thank you. Before recognizing Senator Withem for further discussion, the Chair is pleased to announce that Senator Dierks has a special guest under our north balcony. Mr. Mike Hannon from O'Neill, Nebraska. Mr. Hannon, would you please stand and be recognized. Thank you, we're glad to have you. Senator Withem, please, followed by' Senators Warner and Hall.

SENATOR WITHEM: Yes, Mr. President, members of the body, the Warner amendment, as I understand it, is the show card amendment, I guess, on what we do about the fact that the revenue projections, on which this bill was originally based, have been revised in a negative sense. And there is not the money here to fund this, in its current form, in its first year. Senator Moore has spoken on his preferences on the bill. And his preference, as I understand it, is to ... his preferences are ... his preference is to allow the bill to be phased in in a two-year basis, and not bring the income tax into effect January 1 of 1990. To do January 1 of 1990 would, in fact, result in double withholding of the income tax increase in the first year. A number of people, I think, think that that is a problem. Not doing this, though, would result in the effects of the property tax decrease not being felt in their totality until the second year, and you would not have the dramatic type of decrease that you would have ... that you would have otherwise. So, that's your choice, I guess, as a Legislature. And I think it's one where I'm probably going to go along with the Warner amendment, but that's a personal preference. If your preference is to see it all go into effect in one year, then you vote for the Warner amendment and it goes on, and you'll have double withholding the first year. One the other hand, if you're comfortable letting the effects of the property tax reductions on individuals come in a two-step phase as opposed to a single phase, then you ought to vote against the Warner amendment. if the Warner amendment doesn't go on, we'll make adjustments in the A bill to appropriate the sums of money that will be available, it will be in a two-year process. Senator Moore has

11454

given you one scenario, Senator Warner has given you the other one. I think it's a... it's not the major deal that it's been made out to be. I mean 77 million dollars, yes, that is a major deal, but it can be addressed in one of two ways, either in a two-year phase in with the property tax and the state aid benefits, or by putting the operative date of the income tax back one year. And it's a choice you'll have to make. Whatever choice is made, we'll go on from there.

SPEAKER BARRETT: Thank you. Before recognizing Senator Warner, I'm pleased to announce that the entire Lincoln delegation has 15 Boy Scouts from Cornhusker Council here in Lincoln with us this morning, in the south balcony. They are working on their citizenship merit badge. Their counselor is Rod Armstrong, of Legislative Research. Would you folks please wave and be recognized by the Legislature. Thank you. We're very happy to have you with us. Thank you. Senator Warner, please, followed by Senator Hall. Senator Warner.

SENATOR WARNER: Well, again, I guess I maybe would have another question from Senator Moore so I can understand the issue, if.... I would agree that phasing in is one option. What I'm not sure if I understand is how the equalization aid formula would work with a phase in on the income tax, because, as I understood the equalization aid, one of the measurements for ability to pay is the amount of the income tax that is raised locally, that becomes a calculation on equalization aid. If there is no income tax locally, then in effect that returns to our current system of distribution of state aid by using property tax levy alone, or amount of property tax raised as the trigger as to how much equalization aid one receives. And so I guess my question is, if you have, and I assume you have, in the concept of phasing over two years, if you have... if you could tell me how the equalization, as a practical matter, could work without any income tax as part of the accountable receipts to the local school district.

SPEAKER BARRETT: Senator Hall. I'm sorry, Senator Moore.

SENATOR MOORE: I'll answer Senator Warner's question when my time comes up, unless he...

SPEAKER BARRETT: Thank you. Senator Hall.

SENATOR HALL: Thank you, Mr. President, members. I rise in

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support of Senator Warner's amendment to 1059. The issue is one of do we fund it at a level that we feel is appropriate, or do we, as Senator Moore is going to explain on his time, phase in the proposal. I have no problem with the increase that Senator Warner would put in place with his amendment and the income tax to take effect for one-half of the year, which would basically double up the withholding, but raise the money so that the program that I feel is very important that we have spent two years on, or that the commission has spent two years on, and this finally coming to fruition here on the floor. If we're going to do it, it is not something that I have, to date, thought about phasing in. I think that strictly based on some of the things that we're going to be faced in the next six to eight months, with regard to court action and the case that very likely will go before the Supreme Court dealing with our school financing system, that the Warner amendment, which would let the implementation of LB 1059 take effect and put it in full force January 1 of 1991, is a very' good amendment, and one that all it basically does, I think, is clean up provisions that to date, because of shortfalls in revenue, for no other reason than that we need to enact this amendment to the bill. I would urge your support.

SPEAKER BARRETT: Thank you. Senator Moore, followed by Senator Hefner.

SENATOR MOORE: Yes, Mr. President.- In response to Senator Warner's question, I thought I had the answer. I want to confirm a little bit. The way the equalization formula works, it's based off income data of previous years. So, therefore, what you would do, if you do not pass the Warner amendment, you would amend the A bill down, whatever amount would be necessary, 70 million dollars, 50 million dollars, you know, 70 million dollars if we don't... if... truly in the fund itself would be 70 million dollars. If there is some money there, it would be something less than that. But, if you would do that, let's say you do that, you amend the A bill down by 70 million dollars, you decrease the amount of pool in the equaliza... the money available in the equalization pool, you know, by...down to about 200 million dollars is what it amounts to. Two hundred and sixty is what's in there now, 190 million, whatever it is. So, you'd have less amount distributed on the equalization formula. The formula, no matter where you have the income tax rate go into effect, the formula is based off of income data of past years. So that income... I mean it's not like the formula will

11456

work the same, regardless of when that income tax rate goes-into effect. Now, yes, if there is less money received from a rebate in a year, which that doesn't really make any difference, there would be... the first year property taxes would be higher than they would be in the second year, thus the phase in. And so if Senator ... have I answered your question, Senator Warner, that the formula will work the same way, because that formula is based on income tax data from, I believe, I believe it's '88-89. If I'm incorrect on that I will correct it later.

SPEAKER BARRETT: Senator Hefner.

SENATOR HEFNER: Mr. President and members of the body, I rise to oppose this amendment. I think it would be unfair to the citizens of Nebraska to go back a half a year and pick up the extra income tax. It's going to cause a terrific hardship on some of our wage earners and also on some of our other people, because they have adjusted the rate of their income tax now in their budgets, and here we're changing it in the middle of the year. I see no reason to rush into this. If this bill is a good bill, I think the proper time to levy that increase in the income tax would be January 1, 19-91. Then we could start withholding it at the correct rate.' Also, if there is under withholding, then this taxpayer is going to have to make it up at the end of the year, there again causing a terrific hardship on some of our families in Nebraska. So, I would urge you to vote against the Warner amendment and go with it the way it's in the bill.

SPEAKER BARRETT: Thank you, sir. No other lights on. Senator Warner, would you like to close on the adoption of your amendment.

SENATOR WARNER: All right; Mr. President, members of the Legislature, the argument against this, as I understand it, is primarily that you'd have a doubling of the withholding tax for the balance of the year, for six months. And I certainly would imagine that is probably true. There would be another option, if you want to fully fund the bill the first year, I suspect it could be used without a double withholding. You could have a surtax added at the end, which would become either a smaller refund, or more likely it would be additional tax to pay on April 15th, or whatever due date of a particular state income tax might be. That way you would avoid at least the doubling the withholding, but you would not, obviously, reduce the amount

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of tax, income tax that people pay. It would just be a matter of when they paid it. My interest in providing this is two things. One is that I certainly agree, that this kind of legislation can be phased in over two years. But, if .... And that's not a problem, if you want to disregard any assumption that there will be visible property tax reduction, if any, because, obviously, over two years, with the growth that would occur, that would further dilute the possibility of any visible property tax reduction to the extent that that might occur. But it does seem to me that conceptually, at least, it makes a lot of sense to ... and it's a position I've always felt, it makes a lot of sense that, if you're going to have a major shift from property to sales and income tax, that the likelihood of the favorable impact on the property taxpayers is going to be much more visible, if it's all done at one time rather than phased in. Phased in does not relieve, in the long-run, any impact whatsoever as far as increase in sales or income tax, or, for that matter, the reduction in property tax reliance, it just makes it more difficult to identify to the average citizen when it's spread over two years. Then we still have the additional problem, which I assume someone ... maybe it's not a problem, of whether or not, if we have less than 33 votes, what happens to the sales tax increase. I simply don't know. And it may have no impact. Obviously, a very easy solution to both of those problems is do the income tax retroactively, do it with a surtax, if we do not do it this way. Have the property ... have the sales tax adjusted October 1, then I believe that the bill would be fully funded the first year, with a very minimal additional funds beyond what the legislation requires. But, in any event, the issue, as I see it, is really very simple, whether you want to fully fund the bill, initially, so that all of the benefits as far-as property tax issue is realized at one time, or whether you do not want to do that.

SPEAKER BARRETT: Thank you. You've heard the closing. The question is the adoption of the Warner amendment to LB 1059. All in favor vote aye, opposed nay. Have you all voted? Have you all voted? Record, Mr. Clerk. Record vote has been requested.

CLERK: (Record vote read. See pages 1471-72 of the Legislative Journal.) 18 ayes, 22 nays, Mr. President.

SPEAKER BARRETT: The motion fails. The Chair is pleased to note that Senator Dennis Byars has guests under our south

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balcony. Senator Byars' in-laws are with us from Beatrice, Mr. and Mrs. Jerry Busboom. Would you folks please stand and be recognized. Under the north. balcony. Thank you. We're glad to have you. And also Senator Coordsen is announcing the presence of 50 fourth graders from Crete Public Schools in Crete, Nebraska with their teachers, in the south balcony. Would you folks please wave and be recognized by the Legislature. Thank you. We're glad you could be with us this morning. Mr. Clerk, the next amendment, please.

CLERK: Mr. President, Senator McFarland would move to amend. Senator, I have AM2897 in front of me. (See page 1287 of the Legislative Journal.)

SPEAKER BARRETT: Senator McFarland.

SENATOR McFARLAND: Thank you, Mr. Speaker. This amendment is relatively simple. It is designed to adjust the rates on the state income tax so that in LB 1059 the rates on the lower income tax brackets and the middle income tax brackets will be slightly lower and for those persons in the brackets over 50,000 ... over 54,000 for a single person, over 90,000 for a married couple filing jointly, or over 80,000 for a head of household will have their tax rate increased under 1059. It is, if you look at the chart that I have distributed, the amendment, 2897, is the tax rate in the... that's darkened in, it's the darkened bar and if you compare it to LB 1059 in its present form, LB 1059 is the kind of... the lighter colored one right next to it. It shows the rates for all the brackets with the little dots in it. And you can see that with the diagonal dots, LB 1059 in its present form. And you can see, for example, the maximum income subject to tax rate for the single taxpayer in the zero to 1800 bracket the rate currently would be approximately, under LB 1059, it would be approximately 2.2 percent as I can see it, but then this would lower that rate to approximately 2 percent. Yeah, it would be 2.37 percent under 1059 in the first column. This amendment would lower it to 2.18 for a single family. And, for example, in the second bracket, the $16,800 for a single person, it would be 3.63, this would lower it to 3.52. However, in the upper bracket, under 1059 presently it would be 6.92 percent. The upper bracket in this amendment would be 7.92 percent. It would, raise it 1 percentage point. It's a fairly simple amendment and the object, of course, is to correct the inequities that were... or at least address the inequities that occurred when we passed

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LB 773 four years ago. one of the complaints that I had about LB 773 at that time was that the adjustment in the state income tax rate burdened the middle. income people at the time that it gave the upper tax bracket a tax relief. And I know, if you remember that debate, Senator Johnson had created, I think, five separate brackets within the bill, however, at the time, he and the Revenue Committee had the upper bracket for a married filing jointly from 45 to 90, they had that upper bracket the rate equivalent to the persons over $90,000. There was no progressivity in that rate after the $45,000 for a couple filing jointly was reached. My understanding that the reason he kept them as separate brackets and he kept the over 90,000 as a separate bracket was, in fact, at some future date to go in and do the what they call the super bracket, put in the higher rate for the higher income people. This amendment would, in fact, do that and would have the advantage of lowering the rate slightly in 1059 for the middle income people and lower income people. I think it is a way to try to address some of the complaints that people have had about these changes in the state income tax system that were made in 1987. 1 think it is a fair way to do it. There may be some who say, well, we don't want to ... we don't want to change this bill because we could jeopardize its passage. I don't think this will jeopardize its passage and I think the bill, if it passes, is going to be vetoed anyway. So the fact that we changed this, it's going to have to be...I think the only way that LB 1059 is going to be enacted into law is with a passage, a veto and an override of that veto. So as far as any concerns in the Governor's office, I don't think we have to really be concerned about it as far as how the tax rates are shifted. And I think this is a reasonable way to do it. I think it is the only decent thing to do. It is only fair and right to try to address some of the problems that were created when the state income tax system was passed in LB 773, and I would urge you to adopt the amendment.

SPEAKER BARRETT: Thank you. Discussion of the McFarland amendment. Senator Withem, followed by Senators Hall and Hefner.

SENATOR WITHEM: Yes, Mr. President and members of the body, I would stand in opposition to the McFarland amendment. It's kind of interesting on this bill that the type of criticism that it is receiving. Some people say it does too much. Some people say it does too little. Many people are looking for excuses to oppose the bill under any circumstance say both, it does too

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much and it does too little. The bill does not purport to right all of the wrongs that exist in our tax system. Senator McFarland is addressing what he considers to be a major fault in our income tax system. We, when we proposed this bill, as a commission, and we, as co-sponsors of LB 1059, have had to limit ourselves to the degree of wrongs that we attempt to address with this bill. We are not doing lots of different things with our tax system as it exists. I guess I would be honest that I have heard the McFarland amendment offered on enough different bills, enough different times, it's maybe beginning to sink in a little bit to me and I'm not as adamantly opposed to what he is trying to do as I may have been back when I voted for 773. Part of that, I guess, indicates to me that maybe some of the people that supported 773, not inside the body but outside the body, maybe were more interested in individual tax impact than they really were in attracting other industry into our state. But I just don't think we ought to attempt to correct all of the problems of the world on this particular bill. There are some other things that are listed here that on their own I may be giving some consideration to them, but I just don't think we ought to be trying to use this bill to attempt to correct all of the wrongs within our society. I indicated that Senator McFarland has adopted... tried to offer this amendment any number of times before. I think on the motion to adjourn sine die he offered this as an amendment last time around also. So I think the arguments are very similar to what they have been before and I'm just not going to support it on-this particular bill at this time.

SPEAKER BARRETT: Senator Hall, please.

SENATOR HALL: Thank you, Mr. President, and members, I rise in support of Senator McFarland's amendment and, like Senator Withem, I am a co-sponsor of the bill. But I disagree with Senator Withem's logic with regard to whether or not the McFarland amendment needs to be a part of this measure because if you look at what 1059 does, it clearly is not something that even purports to right all. the wrongs but it does deal with the issue of school finance and school equalization and state aid with regard to the funding of those provisions. And, as a part of that, in order to right that wrong, we use income tax as a way to increase those monies that we send to the local school districts. It only makes sense to me that if we feel that we need to correct the wrong that we have in our school finance system that I clearly believe we do, when we use that income tax

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system to achieve those ends, then it makes good sense for me to say, that income tax system ought to be the fairest income tax system that we can possibly have. And when we enacted LB 773 1 supported, I think on every single one of-those bills, the McFarland amendment that he has attempted over the years and I applaud him for it and there are times that I have offered the amendment myself, because, ladies and gentlemen, our current income tax system is not fair. It is not fair for Tim Hall and his wife, who last year in 1989 paid in the highest tax bracket....I have three kids and live in a modest home, but yet because my income last year, which was the best it has been in a long time, I'm in the highest income tax bracket in the state. I am in the highest income tax bracket, I'm in there with any number of robber barons that are in the Omaha area, any number of the wealthiest men and women in this state, any number of the largest landowners, the corporate executives, the richest of the rich and I pay the same rate. Ladies and gentlemen, that is not fair. That is not fair to have an income tax system that stops its progressivity at the point in which you have someone who is at a modest income, pays the same rate as someone who has an unlimited income and in some instances that is the case. In this instance, with the McFarland amendment, what you do is you do provide some progressivity into our system. You do correct an error. You correct a mistake. You do right or wrong and that wrong, I think, is just as much a wrong as our school finance mechanism has been in the past. It is just as important to make this change a part of 1059, I would even argue maybe more so at this point in time, because if we feel that it's appropriate to use the income tax system as a funding mechanism to fuel this change of school finance, then I think it's only proper and right to make sure that the funding mechanism, the choice with regard to the income tax system be one that is as fair as possible. Senator McFarland's amendment, I think, brings something to 1059 that to date it does not have and that is an income tax system that reaches out and touches those who can best afford to pay. One of the biggest arguments in support of 1059 is that property is not a sign of wealth. Property is not a sign of wealth. Property is not a sign of wealth. Well, what is a sign of wealth, ladies and gentlemen? Income. Income is a sign of wealth and we only recognize income in this state to the point of about $45,000...

SPEAKER BARRETT: One minute.

SENATOR HALL: ...depending on your if you're married or not and

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if you file jointly or not. And then income stops. It no longer is a factor in our income tax system. I say that it should be a factor at a. higher level. I think Senator McFarland's amendment is a fair one. It does not gouge the very rich. It does not put in five or six additional brackets. it changes the top bracket and it changes it in a very fair and very progressive way that will not drive any of those robber barons from the state. You won't see CEOs packing up because of a slight change in the fifth bracket. This is just as important because it is a sign of wealth. Income is a sign of wealth. We need to recognize that. Just as property is not a sign of wealth, income is. Senator McFarland's amendment recognizes that and for those who can afford to pay, we should adopt it.

SPEAKER BARRETT: Thank you. Senator Hefner, followed by

Senators McFarland and Wesely.

SENATOR HEFNER: Mr. President and members of the body, I rise to oppose the McFarland amendment. I don't know how many times this pony has been around the track but it's quite a number. I'm keeping score now and it will probably be around again. But, Senator McFarland, I would suggest that this is a school finance bill and if you want to introduce an income tax bill, I would suggest introduce a bill, have a public hearing on it and let the committee go from there, and I believe you have done that before too, so that wouldn't be new to you. But when the Revenue Committee worked on LB 773 we spent long hours on it and we didn't have a perfect bill. We realized that and we came back I think two more times to fine-tune it. But I think the way our tax brackets are now, it's fair and equitable to everybody. We also need to remember that we have five states in our nation that do not have state income tax and two of those, I believe, two or three border our own State of Nebraska and I'm very familiar to South Dakota. South Dakota does not have a state income tax and here in Nebraska we're trying to raise the top bracket. I certainly don't think it's right and especially not at this time. Let's have a public hearing on it and get both the proponents and the opponents on it. But this is a school finance bill. If we're going to approve this, let's use the same tax rates and the same way on the sales tax, let's leave the sales and income tax the way it is now and go forward. If we can support this bill, go forward, and if we can't, well, then we'll have to vote against it. But I don't think we should be changing the tax structure at this time.. Thank you.

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SPEAKER BARRETT: Thank you. Senator McFarland, please.

SENATOR McFARLAND: Thank you. Senator Robak just came to me with an interesting comment. She said that the farmers in her district are telling her that if they make the income, they're willing to pay the tax. And that's the whole nature of the* tax system that it's supposed to be a progressive rate in which the ones who can most afford it have the obligation to pay a higher proportionate share of the tax. I don't think it is fair to have someone, as Senator Hall described, someone who is in the income bracket with a family of making say 45, $46,000 end up paying the same tax rate as someone who is making in the $500,000 income bracket. That's not the nature of our entire tax system. That's not the nature of the* federal tax system. That's not the nature ... has not been the nature of our state income tax system prior to LB 773's passage. What I am ... what I am trying to do is correct a problem and this is not just a school finance bill. If it were just a school finance bill, we wouldn't...we wouldn't have the opposition to it. What it really is is a significant tax adjustment. In order to change the school ... the school finance system, adjustments had to be made in the income tax and the sales tax bracket. That's why I have been opposed to this, because while it does have a good goal of increasing support through state aid and also a good goal of trying to reduce property taxes, it, unfortunately, has a negative consequence of significantly increasing income tax to people in bur state and also significantly increasing the sales tax. It seems to me it is appropriate to address it here. if the opposition is coming on the income tax increase and on the sales tax increase, we ought to be aware of it and we ought to be trying to improve the bill. I realize Senator Withem's frustration when he says that people are trying to find an excuse to vote against the bill because I suspect that of those 34 people who voted for it on General File there are a number of them that are just waiting for an excuse to justify a no vote, particularly since the Governor's office has come out to oppose it. But I, on the other hand, am not looking for an excuse to vote against the bill. I voted against it on General File. What I am looking for is an excuse to vote for the bill because I agreed with some of its concepts. But I cannot, in good conscience, vote in favor of a bill that perpetuates an injustice in the state income tax system that this Legislature put into effect in 1987. It is time to correct the injustice. It is time to give middle income taxpayers some tax relief and it is time to have the upper bracket taxpayer, the wealthy and

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the affluent pay their proportionate share of the tax burden, and that is why I offer this amendment at this time.

SPEAKER BARRETT: Senator Wesely.

SENATOR WESELY: Thank you, Mr. Speaker and members, I, too, would rise in support of the McFarland amendment. I share the concerns that Senator Hall and Senator McFarland have both already expressed. As you know, I have raised many issues over the past few years about the income tax adjustment, about the fact that it was, in fact, a significant increase in taxes that was being denied by the Governor. We finally found the truth eventually and then this Legislature did make some adjustment in that. Nevertheless, it's still not as progressive a tax system as it should be. It still provides for those of the wealthiest among us the tax relief that the Governor had originally intended. It still provides for a tax rate increase for those who are the lower income working people of this state. The middle income people that make up the bulk of this state are paying more taxes now than they were in the past. The proposal by Senator McFarland helps us to try and change that. And I think it's an appropriate amendment. I understand Senator Withem's concern. I understand why complicating the bill any more than it's already complicated would concern those that support the bill and I can appreciate that. But it is a tax increase. It's a sales tax increase. It is an income tax increase. And if we were on our own talking about an income tax increase apart from any of the rest of the bill, if before us was the question of raising the income taxes in this state to pay for whatever purpose, I think legitimately we would be talking about the system itself, progressivity of it, the fairness of it. And so for us now to raise this issue in light of the much broader proposal that's encased in LB 1059 is still an appropriate question. I think exactly, as Senator McFarland has, my big concern with the income tax changes has been...it's lack of recognition of the problems that have been brought about by that change, the feelings among the vast bulk of Nebraskans that it was an unfair change in the tax system. They're feeling that they were misled and had been told one thing and resulted in another thing. All of these things come back to us as we discuss this measure here in 1990 as we looked at the issue in 1987. Three years have passed but I think the lesson still has not been learned by a lot of people that Nebraskans didn't like what happened in 1987. They still resent what happened in 1987 and this change will help to, in some ways, deal with that

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problem. I think, in fact, that it will strengthen the-bill because we'll recognize once again ability to pay and that those that have had the highest incomes in the state and the different breaks they have received, that we're not treated with the fairness and equity that we would like to see all people treated with, that we have those incomes of modest means that are now, of course, paying that higher income tax that feel they want to see some relief and so this proposal I think is exactly the heart of the issue, exactly the heart of the concerns some of us have with LB 1059. And if we could, in fact, make this adjustment, it would alleviate a lot of the concerns of not only ourselves but those people we represent, those citizens across the state that have expressed concern about the fairness and equity of LB 1059. This would, in fact, make it clear and send that signal back to the citizens of the state that this bill is, in fact, trying to bring equity and fairness to the tax system, trying to correct flaws in the system that have been in place now for three years, trying to recognize that the average income individual out there needs some attention to their concerns and that's what this amendment attempts to do. So I very much would support the amendment and urge others to support it as well.

SPEAKER BARRETT: Senator McFarland.

SENATOR McFARLAND: If I'm the last light, I will just close now.

SPEAKER BARRETT: We have one other light, do you want me to proceed?

SENATOR McFARLAND: Okay, I will just pass then.

SPEAKER BARRETT: Thank you. Senator Nelson, would you care to discuss the McFarland amendment?

SENATOR NELSON: Yes, Mr. Speaker. I know it's interesting when we compare with other states and the top personal income tax. I certainly...and I have an amendment myself coming down the line, too. But how much of this can we put on LB, 1059? But I think this is important. This is something else that I happen to have right quick that I can put my fingers on. When people start comparing our tax rate and our tax rate with other states, as you know, Colorado is a straight 5 percent tax on the federal taxable income, with no exemptions for personal exemption. So look where that is. Iowa's top bracket, over 45,000, is

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9.98 percent; Kansas, over 35 percent is $1,418 plus 5.3 percent over 35. We're very low. Minnesota the one where you really get a seven, eight, nine hundred dollar boost in income when you move from Minnesota; over $19,000, it is $1,140 tax plus 8 percent over all of the 19,000. Missouri, again, over 9,000 is the bracket and from there on 306 percent over that excess,-; Wisconsin, 7 percent. So I think that we do need to address that top bracket. We simply are giving away and not being able to do justification to some of those in the lower tax bracket simply because when we enacted LB 773 that if we didn't give all of the tax advantages to the very few, which I remember something like those over 90,000 like about 4 percent of the people or less than that, we were not doing ... not being ... doing justice to them. I think this is time to start addressing it. Just compare your rates with other states and we are very favorable if we would raise the upper bracket.

SPEAKER BARRETT: Senator McFarland, you are entitled to closure.

SENATOR McFARLAND: Thank you, Mr. Speaker. Just for purposes of clarification, this amendment that would adjust the rates according to the solid or blackened in portion of the graph and it would decrease it for the lower three brackets under 1059. The fourth bracket would be the same as it is presently in 1059 but the upper bracket would be increased by 1 percent. I should point out too that these calculations were made to generate the same amount of revenue as would be generated under 1059 with its present rate structure. So these adjustments where you lower the rate for the lower income and the middle income people and then increase it for the very wealthy people would result in generating the same amount of revenue as would be generated under 1059 with the present rate structure. And it's true that, as Senator Hefner said, this horse has been around the track for a number of times and it will be as long as I'm here and as long as I'm a citizen of this state I'm going to make the same argument and I'm going to make it over and over again because I believe that we need tax fairness for middle class people. The system we have in Nebraska is a system in which the middle income people bear the tax burden while the very wealthy people do not pay their proportionate share that they are... that they have ... are certainly sufficiently ... have sufficient income to pay- It's an argument that has been made over and over again and it is somewhat surprising that no one in this Legislature, I shouldn't say no one, that the Legislature in general has not

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heard that message being communicated. Middle income people in this state are outraged and are angry about the tax changes that were made in LB 773. They are still not satisfied and I still get calls and I still get people who meet me on the street and say, you are exactly right, I have... I am a middle income person, I am a middle class person and my taxes have went up and they went up for the past four years and yet the higher income bracket, the-corporate executives, are getting a break. And so it's an argument that I will continue to make for as long as I am around and as long as I am here in the state. Frankly, I think that this Legislature should be embarrassed and ashamed of the tax rates that were implemented under 773. That was an egregious mistake, in my view, it was unconscionable to have a tax structure like that and have the wealthy corporate executives get a tax relief package at the time that the majority of the citizens in our state, middle income people, were getting a tax increase. This is a bill or an amendment to try to address that problem as it...as it is going to be perpetuated in 1059. 1 don't think we need to perpetuate that injustice by just saying that this is a school finance bill, it has nothing to do with taxes. It has everything to do with taxes because it perpetuates an unjust system, an unfair system. Unless we move to correct it, I don't see how anyone can support this bill. For that reason, I offer the amendment. I urge everyone to vote for it and I urge you to consider this amendment as a matter...

SPEAKER BARRETT: One minute.

SENATOR McFARLAND: ...Of fairness. Don't consider it as whether the certain Chamber of Commerce is advance...is in back of it or supporting it because they're not. The Chambers are not supporting this kind of thing. Don't consider supporting it because maybe some kind of special organization that's an educational organization is interested. I don't know that they are. I don't have any particular special interest group supporting this amendment. What I do have is a number or numerous people ...

SPEAKER BARRETT: Thirty seconds.

SENATOR McFARLAND: ... middle income people that feel that the state income tax system was changed unfairly in 1987, they would like to see that injustice corrected. This amendment will address that problem and I urge you to vote for it. Thank you.

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SPEAKER BARRETT: Thank you. The question is the adoption of the McFarland amendment to LB 1059. All in favor vote aye, opposed nay.

SENATOR McFARLAND: (Microphone not on) ... house and a roll call vote. Senator Hall mentioned that.

SPEAKER BARRETT: Shall the house go under call? Those in favor vote aye, opposed nay. Record.

ASSISTANT CLERK: 17 ayes, 2 nays to go under call, Mr. President.

SPEAKER BARRETT: The house is under call. Members; please record your presence. Those outside the Legislative Chamber please return and record your presence. The house is under call. While we're waiting, Senator Jacklyn Smith is announcing the presence of a guest under our north balcony, Joni Gustafson from Hastings. Joni, would you please stand and be welcomed. Thank you. We're pleased to have you with us. Senator Abboud, Senator Kristensen. Senator Hall, would you check in, please. Senator Schimek, would you check in, please. Senator Landis, please. Senator Lindsay. Senator Moore, the house is under call. Senators Chambers and Bernard-Stevens, the house is under call. Senators Goodrich and Schmit, please report to the Chamber. Senators Chambers, Bernard-Stevens, Schmit and Moore, the house is under call. Senator Schmit, would you check in, please. Senator McFarland, may we proceed.

SENATOR McFARLAND: Who do we have absent, Mr. Speaker?

SPEAKER BARRETT: Senators Chambers, Bernard-Stevens and Moore. They are not in their offices.

SENATOR McFARLAND: We can just go ahead and proceed then. Thank you.

SPEAKER BARRETT: Thank you. A roll call has been requested. The question again, the adoption of the McFarland amendment to LB 1059. Mr. Clerk.

CLERK: (Roll call vote taken. See page 1472 of the Legislative Journal.) 19 ayes, 21 nays, Mr. President.

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SPEAKER BARRETT: The motion fails. Anything for the record, Mr. Clerk?

CLERK: Not at this time, Mr. President.

SPEAKER BARRETT: The next amendment, please.

CLERK: Mr. President, Senator McFarland would move to amend.

SPEAKER BARRETT: The call is raised.

SENATOR McFARLAND: Mr. Clerk, could we just pass over that amendment for the time being?

SPEAKER BARRETT: The next amendment, please.

CLERK: Mr. President, the next amendment to the bill is by Senator Smith. Senator Smith's amendment is on page 1303 of the Journal.

PRESIDENT NICHOL PRESIDING

PRESIDENT: Senator Smith, please.

SENATOR SMITH: Thank you, Mr. President. And may I ask, is this amendment 2952? May I ask the Clerk is this is 2952?

PRESIDENT: Just a moment, please.

CLERK: I'm sorry, Senator, what did you need?

SENATOR SMITH: Excuse me, is this amendment 2952?

CLERK: AM2952, yes.

SENATOR SMITH: Right. Okay, thank you. All right, you will remember this amendment, folks, by the fact that it was introduced the other day by Senator Haberman and what it simply does is ask that you reconsider the concept that he presented to us when he asked us to keep the sales tax rates on motor vehicles at 4 percent. I voted with him the other day and I agree with him totally in his argument that there is an increase here that we're talking about which is going to go to another fund and this is an education bill. So, for that reason, I reoffer this amendment,. hoping that you will reconsider your

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vote from the other day and retain the 4 percent tax on- the sales of motor vehicles. And the way we have drafted the amendment, in case Senator Nelson is interested, we looked in the statute, Senator Nelson, and we did take the language which is used there to describe motor vehicles, so that we include all of that classification of those that are taxed, with the money going to the Highway Trust Fund. It's that simple. And I don't... I, you know, I hope there will be some people that might want to discuss this, but I just feel very strongly that he was correct in what he was saying to us the other day, that this is an education bill and this is one little break that we can give to everyone in the State of Nebraska if we retain the 4 percent tax on motor vehicles. Thank you.

PRESIDENT: Thank you. Senator Haberman, please, followed by Senator Chambers and Senator Schmit.

SENATOR HABERMAN: Mr. President and members of the body, I would like to commend Senator Smith for bringing this issue up one more time, as if you examine the issue on the basis of what LB 1059 is all about, the increase in the tax on motor vehicles doesn't fit. Now I will again repeat that there isn't anyone here who needs highway funds more than I do. However, I would like to be fair to the citizens of the State of Nebraska and if we're going to raise the sales tax for school financing, then let's raise the sales tax for school financing. Now I know that Senator Warner is very, very supportive of the Highway Trust Fund and I commend him for that. However, Senator Warner is a statesman, he has always been fair. He has always been honest and I'm sure that if he looks within his heart, he will see that in this case, that in this particular instance this sales tax should not be raised on motor vehicles on a school bill. Now we have an Attorney General's Opinion that says this can be taken out of the bill and be constitutional. Now we have heard people stand up here and say that we have to raise unemployment fees, we should lower the income tax, we should help the needy, we should help those that are hurting for funds and all of those folks and the majority of those folks need automobiles to go to and from work, to go to and from the doctor's office, to go to and from school. Many of them and many people in the State of Nebraska have two automobiles. The automobile business in the State of Nebraska is one of the biggest there is. There was an article in the paper yesterday about Ford finally outselling Chevy. Every time we purchase a vehicle we have to pay the sales tax, so this 1 percent sales tax that Senator Smith is

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intending to take out of the bill will not hurt the financing of 1059 because the money is not going into 1059. We have a wonderful highway program going on at the present time. We have given multimillion dollars in the past few years to the highway program and it's going on full blast. So I firmly believe...

PRESIDENT: One minute.

SENATOR HABERMAN: ... that the figures that this boils down to, which I think is 15 million the first year, and 18 million the second year, the highway fund could, in fact, survive. We could build the highways we have planned by removing this 1 percent sales tax on motor vehicles. Thank you, Mr. President.

PRESIDENT: Thank you. Senator Chambers, please.

SENATOR CHAMBERS: Mr. Chairman and members of the Legislature, I would like to ask Senator Warner a question or two if he will answer.

PRESIDENT: Senator Warner, would you respond, please.

SENATOR CHAMBERS: Senator Warner, most of these questions are simply for the record. Is the money that is to be generated by the increase in income tax and sales tax designed to finance LB 1059? Is that the purpose of the money that will be raised through the shifting or raising of taxes required in 1059?

SENATOR WARNER: Well, sure, to answer your question precisely and exactly, Senator Chambers, the way the bill is written that portion of the sales and income tax that goes to the General Fund is for LB 1059, that portion of sales tax that would go to the Highway Trust Fund, the cities and the counties and the state, by other law automatically goes to the Highway Trust Fund.

SENATOR CHAMBERS: Now when LB 1059 was envisioned and worked up by the different groups. that got together, was it their intention when they were raising the sales tax to put money into the Highway Trust Fund? Was that discussed by the people who were putting this bill together?

SENATOR WARNER: That I cannot answer other than I know that all of the data that I saw that was published only retained that portion of the income ... or the sales tax that generally...that

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March 20, 1990 -- LB, 1059

currently goes into the General Fund.

SENATOR CHAMBERS: Would this give the Highway Trust Fund a bonanza or a windfall? That's the word that is less negative perhaps.

SENATOR WARNER: Now the answer to that question is no and when I get my turn I will, on the light, I will go into that in more depth.

SENATOR CHAMBERS: Okay, thank you. Members of the Legislature, I disagree with Senator Warner. I believe that this does give a windfall to the Highway Trust Fund. And if Senator... I don't see Senator Withem here, otherwise I would have asked him one or two of the questions that I put to Senator Warner. Oh, here's Senator Baack. Senator Baack, you're one of the architects or one of the godfathers of this proposal, correct?

SENATOR BAACK: No, I was not in on the...

PRESIDENT: Senator Baack.

SENATOR BAACK: ... drafting of the bill and I was not a part of the Finance Review Commission that did the drafting, so I cannot answer that question either. I wish I could, but I can't.

SENATOR CHAMBERS: Thank you. And I see Senator Moore is gone. Who... who else is a co-sponsor on the bill? Is there... oh, Senator Lamb, you were not a co-sponsor. Oh, thank you. Oh, here comes Senator Withem, and I hope my time doesn't run out. Senator Withem, did you all envision the Highway Trust Fund getting a portion of the money that was being generated by the increase in sales tax under this bill?

SENATOR WITHEM: I knew it would happen. It was not discussed in great detail.

SENATOR CHAMBERS: Has this bill been represented to those who may have heard anything said by the committee or the individuals who supported it that part of the money generated under this bill is to go to the Highway Trust Fund...

SENATOR WITHEM: No.

SENATOR CHAMBERS: ... or has all the discussion been in terms of

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benefiting education and equalizing (interruption).

SENATOR WITHEM: The latter is a more accurate representation than the former, yes.

SENATOR CHAMBERS: Thank you. And, members of the Legislature, this bill, if we don't accept Senator Smith's amendment, is indeed flying a false flag. This is the jolly Roger. It's a sporadical. It is a bill to benefit the buccaneers. And I don't have the respect for the Highway-Trust Fund that Senator Warner has. I haven't committed my legislative career to road building and protecting the interests that build the roads. I'm more concerned about the human beings who might have to make use of those roads, the education that they would receive if that's, in fact, what this bill is for. Those are different issues, but the one before us now is how the money is to be spent under this bill. Since I percent of the sales tax...

PRESIDENT: One minute.

SENATOR CHAMBERS: ... would also attach an increase to automobiles and that money is going to the Roads Department, there is no way in the world that 1059 and its supporters can keep faith with the public based on the representations they have made if that money goes into the Highway Trust Fund. I support Senator Smith's amendment. I applaud Senator Haberman for having brought it originally. It shows that everybody can be right, on occasion. There is no such thing as infallibility of an affirmative kind or a negative kind. Senator Haberman's bringing this amendment proves part of that. But, in all seriousness, it would be a mistake, I think, to give the Highway Trust Fund a windfall through this bill. It can be crafted to minimize some of the injustice and inequity that currently inheres in the bill. So I support Senator Smith's amendment.

PRESIDENT: Thank you. Senator Schmit, please, followed by Senator Nelson and Senator Smith.

SENATOR SCHMIT: Mr. President and members, I'm going to oppose the amendment by my good friend, Senator Smith, as resurrected from Senator Haberman's amendment. In fact, you know, I'm a little bit surprised by Senator Chambers because the sales tax on motor vehicles is one of the few progressive taxes we do have in this state. Now the used automobile that I buy every five years doesn't pay much sales tax, but some of my colleagues who

11474

buy a new Cadillac every year or two, of course, it's more of a factor in that instance. With reference to what was intended and what was not intended, no one really knows but without a doubt there will be a substantial increase in travel up and down the highways by school buses and by individuals traveling to and fro to attend various athletic events and other school events and it may well be, Senator Smith, and Senator Haberman, that the money will be needed to repair those roads that are going to be worn out by the increased travel that's occasioned because of the passage of this bill. I doubt very much that the entire 225 million is going to be spent within the confines of the school buildings. Therefore, as a result there is going to be additional travel. Now if you want to separate it, perhaps that's all right, I don't know. But I think that generally every one of us, on a daily basis, pay sales tax dozens of times, I'm going to pay sales tax on the parts that I buy, much of the supplies that I buy, clothing I buy, the items that my wife spends money on, going to pay sales tax on all of that on a regular basis. But the individuals in my district, very frankly, who drive the $1,000 cars or the $200 cars or the $2,000 cars don't buy them very often, are not going to be very terribly burdened by the tax... the sales tax on automobiles. Where they will be burdened is on the day to day purchases they make on a regular and routine basis, whereupon they will be called upon to pay the sales tax. Oh, yes, only pennies, a penny here and a penny there, but at the end of the year's time it will be a substantial amount of their tax burden.

PRESIDENT: Senator Schmit, may I interrupt you a moment.

SENATOR SCHMIT: Please.

PRESIDENTS: (Gavel.) Let's hold it down, please, it's very difficult to hear over in this section, please. Thank you. Thank you, Senator Schmit.

SENATOR SCHMIT: Thank you, Mr. Speaker. You're very considerate, an improvement from what you were on the judges' pay bill but that's all right. I just want to... I just want to say this, that no matter how you look at it, if we're going to raise the taxes across the board, 25 percent on the sales tax and another substantial amount on the income tax, I do not think the public is going to be particularly enamored by the fact that we said we saved them the taxes, 1 percent sales tax on their motor vehicle purchase, particularly when they do not make that

11475

many purchases. Here and there, true, but usually you will find that the person who can buy the $20,000 vehicle, is able to pay the 4 percent tax, they will be able to pay the five. It's the person that's low income who does not make a very substantial purchase when he buys an automobile who is going to be saying, well, shucks, I pay it every day, it isn't going to make any difference if I pay the extra 1 percent on a $1,000 car. So I would suggest that it might be better to spend the additional money to keep those roads up. I'm going to say one more thing. For example, in the City of Omaha,...

PRESIDENT: One minute.

SENATOR SCHMIT: ... there's a substantial amount of highway construction being done there and the traffic must be diverted for a period of several years because of the length of time it's going to take to complete that work. If it's possible to accelerate that construction and not burden the public with having to drive around that-construction process for a longer period of time, the money might even be well spent. So I would oppose the amendment.

PRESIDENT: Thank you. Senator Nelson, you are next. May I introduce some guests, please, in the south balcony. They are guests of Senator Coordsen and there are 50 fourth grade students from Crete Public Schools in Crete, Nebraska, and their teacher. Would you folks please stand and be recognized by the Legislature, please. Thanks for visiting us today. We appreciate it. Senator Nelson, please.

SENATOR NELSON: Yes, two things. Senator Smith, I'm glad that you finally dug in when I tried to find an answer the other day on whether truck-tractors were or was not included in motor vehicles and in the subsections and the mopeds and so on and so forth that you've finally gone to the tax portion and over the road truck-tractors then, for the records, will be included in your amendment.

SENATOR SMITH: Yes.

SENATOR NELSON: All right. Because that is a major portion, I mean, they're 20, 30,000 and they're 15,000 for an old junker and that is... that is an item that is a big item for the farmers, as most of the trucking companies don't pay that tax. Again, I have to agree with Senator Schmit on this and our roads

11476

and so on. As you know, the Syracuse study told us that we should tax the full price of a new automobile or a new pickup or a van instead of the trade-in price because what we were doing is we were being unfair to the poor person that bought a four or five thousand dollar car and the one that was able to trade every two, three, four years, or every two years you buy a $20,000 automobile, you receive 12,000 for your old -car, you're paying on $8,000. The fellow that cannot afford to buy that new car, he probably is paying sales tax on the full amount, or that used pickup. So it is a concern there, but I'm not in any way whether to introduce any amendment to that effect. Senator Schmit is right, this is a big item but let's take that new cultivator or that old used tractor, we're up in the twenty thousands or the thirty thousands or the ten thousand, or, as someone told me the other day, when I have to buy a new funeral limousine that's $70,000, 1 will be paying the increased tax also on that on 1059. So, again, it's... a car is probably one of the major purchases that the increased sales tax would affect. I suppose Tim, if he bought a new car, would be the biggest increase that he would be having to spend for extra sales tax. But, again, we do have to fund our roads and I think this is a progressive tax for our highway funding. And, with that, I probably will not be supporting Senator Smith's amendment.

PRESIDENT: Thank you. Senator Smith, please, followed by Senator Hefner and Senator Warner.- Pardon me? Okay, Senator Hefner, please.

SENATOR HEFNER: Mr. President and members of the body, I rise to oppose the Smith amendment. I think we have an obligation here. School buses use roads. Senator Chambers, they use country roads, they use county roads, they use streets and bridges, they use highways. And how do we build these? Part of this comes out of the Highway Trust Fund. The state gets 53 1/3, the counties get 23 1/3, the cities and villages get 23 1/3. So I think we need this to improve our road system. Now, Senator Chambers, maybe you don't need the money in Omaha because you've got all these super interstates, these super expressways, but you get out to northeast Nebraska and some of our roads go straight up and down and they're not very wide and so we're trying to build better roads in northeast Nebraska and especially in the rural areas. And so this sales tax on vehicles is part of that Highway Trust Fund. I think if we're going to increase the sales tax on everything else, we should

11477

March 20, 1990 -- LB 832, 1059

keep it on vehicles. And I know this will cost a little more money to the people that buy new and used cars but I only think it's right and just to keep it there. Several years ago we passed an increase in the gas tax and this... I supported that and it is being well used. We have made a lot of improvements in our highways. We still have a long ways to go, as you know, that we have embarked on a speeded up version of constructing new highways, the expressways in Nebraska which is sorely needed. And it's not only for our school buses to travel on, it's also used for cars or station wagons or vans to transport these children to and from schools. And so I would urge you to defeat the Smith amendment.

PRESIDENT: Thank you. May I introduce some guests, please, of Senator Moore. Under the south balcony, we have Gerald Carson. Would you please stand so we may see who you are. Over here. And also with him are the parents of Senator Moore, Dale and June Moore of Stromsburg. Would you also stand? Thanks to you for visiting us this morning. Senator Warner, please, followed by Senator Chambers and Senator Haberman.

SENATOR WARNER: Mr. President and members of the Legislature, just two or three points. Through June 30th of 1991, which is the current budget cycle, the level of the variable gas tax for state purposes, of course, is set by the budget which is set through that period of time. And, as all of you know, as the variable gas tax is determined, it is reduced or the need for the variable is reduced by the amount of sales tax that is collected, in fact, the sales tax on motor vehicles over the last decade, in fact, since the early seventies has been in essence the only growth of appreciable growth that we have had in receipts. But the impact then of increasing the sales tax will be one of reducing the variable gas tax as far as the state is concerned for that period of time. Secondly, there was legislation introduced, I introduced LB 832 this year, as I introduced a similar bill last year, which was to increase the sales tax on motor vehicles from 4 to 5 percent and the reason was in order to have a committee of the Legislature, the Revenue Committee, have before them' a public hearing that built the need for additional revenue in order to meet the highway program that this Legislature approved and adopted a year ago, two years ago, I guess now, and show that indeed if that road program that many people have felt was desirable for the state as a whole was to be carried out, additional revenue other than fuel tax was likely to be needed. The first four years of that program was

11478

March 20, 1990 -- LB 832, 1059

estimated to take, at the time of its enactment, about 3.5 cents increase in fuel tax, actually it's come out a little bit less than that, but it also is projected that to fully meet the commitment of that road program throughout the state will require somewhere between 6 and 8 cents within about three years. And, obviously, if there is additional funds appropriated by the Legislature in 1991 and in part because of the sales tax on motor vehicles being increased and if the Legislature then wishes to also raise the fuel tax, a portion of that program no doubt could be accelerated, most certainly, it would be able to stay on target. As I recall the hearing on LB 832, there was, obviously, an opposition as there would be to any increase in tax, but, as I recall, the principal argument that was used was that the sales tax on motor vehicles ought not to be different than what the general sales tax is for other items. And, of course, if that was an argument that in part was a factor in the Revenue Committee, and I think they probably indefinitely postponed LB 832, 'but if, in fact, that was part of the argument that it ought 'to be uniform and not treated separately, the retention of LB 1059 as it currently is written. is in keeping with that concept of being uniform. And then finally Senator Hefner indicated out of the Highway Trust Fund is the distribution to the cities and counties and, as he indicated, 46 2/3 percent of that additional revenue, in fact, is distributed to cities and counties for road purposes and the option, of course, with road... for the cities and counties is to use property tax. So if there is a -consistency looked for in 1059 in roads...

PRESIDENT: One minute.

SENATOR WARNER: ... at cities and counties level, very obviously it ties in with the provisions of 1059 as having less reliance upon property tax even though in this case it would be for roads, but nevertheless it would be less impact on property tax to a relevantly small extent, admittedly, but nevertheless that would be a valid argument. There is no question that increase in the sales tax, obviously, will fall upon the higher, more expensive cars in terms of the dollars. The offset through June 30th of 1991 will be a reduction in the equal fuel tax that is paid no matter what kind of a vehicle you have and, obviously, if you have an older vehicle, the odds are its fuel consumption would be higher so it would be a benefit, it would seem to me, to the...to those who are driving older automobiles, less fuel efficient to not be paying about roughly the

11479

equivalent of 1 cent of fuel tax that otherwise would be required just to meet the appropriation that's already approved. So I would urge that the body reject the amendment. The case where those funds have been built in a bill, the principal argument against was there ought to be uniformity, as I recall, at least there needs to be a uniform sales tax rate for all items and that provisions of LB 1059 as it currently stood meets that criteria.

PRESIDENT: Thank you. Senator Chambers, please.

SENATOR CHAMBERS: Mr. Chairman and members of the Legislature, but where does the other sales tax money go? It doesn't go to the Roads Department. I hope the Governor's people are listening to this discussion and I hope the Governor takes this as another example of the crass dishonesty of the way this bill has been represented. I have not seen a single supporter of this bill go before the public in outstate Nebraska, instate Nebraska, northeastern, southeastern, north central, south central, any part of the state and say, this bill, when your taxes are raised, is going to help build better roads. Which one of them has said it? Not one. Why did the matter become discussed at all? Because Senator Haberman brought an amendment to try to bring some justice. Do you think it will be talked about in the hustings now? No, because they want the rubes and the hicks out there to think this is a bill raising money for education. Senator Haber... Senator... excuse me, Senator Haberman, Baron Hefner said out in the western part of the state they've got roads that go straight up and go straight down. No matter how much money you raise, you're not going to change the fact that they go straight up and go straight down, they selected a hilly terrain over which to build roads and they selected it probably because some of the politicians own the land in the path of the roadway. That's why roads take strange turns. That's why they go where there is required a lot of fill in and a lot of leveling because it might go through some ... Roman Hruska owns some land, I believe, that part of the Interstate 80 went through, 1-80. We get on this floor and act like we don't know the realities of life. When there is a lot of money involved, especially public money, a lot of hands go into the till and plunder. That's why I called it a pirate's bill. American hates Libya to this day because the barbary pirates, as they call ... as they were called, would not let America pass through those waters unless they paid tribute. And one American, during a political campaign said, millions for

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defense but not one cent for tribute, and the barbary pirates and those who know what they could in this country said, well, if you want to travel those waters, you're going to pay whatever tribute they charge. And America has never forgiven Libya, because Libya was the country. And now we've got some pirates here saying under the guise of a bill to raise money for education put some in the Highway Trust Fund. I hope the Governor is listening and if not the Governor, somebody who represents her to show that this bill is a sham and I think those who originally started out had a good intention. Just like Jim Jones. You all have heard of Jim Jones. Baron, you've heard of Jim Jones, the man who started out trying to help the poor was going to give an alternative to the established organized religions and he really meant well. But as the poor came in greater numbers, and the money that the poor had, small from each one, began to multiply because of the numbers contributing, the money that came in and the power attendant on that money corrupted the man., And when he lost his mind he had some Kool-Aid prepared and he had all of these people who believed in him and trusted him drink the Kool-Aid, but before they checked out, Senator Smith, by drinking the Kool-Aid, they bumped off a Congressman and some other meddlers. Congressman went there and he's going to straighten everything out and he got bumped off. Now we've got some Jim Joneses on this bill. They started out with high motives, if we accept at face value what was said and we don't have any reason not to, but now that the nature of this bill is becoming clear, what is to be done for the public? They're-to be fed the Kool-Aid, Baron Hefner, the poison Kool-Aid. And when it comes to them what has happened they will see the Legislature in general as a bunch of people who misrepresent and trick the public constantly, who will take the most noble concept and taint it, soil it, and use it as a means to trick the people. Nobody who supports this bill has said that one of the hidden purposes is to build better roads. I hope that Senator Smith's amendment is accepted, but if it's not, I hope the Governor accepts this free advice and will point out this aspect of the bill and also point out that it was thoroughly debated on at least two occasions and some of the most senior members of the Legislature said, use the education bill to raise money for the highways.

PRESIDENT: Time.

SENATOR CHAMBERS: Didn't that one fellow who ran circuses say, a sucker is born every... there is one born every second, and the

11481

other one said, if you find a sucker, bump his head. That's what this bill is.

PRESIDENT: Thank you. Senator Haberman, followed by Senator Lowell Johnson and Senator Hefner.

SENATOR HABERMAN: Mr. President and members of the body, I would like to call to your attention that if LB 1059 would have never been introduced, there would be no additional money put into the Highway Trust Fund because this body would not raise the sales tax one cent to put money into the Highway Trust Fund. So think about that. This is just the fallout from 1059. Senator Schmit, evidently your farmers are satisfied with their real estate property tax. They must be satisfied, because you're standing there saying they don't mind paying an extra percent to buy a new pickup. Why, they're happy. Why, they're happy to pay this extra sales tax. The same way with Senator Hefner. He is saying his farmers are happy when they go buy a new pickup to pay this extra 1 percent sales tax. They're tickled to death to do this. They sure are, and their property taxes aren't too high. Senator Nelson, the same thing. You're saying, why you're farmers' property taxes are all right. it's okay if we raise the sales tax 1 percent on the pickups, but we're going to try to lower the personal property tax. That's the issue of the bill but it's turned right around and going to raise the sales tax on the farmer's pickup. Now, Senator Hefner, if these roads that these buses are going on are so dangerous, I would suggest you go to the school board, Senator Hefner, and go to the county board and insist that they fix these bus routes if they're that dangerous. I would like to ask you to do that. My office had a phone call and I'm supposed to ask this body, what about the gentleman that buys a new fleet of taxis? He doesn't use the highway. He doesn't use the interstate, but we're going to stick him with the 1 percent increase in the vehicles. So I ask this body to take it out, don't sock the taxpayers with the 1 percent on their vehicles. And if this fails, let's introduce another amendment to put the money into the school aid bill instead of the highway fund. Thank you, Mr. President.

PRESIDENT: Thank you. Senator Hefner, please, followed by Senator Schmit.

SENATOR HEFNER: Mr. President, members of the body, speeder, toe-crusher Chambers, are you listening? Are you listening?

11482

March 20, 1990 -- LB 84, 1059

Okay. Okay, I have a letter here from Governor Orr and she spells out one of the flaws about 1059, and that's true.. And she says that's true that almost 17 million sales tax increase required by LB 1059 will go into the Highway Trust Fund for road construction and maintenance rather than for education. But you can't educate these kids unless you get them there. You can't educate these kids until you get them in school. So that's why we need better roads and this 1 percent sales tax will go in to building better roads because our buses travel on them, our vehicles travel on them, our vans travel on them, our station wagons travel on them, and so that's why we need to keep this 1 percent sales tax on it. And, Senator Haberman, I didn't say that the farmers were happy with this or I didn't say that these people would be happy having 1 percent sales tax increase. I know people don't like to pay additional taxes but how are we going to relieve property taxes if we don't increase sales --ax and income tax a little bit? So I would just suggest to you that you defeat the Smith amendment and go on from here. if I have some time left, Senator Arlene Nelson would like to use the rest of it.

PRESIDENT: Okay, Senator Nelson, you have three minutes.

SENATOR NELSON: It won't take that long. I'm sure that my business people and farmers are no more willing to pay any more tax than they absolutely have to. Another point that when we're getting down to the more technical points on this, as you know, most of the figures given out by the Revenue Department and our own Fiscal Office, and so on, do not take into consideration the additional tax that farmers and business would pay on the purchase of new equipment. But when we get down to actually the basic bottom line now when we're talking, you know that the sales tax of business or farm equipment comes off as a farm or a business expense when you buy that automobile or that truck or that funeral limousine. All right, and today the self-employed pays 15 percent Social Security, say 28 percent federal, and 3 percent state, we're almost up to-SO cents on the dollar. So then let's reverse that, that 1 cent, and I'm not saying whether it's justified or not but it's a point, that 1 cent then becomes a half a cent sales tax that otherwise the federal government and the Social Security fund would be the recipient of. So I want you to understand we have that same thing on LB 84. One-third of that money went to the federal government, it did not go back to the taxpayer and that same formula works out here, a percentage for social security and a percentage for tax.

11483

March 20, 1990 -- LB 361, 1059

So I guess when we get right down to it and it's for each one to make up it's own mind, so approximately we're talking a little over half a cent now on business equipment and farm equipment.

PRESIDENT: Thank you. Senator Schmit, please.

SENATOR SCHMIT: Well, I didn't hear all of what Senator Nelson was talking about but I did just hear her mention farm equipment and, of course, we're going to keep on paying sales tax on that and everything else we pay sales tax on. it's always interesting to me that when we begin to speak about a bill which is a dramatic increase in taxes that, all of a sudden, we seize upon a small idea and say, well, we're-going to be good to you in this one particular area, we are going to save you the sales tax and increased sales tax that you might have paid if you happened to have bought or purchased a car, and that sounds good. But I do not believe, Senator Haberman, when you go back out to your district and you tell them that Senator Schmit, believe it or not, said, go ahead and tax your automobile. Tell them the rest of it, Senator Haberman. Tell them that Senator Schmit said he's not for the bill, he's not for the bill. He doesn't only want to save you 17, or 18, or 20 million bucks, he wants to save you 200 million bucks.* Now I know it's not saving, and you tell me, well, your farmers' taxes are not too high. Senator, before you were a member of this body, which is a long time ago, I introduced bills to transfer cost of education from real property to sales and income tax. I've done it year after year after year when you were a member of the Revenue Committee and you never once, Senator, voted to send one of those bills to the floor. It did not have, it did not have in the bill the intricate, delicate network of formula adjustments, et cetera, et cetera which are contained in LB 1059. I'm not an expert on the bill. You do not need to be an expert on the bill. You do not need to be an expert in finance. I pointed out to you this morning, you know last year this body passed, with the dissenting vote of Senator Robak, LB 361. I've regretted ever since that I was absent that day. That raised the tax on farmland by $50 million and there are persons on this floor who realize that the chickens are coming home to roost and that there is going to be a substantial increase in farmland valuations and, in most instances, farm taxes when LB 361 is implemented. And so there is a desperate, a desperate attempt to enact this bill which will give maybe some temporary relief to farm taxes. Nothing wrong with that. We all like a little pressure to come off from time to time,

11484

March 20, 1990 -- LB 361, 1059

but, ladies and gentlemen, I warn you that under the best of conditions, given the normal attrition, that tax saving on farmland and real property will be gone in three years, absolutely gone, and you will still be paying the additional 220 million bucks, plus the normal inflation, probably about 300 by that time, that goes along with the increased sales and income tax collections. What's going to happen? Just as I told you, once you get into the trap, you know, I've done a little bit of this sort of. thing. You try to catch a wild steer, so what do you do? You throw a little hay and a little grain in the feed bunk and pretty soon that wild steer comes up there and he sniffs the ... he smells that grain and that hay and he wanders into the pen and you slam the gate shut. Now Howard and I know what happens once the gate gets shut on that steer, that bull calf. Anyway, let me tell you, this is what's going to happen. Once you get those farmers in the pen, once you get them in the pen, aha, the valuations go up because of LB 361, less state aid. Property values begin to escalate, less state aid. What happens?

PRESIDENT: One minute.

SENATOR SCHMIT: Cities and counties need more money. Put the tax back on personal property and you throw a billion dollars of valuation in the rural areas. What happens? State aid is gone with the wind, no more state aid. And some of them will stand on this floor and say, we never in-tended. How many times have my friends on this floor heard it repeated, we never intended taxes to go up under 773. We never intended this to happen or that to happen. Ladies and gentlemen, if you don't learn from history, you're going to repeat it. For eight years, through Governor Thone and Governor Kerrey, state revenues were fairly ... were fairly flat. This Legislature has attempted to try to provide property tax relief. We've adjusted some other bills, we passed LB 773. Right now, we have a 50 percent generally...General Fund increase. Heading for 75, heading for a 100. Ladies and gentlemen, have you gotten any more for your money? I don't think so.

PRESIDENT: Time.

SENATOR SCHMIT: I think you're going to have to answer that question one of these days and the answer will be difficult to come by. I still oppose the Smith and Haberman amendment.

11485

PRESIDENT: Thank you. Senator Nelson, please, followed by Senator Lowell Johnson. Thank you. Senator Lowell Johnson.

SENATOR L. JOHNSON: Call the question.

PRESIDENT: The question has been called. Do I see five hands? I do. And the question is, shall debate cease? All those in favor vote aye, opposed nay. Record, Mr. Clerk, please.

CLERK: 26 ayes, 1 nay to cease debate, Mr. President.

PRESIDENT: Debate has ceased. Senator Smith, are you going to close, please.

SENATOR SMITH: Thank you, Mr. President. And I want to 'thank all those people that did stand up and debate this issue and especially those, of course, that were supportive of the concept. Senator Chambers made a comment about the fact that the intent of the bill, as it's debated, I guess ... I guess what I would like to do is just expand upon that a little bit and just say that one of the things that Senator... or that Governor Orr brought out as a concern about the bill was this very issue. And, yes, I agree with you, Senator Chambers, I hope that she or someone in her office is listening because this is just one of the steps that I think we need to take in order to make this become a better piece of legislation. We talked about this earlier. I think that this is a bill that is very far-reaching. It needs to be debated in detail which is what we are doing and I think that we need to be also willing to make the changes that we see that surface. Maybe that wasn't the original intent of the people that introduced this piece of legislation, as Senator Chambers commented, but it's been brought to our attention, and this being an education bill, then I think that it's only right that we don't increase funds for another resource in the state. That's not the intent. And if we have a concern about taxes, then we should take this out of there because this helps at least that little bit. And, Senator Schmit, you know, you made comment about the fact that a penny here and a penny there is lot easier to pay. Well, yeah, it is a lot easier to pay for middle and low income people. That's the reason I voted for the McFarland amendment on this bill, because I have a concern about those people and it's a lot easier for those people to pay the penny here and the penny there than it is to pay a chunk of money when they have to buy a new motor vehicle of some sort. And there are many of those in the state that are not... that

11486

don't have the kinds of exemptions that we have talked about with business and farm exemptions on equipment and so on. So I hope that you folks will keep this in mind when you make the final vote on this amendment. I guess I really don't have too much more to say. I think we have said it all pretty much before and again today. But keep in mind that this is a bill that we're working to make a better piece of legislation and, in my eyes at least, this is one of those amendments that can help to make it be that. Yes, it's a small step but it's a part of many of those amendments that are out there that could make a. good piece of legislation when we're finished with it. I ask your support for the amendment. Thank you.

PRESIDENT: Thank you. The question is the adoption of the Smith amendment. All those in favor vote aye, opposed nay. Senator Smith.

SENATOR SMITH: Mr. President, I think that I will ask for a call of the house and a roll call vote, please.

PRESIDENT: Okay. The question is, shall the house go under .call? All those in favor vote aye, opposed nay. Record, Mr. Clerk, please.

CLERK: 24 ayes, 1 nay to go under call, Mr. President.

PRESIDENT: The house is under call. Will you please record your presence. Those not in the Chamber, please return to the Chamber so that we may take this vote. Please record your presence, ladies and gentlemen. Thank you. Senator Chizek, Senator Conway, Senator Beyers ... Beyer, I should say. Senator Ashford. Senator Barrett. Senator Rod Johnson. Still looking for Senator Rod Johnson and Senator Bernard-Stevens. Now we are looking for Senator Bernard-Stevens. Senator Bernard-Stevens is on his way and will be here in a moment. And roll call vote in regular order has been requested and we are voting on the adoption of the Smith amendment. Mr. Clerk, please.

CLERK: (Roll call vote taken. See pages 1473-74 of the Legislative Journal.) 17 ayes, 20 nays, Mr. President.

PRESIDENT: Anything for the good of the cause, Mr. Clerk?

CLERK: Mr. President, new A bill, LB 1186A, by Senator Johnson. (Read by title for the first time. See page 1474 of the

11487

Legislative Journal.) Mr. President, Senator Withem has amendments to be printed to LB 866. (See pages 1474-76 of the Legislative Journal.) Study resolutions. LR 331-342, all will be referred to the Executive Board. (See pages 1476-85 of the Legislative Journal.) That's all that I have, Mr. President.

PRESIDENT: While the Legislature is in session and capable of transacting business, I propose to sign and do sign LR 34 (sic). (Journal page 1485 shows LR 274.) Mr. Speaker, did you wish to ... Senator Barrett, do you wish to say something about recessing?

SPEAKER BARRETT: Mr. President, I move we recess until one-thirty.

PRESIDENT: You have heard the motion. All in favor say aye. Opposed nay. We are recessed until one-thirty.

RECESS

PRESIDENT NICHOL PRESIDING

ASSISTANT CLERK: There is a quorum present, Mr. President.

PRESIDENT: May I announce that there are students, I believe they are leaving now from the south balcony, from the St. Agnes Catholic School in Omaha and they are 27 third, fourth, seventh and eighth graders and they are guests of Senator Labedz, so it is nice to have had you. Sorry we didn't get started sooner. We also have guests of Senator Beck in the south balcony. We have 52 students from the' Holy Name School in Omaha, and would you folks please stand up and be recognized. Thanks to both groups for visiting us today. Mr. Clerk. (LB 1059.)

ASSISTANT CLERK: Mr. President, the first amendment that I have is from Senator Hall and it's an amendment that appears on 1179, but, Senator Hall, I understand you want to substitute AM2949.

PRESIDENT: Is that correct, Senator Hall? Is there any objection to the substitution of one motion for another by

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Senator Hall? If not, would you proceed. Just a moment, we have a problem. Would you try Senator Chizek's microphone. We seem to have a little problem here at the moment. Well, maybe we don't want any .... Try them again to see if there is sound there at all. No, there is none. Senator Byars, let us try yours to see if it is working. Try yours, Senator Byars, now to see if it is working. No, yours. Okay. Senator Owen Elmer. Looks like it. At ease a moment, ladies and gentlemen.

EASE

PRESIDENT: (Gavel.) If I might have your attention, it has been suggested that speakers come up. and use the Clerk's microphone until we get the problem resolved which might be any time or it might be later. So, if that would be agreeable with you, it would be inconvenient for you, but the speakers as lined up could come up and speak in the Clerk's microphone and we'd get something done at least, Mr. Clerk, which do we have up first? (Gavel.)

ASSISTANT CLERK: Mr. President, the amendment that currently is before the body is the Hall amendment, AM2845. It is found on page 1179.

PRESIDENT: Senator Hall, do you want to be our first guinea pig?

SENATOR HALL: Mr. Speaker, members, the amendment that the Clerk read you, 2845, is the amendment that we skipped over this morning. It is one that was requested on behalf of the county officials. It was included in one version of the combined amendment that Senator Withem offered this morning and was inadvertently left out. It basically does nothing more than hold off the provision that allowed for the assessment to be determined on behalf of school districts for one year. So in other words, the only change that we would make here is allow the current system for assessment with regard to valuation to remain being the process that we currently use by county and the assessment by virtue of school district which was in the original version of 1059 would be delayed for one year. The purposes for this are that the county officials requested it because it will take some time. The county officials in conjunction with the Department of Revenue requested it. it will take some time to implement this. We also are in the process, as many of you remember, the Property Tax Assessment

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Commission that we placed and was appointed by the Governor last year, LB 653, is currently in the process of reviewing the property tax assessment valuation practices across the state. We will have a report ready and filed by January of next year. We would like to have an opportunity to look at what recommendations come out of that commission and basically we feel that the current practice will allow a phase-in where we can then pick up and use the school district method in terms of valuation. I would urge the adoption of the amendment.

PRESIDENT: Thank you. It worked well. Senator Withem, please.

SENATOR WITHEM: Yes, Mr. President and members of the body, the portion of the bill that Senator Hall is amending was considered to be a very important part of the bill by the sponsors of the bill. It involves the re ... not the revaluation of property, but the adjustments to the valuation so that county boards will not be tempted to artificially lower valuations in order to get more state aid. It also is, frankly, one of the more expensive administrative provisions of the bill. The county officials have asked for, basically as I understand it, Senator Hall, one year so that they can prove to us that they don't need to get the Department of Revenue as intimately involved in their business as the original bill would do. So I think Senator Hall's amendment is appropriate. It should have been included, it was my original understanding it was going to be in the group that we packaged together this morning. I had some miscommunication as to Senator Hall's desires on that. We probably should have done this previously and I think it needs to be done now, so I would urge you to do so.

PRESIDENT: Thank you. Senator Moore, please.

SENATOR MOORE: Yes, Mr. President and members, I only rise to also support this amendment. This particular issue of having the Department of Revenue involved in this situation has been one of the red herrings that has been veered across this bill by certain opponents of this bill. They try and lead people to believe this is a sinister plot only to once again further some unfair treatment by larger subdivisions and primarily a method to disenfranchise rural Nebraska. I think that is exactly as I pegged it, a red herring. We have been working with the county officials, the county assessors in developing an amendment as stated, this amendment simply postpones the enactment of this for one year. There are valid concerns why we need to do this,

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but obviously we like to work with the county assessors and the county officials in developing a program that can assure that there is equal assessment across school district by school district while at the same time, most certainly does not open a door to the mischief that some people are trying to claim this particular amendment does. I think this, by adopting Senator Hall's amendment, we postpone it for a year and certainly remove that... further remove that red herring that really didn't amount to anything anyway.

PRESIDENT: Thank you. Senator Hall, would you like to close, please.

SENATOR HALL: Thank you, Mr. President, members, again, the amendment clearly just keeps in place our current practice. it delays the implementation of the school district method for a year. There is a corresponding amendment to 1059A that would put off the funding, the General Fund appropriation for a year and thus reducing that 1059A by about $350,000. That will follow on the bill when we deal with that. I would urge the adoption of this amendment.

PRESIDENT: Thank you. The question is the adoption of the Hall amendment. All those in favor vote aye, opposed nay. Senator Chambers, would you please come to the podium for the next. Record, Mr. Clerk, please.

CLERK: 28 ayes, 0 nays, Mr. President, on adoption of Senator Hall's amendment.

PRESIDENT: The Hall amendment is adopted. Mr. Clerk.

CLERK: Mr. President, the next amendment I have to the bill, Senator Smith, I understand you want to temporarily withdraw.

PRESIDENT: Is that true, Senator Smith? okay. It is withdrawn.

CLERK: Mr. President, the next amendment I have to the bill is Senator Hall's. Senator, this is your AM2749.

PRESIDENT: Senator Hall, please.

SENATOR HALL: Thank you, Mr. President and members, the amendment, AM274... this is kind of nice, I mean, you can kind of

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walk up and down the aisle and say, look, are you going to vote for this amendment? Mr. President and members, the amendment, AM2749, is the very thick amendment that is filed separately so it is not-in your bill books and it is not being handed out on the floor, but there is a handout that should be coming out to you that explains just what the amendment does, and I will give you a very detailed explanation at this time. What it does is it provides for the reduction in the sales tax increase from one cent to one-half cent. It would then reduce the number of exemptions that we currently have in the sales tax area. Basically what it does is it adopts the Syracuse proposal that our tax study in 1987 allowed for and it does that in the area of sales tax on services and personal services, repair services, amusement and recreation services, the professional services, being architectural, engineering, accounting and legal, and then also in the area of construction services that deal with basically improvements but they are beyond repair services, but it does not impact home building. It also takes and reduces a tax increase for income from the .55 to .4 and it places in a super bracket with regard to the income tax that was previously spoken about on the floor through Senator McFarland's amendment. What the impact would be is that there would be approximately a $200,000 increase, just $200,000 in the overall funds that were raised. So in other words, by decreasing the sales tax increase almost $58 million, from one cent to one-half, we pick that up with the $76 million that would be in the Syracuse proposal, the sales tax on services. We would reduce the income tax then again by about $27 million and we would increase the income tax with the super bracket by approximately $9 million. That all balances out to be about a $200,000 positive impact on what the bill does. My reasons for doing it is that when we're going to have as massive a change in our tax structure as we are in 1059, and it is that, that is the one point that I do agree with the Governor on, that it is a massive tax increase. No one has denied that it is not, that we should look at the overall system. That was my reason and my basis for supporting Senator McFarland's proposal in the super bracket this morning. What we do with this amendment is look at the issues of what are we taxing and how are we taxing it when we're going to have the increases that we do? I think the service tax is a very appropriate tax. It is basically a sale. There is little or no distinction in my mind between the sale of the good and the sale of a service and as we become more of a service oriented country and clearly a state, we see those industries being more and more prevalent, taking more and more of the sales, generating more

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and more of the income for people, but we refuse to look at them in terms of a tax and in terms of a sale of a service being different from a sale of a good. My purpose for bringing this is to say that we have an opportunity here to address this issue. We can reduce by half the sales tax impact and we would broaden out base, I think put some growth into that and allow for the ability for growth to continue in this area of education which so clearly needs it, thus the introduction of LB 1059. With that, Mr. President, I would try to answer any questions folks may have, and that will be interesting under our current system here with the microphone. Senator Johnson,' no.

PRESIDENT: There are no other lights on. Would you like to close, Senator Hall? If not, the question is the adoption of the Hall amendment. All those in favor vote aye, opposed nay. Have you all voted? A record vote has been requested. Have you all voted? Record, Mr. Clerk, please.

CLERK: (Read record vote. See page 1487 of the Legislative Journal.) 6 ayes, 24 nays, Mr. President, on adoption of the amendment.

PRESIDENT: The amendment fails. May I please introduce guests of Senator Dennis Byars. We have Marlene Burnham who is the mother of Page Shawn Burnham and Heather Burnham who is the sister of Shawn, and Carolyn Bargman of Beatrice. Would you ladies please stand and be recognized. Thank you for visiting us today. Mr. Clerk, we have something else?

CLERK: Mr. President, Senator Withem would move to amend the bill. The amendment is on page 1373 of the Journal.

PRESIDENT: Senator Withem, please.

SENATOR WITHEM: I believe this was filed, was it not, as an amendment to a Warner amendment, which has not been taken up, so I choose not to take it up at this point if it is the one I'm thinking it is, AM3001.

CLERK: It's 3001. I'm not sure. Well, I see what you're saying, Senator. At least it references, in part, the Warner amendment.

SENATOR WITHEM: Yeah, let's pull that.

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PRESIDENT: All right.

CLERK: Senator Hefner. Mr. President, Senator Hefner had an amendment that I believe he wants to withdraw.

PRESIDENT: Senator Hefner, could we have your attention a moment. Did you wish to withdraw that?

CLERK: It's the one amendment, Senator, to Senator Hall's that we just voted on. Okay.

PRESIDENT: It is withdrawn. Thank you.

CLERK: Mr. President, the next amendment I have to the bill is by Senator Nelson.

PRESIDENT: Senator Nelson. We'll wait a moment to see if we can find Senator Nelson because...

CLERK: Your amendment is on page 1399 of the Journal.

PRESIDENT: Senator Nelson, I believe you'll have to use the microphone over in the aisle, I'm sorry. New arrangement today.

SENATOR NELSON: Mr. Speaker, I would ask that... could I pass over this for an amendment or so? I had... this came up a little faster than I anticipated and I had -quite a bit of literature to be passed out by the Pages. Is it possible or not? If not, I'll go ahead and ... pardon?

PRESIDENT: I understand it goes to the bottom of the pile, Senator Nelson.

CLERK: Mr. President, the next amendment I have is by Senators Baack and Kristensen. (Amendment appears on pages 1487-88 of the Legislative Journal.)

PRESIDENT: Senator Baack, are you going to handle that, please?

SENATOR BAACK: Mr. President and colleagues, the amendment that I have is AM3062. I don't believe there are any copies out there. I can get copies for you if you'd like, but I will explain to you the three things that it does. First of all, this amendment would change the hold harmless clause that is in 1059 right now. If you remember, 1059 right now contains a hold

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harmless clause which says that the first year under 1059 you would receive 100 percent of the state aid that you received in '89-90, the second year 80 percent, the third year 60 percent. This amendment says that you would receive 100 percent both the first, second and third year and would contain a sunset at that point. So you would receive 100 percent of the state aid you receive in '89-90, right down the list right now for three years. It also contains in the language of the bill,, it contains a provision that one of the things that the Finance Review Commission will do is that they will review whether or not it is necessary to continue to have a hold harmless clause because I think we will find that by the end of three years most of the hold harmless would be ... would not be applicable anyway because we're going to see most of this phase out as 1059 phases in. That's the first aspect of the bill, of the amendment. The second aspect is an amendment which is going to produce a minimum levy is what it is going to do. We are not specifying a minimum levy though. What it says is that the amount of state aid a school district receives, once it reaches 60 percent of the local effort rate, then the state aid will not continue. You will not receive equalization aid under 1059 until you have at least fulfilled the requirement that 60 percent of the local effort rate has been established. You have to have that much in property tax, 60 percent of the local effort rate. If you want to look at what those rates are, you would look on page 19 of the original bill and on that page it will show you what the local effort rates are for the- varying different school districts, the different size of school districts and then you take 60 percent of that and that is the point where the equalization formula would kick out of place. Once you get down to the local effort rate, 60 percent of the local effort rate, then you would receive no more equalization aid. What this is going to do in effect, is it's going to take the equalization aid that would have gone to districts that go below their local effort rate, it's going to take that money, put it back into the whole formula and then that money is going to be distributed to the other districts that still can receive equalization aid. What it says is that we are not going to provide total funding for schools through this formula. There is going to have to be some local effort involved, you're going to have to raise some local property taxes, we are not going to fund the school totally from the state level. The third thing that the amendment does is it talks about special education and it says that there is going to be a diffident growth rate for special education. You can, each school district can qualify for growth

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above their budget limitation for special education based on their last two years' growth in special education. So you can have some special ed growth beyond the lid and this is done to add some flexibility to the lid because special education costs are totally unique in the fact that they are a year in arrears which causes problems for school districts when you have a lid. They are also unique because it is a mandated program, they have to provide these... they have to provide these services and the money comes a year in arrears, so you can make a good case for this being an exception to the rule. There is still is a lid on this. It isn't that they can have as much special ed growth as they wanted. There is a lid saying that their last two years of special ed growth can be their lid for special ed. It also says that if you can demonstrate to the Department of Education that you are going to have a very high growth in special ed students, there can be some exceptions made for you as far as your growth goes for the next year because in a small school district if you'd have a couple of multiply-handicapped students come into your school one year, it could take all of your budget growth just to fulfill those needs. This adds some flexibility for those school districts that do have a lot of special ed growth. Those are the three things that we do. With that, I would be glad to answer any questions if I can.

PRESIDENT: Thank you. Senator Withem, please, followed by Senator Kristensen, Senator Moore, Senator Abboud and Senator Haberman. Senator Withem, please.

SENATOR WITHEM: Yes, Mr. President, members of the body, I support the Kristensen-Baack amendment, or the ... probably support more fully the Baack-Kristensen amendment, but do, in fact support this. Let me give a little background on it. This is a package of things that we had discussed that are being offered together that probably a little more substantive sort of changes in the bill than may have been there with the earlier package that we did put together. All three of them though do make good sense. First of all, the hold harmless, the districts that are penalized by the bill, I don't like the word penalized, that's their language, districts that get less state aid under this proposal than they would be before, had asked for a hold harmless in perpetuity. The bill currently calls for a phased out hold harmless. What we did in a meeting, visiting with a number of those superintendents was, we talked about doing a hold harmless at 100 percent for three years and also do a directive to the ongoing Finance Review Committee that is

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established in this bill, to report back on what particular concerns they may have. Now for people who say, well, the best way to kill a proposal is to study it, I would ask you to take a look at what is happened with this bill. This bill is a study. You know, we take things fairly seriously that we do study. Senator Baack's proposal last year to study choice has resulted in his priority bill this year. Second point in this amendment is we have kind of taken to calling it a hold harmful amendment as opposed to hold harmless. We do think it is a good philosophical position, that there ought to be some degree of local support for schools. What we're pegging that at is 60 percent of the minimum effort levy ought to be levied at the local level before...a district should not be able to get state aid sufficient to put its local property tax down lower than 60 percent of the minimum levy. Might also point out to you that this, in effect, frees up some state aid dollars that would have flowed out to those districts, would receive a tremendous amount of state aid and it will come back within the system in many ways. It will end up paying for the increased costs of the hold harmless. Final, with special education I think one of the things we need to recognize on this special education, if we're dealing with local property taxes, and that's what we're concerned about capping, special education money is allocated from the state government. Local school districts really have very little control over their special ed budgets, particularly some of the legislation that has been passed in here. I think Senator Baack chaired a committee looking at special ed and he may want to address this a little further in closing. Local school districts really have little impact on their special ed budgets. If a number of families were to move in that had special ed students and it became the responsibility of those local school districts to educate them and they had to do it within the lid established in the bill for all programs, they would have to cut existing programs. So the special ed is a different sort of program because it is funded, 90 percent of the excess costs are funded at the state level so it seems appropriate that there ought to be a differing standard for special education. I think it's a good amendment. I think it improves the bill and I would urge you to support it.

PRESIDENT: Thank you. Senator Kristensen, please, followed by Senator Moore and Senator Haberman.

SENATOR KRISTENSEN: Thank you, Mr. President and members of the body, I, too, rise and supported this amendment and co-signed it

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with Senator Baack for a couple of reasons, and I'm a senator who has what's affectionately been known as a number of losing school districts although some people would say their senator is a loser, I do have some school districts who suffer greatly or perceive that they suffer greatly under this. I also have some school districts that fare very well. And if I think... a majority of you are probably doing the same things that I do and that is saying, now, look, I've got some school districts that do very, very well, but I've also got some school districts that really get hit and how do I balance the good for some of those against the harm that comes to some of the other ones? And we do that in a variety of ways. Sometimes we go back and tell them, well, I support the concept. I think you'll hear that over and over today and really what that is is that's a way of saying, I'm not sure, I'm still trying to weigh this thing. Am I going to vote for it or am I going to vote against it, but I'm sure for the concept? We've all said it. Even Senator Moore has said that. We've all heard people talk about that. This amendment is one of those amendments where you actually can go back and this is a way of leveling out the playing field a little bit, and I have a philosophy and I think it's one that is appropriate for this bill, is that school districts shouldn't be harmed in the short term for us changing our funding mechanism for those schools. And the good provision in this also, it isn't perpetual, but we're going to direct them to look at the adequacy and the advisability of having a perpetual hold harmless that will give this study commission something to do immediately. The other provisions that I find attractive in here is particularly with state aid or for special education. We have several smaller school districts who, if they would have one or two individuals move into their schools, and for those of you with smaller schools know that that could break your budget. It could cause you a tremendous amount of problems and with the lid provisions, would almost make it impossible for you to give those services and you're going to be placed in a large problem. This will give you the opportunity to go back to the state board to show the need for those additional expenditures for special education and I think it is something you can go back to your school districts and to the people at home and say, look, we're trying to address the problem, we don't want to harm any school district because of the change in the funding mechanism and I believe that this amendment does so. The minimum levies, I think, Senator Baack and Senator Withem have adequately explained that, and I would urge your adoption of this amendment. Thank you.

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PRESIDENT: Thank you. Senator Moore, please, followed by Senator Haberman.

SENATOR MOORE: Yes, Mr. President and members, I, too, rise to support the amendment and it's been, those of you that have asked some questions, there has been passed out an explanation of the three sections of this amendment and a copy of the amendment itself, that was recently passed out. I think enough has been said about the hold harmless provisions. I, too, support that, but I can only support it if it does indeed go away in three years and between now and then the ongoing commission can look at that. The two probably more important things I want to dwell on a little bit, the first being the concept of a state aid cutoff. I think it's important. You know, it was never my intent, during my work on the commission and as an introducer of this bill, to take someone from a $2 levy down to a 20 cent levy. That was never my intent. I mean I want to get that $2 levy down, I think 20 cents might be a little lower than I can defend. Nor was it ever my intent to actually eliminate someone's property tax burden for schools in that district. That was not my intent either. I think this particular amendment simply says that it basically, and this is what it does, it basically says that the lowest levy a school district can have and still get state aid in the form of equalization will be about 60 cents if it's 60 percent of a dollar levy. That is basically what it is and you know a 60 cent levy will be far lower than a $1.07, $2.20 or whatever it is. And I think that certainly better molds this bill to the intent that 1, myself, had and on where we want to get property tax levies statewide. Secondly, the special ed exemption to the lid is something that I support-, but I must say, I support a little bit nervously or anxiously. The fact of the matter is there are some people, when we open up this provision, people in the back here are going to say, holy, shucks, hallelujah, the dam is broke, we're going to take a run at that lid. I guess I'm serving notice to you this is the only one that I'm going to support because I think it's different than the other things and there are going to be some other amendments that are going to be brought to us I think later today that will try and further loosen that lid. And I'm going to stand bitterly opposed to them. I was the chairman of the lid subdivision on the School Finance Review Commission, being somewhat of an admitted tightwad myself I guess, I don't really relish the thought of raising taxes and the only way that I'm going to raise sales and

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income taxes is if there is the guarantee with some sort of lid in there, and what I say that increased spending is going to go for, it's going to go to, and if you loosen the lid any more than the special ed provision, you are in danger of pulling out the bottom card that may bring the whole deck of cards tumbling down. Yes, I will support the special ed exemption given the fact that the state funds are at 90 percent a year in arrears, given the fact this is state mandate and out of the control of the local school district, I can support it. It is a legitimate exemption but I think it should indeed be the last one this body grants on this bill. I think by doing this we still make sure there is still more cheese than holes in our lid, but if we go further than this, we could be in danger.. I do support all three portions of the amendment.

PRESIDENT: Thank you. Senator Baack, would you like to close, or are you the one that is to close?

SENATOR BAACK: Yes, Mr. President and colleagues, just a very. brief closing. I think that we've discussed the provisions of the amendment. It is a very substantive amendment. This is making some very sweeping changes in the bill and it is something that we need to be serious about. I think they are good changes. I think they make the bill that much better and I think they're going to make the bill a little more flexible, the lid is going to be a little more flexible with the provisions in there for special ed. That is certainly going to help. I think it's going to help to have the minimum levy concept in there because I know that some of my districts are going to have a much easier time selling this to their patrons by being able to say at least all districts are going to have to have some contributory level for property tax, and I think it does that. And I appreciate the conversation and I would simply ask for the adoption of the amendment. Thank you.

PRESIDENT: Thank you. The question is the adoption of the Baack-Kristensen amendment. All those in favor vote aye, opposed nay. Record, Mr. Clerk, please.

CLERK: 26 ayes, 0 nays, Mr. President, on adoption of Senator Baack's and Kristensen's amendment.

PRESIDENT: The amendment is adopted.

CLERK: Mr. President, the next amendment I have was one by

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Senator Hall. I have a note that he wishes to withdraw.

PRESIDENT: It is withdrawn.

CLERK: Mr. President, the next amendment was by Senator Warner. I have a similar note that he wishes to withdraw.

PRESIDENT: Senator Warner, you wish yours withdrawn? It is withdrawn.

CLERK: Mr. President, the next amendment I have is by Senator Landis and Crosby. (Amendment appears on page 1489 of the Legislative Journal.)

PRESIDENT: Senator Crosby, is Senator Landis going to handle that? Okay, we'll attempt to find him.

CLERK: Mr. President, I have a note that... Senator, I understand you want to withdraw the amendment that I had filed, AM3071 and offer 3105, is that correct? (Landis amendment appears on page 1489 of the Legislative Journal.)

PRESIDENT: Senator Landis is requesting a substitution amendment. Is there any objection? If not, you may proceed, Senator Landis.

SENATOR LANDIS: Thank you. You'll find a copy of this amendment on your desk with an explanatory note. The amendment is one sentence. Let me read it to you. "When a projected increase in formula students will result in the opening of new classroom facilities, the number of projected formula students shall be multiplied by a factor of one and three-tenths prior to making the calculation described in the preceding sentence. " Now, let me explain the phrase formula students or projected formula students for you. In determining the budget which is the expected amount of expenditures for the purpose of the lid in 1059, you analyze the costs of the district and you do that based on a number called a formula student. When you have, however, as a number of the school districts in the state have, a large influx of new students, you then have something that this amendment calls a projected formula student, meaning you anticipate that there will be this growth, growth so great as to create the need for additional classrooms. In that situation in determining your budget number, you don't treat the students who create the obligation for a new classroom the same as other

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students who are being simply added to your program but not changing classroom needs. Why is-that? Well, if there are 30 desks in a classroom and 28 of them are being used and you get two more students, those two students fit into the existing cost structure very easily. The teacher is already paid for, the desks are probably already there, the utilities in that room is already going to be paid for to illuminate the other 28 students. Those last two students are not very costly. However, the first student in a new room that means additional space, a new teacher, more utilities, more administrative support, that student is very, very costly. So that students are not simply always of the same cost or value in the determination of budget, it makes a great deal as to whether or not they are the twenty-ninth or thirtieth student in- an existing classroom or the first or second student in a new classroom. The costs are completely different. This amendment says that where the new students are sufficient to create a new classroom facility need, then they shall be treated differently for the purposes of determining the lid. In the accompanying material which I put on your desk, we examine some of the districts in which this could occur. Millard, Omaha, Lincoln, Bellevue and Papillion are the ones that immediately come to mind. In a situation in Millard, for example, there has had to be built one new school in each of the last ten years. Those costs are considerable. Not only do they mean new classroom costs as far as bond costs and the like, but they usually mean additional administrative support,- additional teacher's aides, custodians, supplies, utility costs, insurance costs, initial supplies to stock the school and of course additional teachers based on changes in classroom size. The purpose of this amendment then is to create in those districts which are growing sufficiently rapidly to create new classroom facilities, a way of analyzing and adapting to, on a one-year basis, those new costs. This language would be applied in the first year of the new classroom only. Following that they are no longer new classroom facilities and would be treated as formula students at the rate that all other students are treated. I would move for the adoption of the amendment.

PRESIDENT: Thank you. Senator Moore, please, followed by Senator Abboud and Senator Withem.

SENATOR MOORE: As mentioned when I spoke on the last amendment, there would be further attempts to loosen the lid on LB 1059. And as I mentioned then, I'd be forced to oppose them. Now,

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Senator Landis, I don't know who introduced it with Senator Landis, who introduced this with you, Senator Landis, just you? Senator Landis introduced this amendment specifically on the behalf of Lincoln Public Schools and they have a particular problem with the bill. I actually think the public schools had more than one problem with the bill, one of which was the item contained in the last amendment, and we said, yes, you have a point. And I am firmly convinced Lincoln Public Schools is going to do all they can to get their lid under this bill up to double digits because there already is a growth factor in the bill. The way the growth factor works in the bill is if you are a growing district, you project the number of students that you will grow, multiply that times...well, 104 percent if you're on a 4 percent lid, another 105 percent if the board votes to go the additional 1 percent, you know, things like that. I mean, that is addressed in the bill. There is a growth factor in the bill. Now Senator Landis makes the argument that, yes, there is a growth factor in the bill but when you go across the threshold to build an additional building, it does not react to that. And I suppose Senator Landis and I can argue back and forth on whether or not the present lid in the bill is sensitive enough to that. I happen to think it is. But I will oppose Senator Landis's amendment because it is on down that rocky road of creating exemptions in the lid in LB 1059 which is the lid that makes it palatable enough for many members of this body to vote for. And when you start playing around with the lid, start getting a... when a 4 percent lid -becomes, in actuality, a 10 percent lid, I think you've created real problems and some real marketing problems for many members of the Legislature. The lid contained in LB 1059 is reasonable. There is a growth factor. With the last amendment we just adopted, we acknowledged that Lincoln has some problems and the special education amendment is good statewide, but it is to specifically to help Lincoln out. As I said, I do not think they are going to be happy until they have a bill that actually gives them a 12, 15, 20 percent lid, I don't know what it is. The fact of the matter is, I mean, no pain, no gain. If you have a lid that doesn't mean anything, you're insulting us, you're insulting the taxpayers and things like that. I mean, many will argue that the present lid in the bill isn't adequate enough. I know Senator Warner had an amendment to take the lid out of there because he will argue that it doesn't do that much already. The state chamber, the Omaha Chamber of Commerce have already argued the lid isn't tight enough the way it is. If you adopt Senator Landis's amendment, you're further eroding that lid and you're

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further eroding a very key ingredient to the bill that allows us to do a very politically tough thing, that is to raise sales and income tax in a year like this, and I think if you adopt Senator Landis's amendment, I know Senator Ashford has another amendment. All of these are an attempt to circumvent the lid process with exemptions. I think we'd be wiser to face that issue head on and see if you can get the votes to make it a 6 percent lid, a 7 percent lid or whatever it is. I think you are really starting to erode the integrity of the entire bill when you start throwing on additional amendments like this. Though I understand, and will give them a certain degree of merit in their response, I think the lid fashioned in LB 1059 is sensitive enough to that and they can survive. And it should also be mentioned as we already know, this lid is something that we plan on revisiting every year. The ongoing School Finance Commission will be addressing this...

PRESIDENT: One minute.

SENATOR MOORE: ... and other issues in the next 12 months, the next 24 months, and truly, if the lid contained in LB 1059 is so onerous that Lincoln Public Schools cannot live by it, then we should adjust it at that time. But please, please, don't loosen up -the lid this much on the front end of this all important bill.

PRESIDENT: Thank you. Senator Abboud, please, followed by Senator Withem.

SENATOR ABBOUD: Yes, Mr. President and colleagues, would Senator Landis yield to a question?

PRESIDENT: Senator Landis, please. Thank you.

SENATOR ABBOUD: Senator Landis, I'm looking over the amendment and the accompanying information on the amendment to this bill. Is this an amendment that comes from a particular school district? You list five different school districts there and I was curious, are you bringing this in in behalf of a particular school district or is this something that you thought about and decided to introduce it on your own?

SENATOR LANDIS: I've talked to representatives of- two school districts and who then indicated they have been in contact or are representative of other school districts as well. Those

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school districts are Millard North and my own, Lincoln Public Schools.

SENATOR ABBOUD: Were both of those school districts in favor of this amendment?

SENATOR LANDIS: I talked last to a representative of Millard North about a week ago and, yes, they were in favor of this kind of a concept. The language that was drafted for that memo is based on the cost factors, I believe, in Bellevue as a matter of fact. So, I think it's reasonable to say that there is knowledge of and support for in concept, the language from Millard North, from Bellevue and specifically from Lincoln.

SENATOR ABBOUD: You mean Millard Public Schools?

SENATOR LANDIS: Pardon me. Yes, Millard Public Schools.

SENATOR ABBOUD: Okay, thank you.

PRESIDENT: Thank you. Senator Withem, please, followed by

Senator Schimek and Senator Wesely.

SENATOR WITHEM: Yes, Mr. President, this is one of those measures that is tough for me because in general I think most of you would recognize historically I am not an advocate of lids under any circumstances, very limited circumstances and this bill is one of those limited circumstances. Also one of the districts that is mentioned in the handout is, in fact, my district, Papillion-LaVista School District. But I'm probably not going to vote for this amendment. Let me give you a couple of reasons why, one of them a philosophical reason, that the commission feels, felt that it was dealing with growth already in the bill. I know Senator Landis talks about unique circumstances when new buildings are opened, but we are... we felt like, in the bill, we dealt with growth by allowing school districts to project their increased numbers of students and used that increased budgetary authority for the growth that they do, in fact have. I understand the rationale between filling up an empty desk in a classroom versus building a new classroom for them, but building funds are exempted. Let me also tell you a very practical political rationale. Lincoln Public Schools wanted basically two things from us. One, they wanted their own tier. Once we start setting up the tier system we start unraveling the whole process. Senator Landis I think was very

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helpful to us in helping those discussions facilitate to the point where a unique tier was not needed. But they indicated further that they needed three things exempted from the lid. One of those was special education. We've already done that. The second one is growth that we're considering now. Third one was recognition for ongoing contracts. Lincoln Public Schools, as I understand it, has negotiated a multi-year contract and will be faced with implementing that multi-year contract during the same time as this lid comes into effect. We've given on the special education and I think that was the right, rational thing to do. We... I, at least for my vote, I'm going to support the upcoming amendment which is the Ashford amendment that deals with multi-year contracts because I think there is a strong rationale for that. There is also a rationale for the growth concept, but it's one of those sort of things that once the growth door is opened, and my district is a growth district, we're facing bond issues, we're facing new buildings, we're facing all of those kind of things, once you open that door then there are lots of other things out there, transportation, health care costs, any other sort of things that you can begin your laundry list of exempting things from the lid, and I'm afraid of beginning that process unless we have incredibly strong rationale for exempting that and so far the types of exemptions from the lid that we have adopted I believe are those where an individual school district may be negatively impacted different from any other. Senator Byars' district gives a court order to pay back money. Special education, a district happens to have more special education kids move into that district. The growth thing, arguably, is maybe a little more speci ... is not, I don't think as specific. It is one that tends to open up the lid a little further than I'd like to see it. I'd prefer to stick with what we did with special ed, maybe consider strongly the Ashford amendment, but...

PRESIDENT: One minute.

SENATOR WITHEM: ...I think I agree with Senator Moore on this one, that this opens it up-just a touch too far. Thank you.

PRESIDENT: Thank you. Senator Schimek, please, followed by Senator Wesely and Senator Hartnett.

SENATOR SCHIMEK: Mr. President and members of the body, like Senator Withem, I, too, have a little bit of difficulty with this issue because I recognize the political reality of asking

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the body to do something that possibly could unravel the bill. Originally I was not too sold on the idea of LB 1059 because I was worried about, frankly, the state income tax base, and if we were not eroding that to a great deal for future legislatures, but because of all the work that has been done on this bill and because of all the good presentations that we've heard,gradually I became convinced that maybe we did have a solution here to offering some kind of property tax, not relief, but exchange for the income-sales tax. But I have been approached on several occasions by people in Lincoln as well as members of the school board who are very concerned about this bill and think that the Lincoln Public Schools would have a very difficult time existing under this bill, and we've tried to figure out a way to work with it so that it wouldn't unravel. And I guess the idea of a lid being on the bill in the first place is difficult for me too, Senator Withem, because I think that we do a lot, officials like you and me, to make those kinds of decisions and here in Lincoln, I believe by and large, our school board has made good decisions. I think that the public has been happy with them except maybe when it came to the issue of trees, but by and large, the public has been happy. By and large, the public has been very, very supportive of the educational system and I have heard some comments on this floor about the fact that it sounds like Lincoln is whining. I don't think you could call it that because Lincoln has not said a word. I've not heard a word from the school board or any of the others who have commented to me about the fact that we're going to be transporting tax dollars to other school districts. That's not the concern here. The concern here is, can we continue to provide the kind of education that we would like for our children here in Lincoln? And some of us feel that you're going to be making it very difficult for us to do that based on the fact that we have a very strong growth rate in Lincoln and I believe the figures this year were 800 new students entered the school system this year and it is projected that way on down the road so that we're going to continue to have this growth factor for a long time. Frankly, I'm really in a bind but I'm going to have to support Senator Landis's amendment to see if that won't ease the situation for not only Lincoln, I'm talking about Lincoln because that's the one I'm most familiar with, but hopefully, for several of these other school districts that we discussed earlier. Thank you, Mr. President.

PRESIDENT: Thank you. Senator Wesely, please, followed by Senator Hartnett.

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SENATOR WESELY: Thank you. I, too, would rise, Mr. President and members, in support of the amendment. You've already heard from Senator Landis and Senator Schimek about the Lincoln perspective. I don't want to be redundant, but nevertheless, Lincoln does have a unique situation. We've looked at, nationally, and I understand research has indicated we're the eighth fastest city in the country right now. Lincoln is booming right now for whatever reasons. We're having some real success in terms of growth and that success is causing us some problems and those problems are inherent in our school system in finding overcrowding that is leading to busing, that has led to some controversy in the city, that -is leading to other considerations and concerns about adequate facilities, and this is causing a crunch on our budget that is of great concern to the citizens of Lincoln. One of the big concerns I have about this bill is that we have to understand any piece of legislation must incorporate the different perspectives of 900 some different school districts and one in particular is, that I have a great concern about, is Lincoln since that is the area I represent and so I'm here to share with you the concerns of that particular district among the 900. We all have in all of our legislative districts different district concerns that we're trying to bring to this floor to try to amend the bill to deal with those concerns and build a package that reflects a consensus across the state. So I can understand why Senator Withem or Senator Moore are not favorable to seeing this amendment adopted, but I certainly feel that without it there is great concern in the City of Lincoln for the impacts of this legislation because of the unique situation here. Although it's not particularly unique, there are other school districts who are experiencing growth as we are, but that growth has to have a response and that means additional spending to meet the needs that we're finding and the growth that we're experiencing. We have a good school system in Lincoln. Obviously it could always be better. We feel that way about the whole State of Nebraska, a good school system, one that could be improved though, but still a good school system. And we're proud of our school system in Lincoln. We simply don't want to see it diminished by legislation that is well-intentioned and perhaps, certainly on a statewide basis, very laudable. But if its impacts on our city are negative, then obviously we have to be very concerned, and right now with the current status of the bill, it would have a negative impact on our city and our school system, so we are asking your support, recognizing it is not just Lincoln's

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concern, and other school districts are in a similar situation, but that this change is justified and these circumstances ought to be supported by this body to recognize our unique situation and the need for a response on behalf of this Legislature in amending this bill.

PRESIDENT: Thank you. Senator Hartnett, please.

SENATOR HARTNETT: Mr. President and members of the body, I rise, I guess kind of reluctantly to oppose this amendment. My district, and my district was mentioned that I represent, mainly because I ... is the Bellevue district, I have a little bit of District 46 in Sarpy County and a little bit of Omaha Public Schools in my district, but I guess my opposition is that I think that, and I served before I came to the Legislature as a member of the Board of Education,. and one of the things we used to do every year is we used to sit down and say, okay, how big a classroom are we going to have? What's the number, the magic number that we're going to have, and I think we used to come up around 24, 25 in a classroom. Well, my other job, I say my real job is supervising student teachers and one of the things I've done for a number of years is simply count the number of desks in a classroom. That's simply... I think Senator Landis talks about 35. I've been in some classrooms where the number is 35, so we're really... I think that there is a need, but I think, you know, you can look at, I think... I also agree that you can do a better of educating 20 or 25 students than you can 35, but I think we're really kind of treading on thin ice when we say, well, we need these classrooms because of this need and it would help talking to the person who represents the Bellevue District would really help. I guess I would see opposing this amendment at this time and look at it and see, as the commission, as Senator Moore said is going to study it for a while and simply look at it and see if it is a real big need. We... I could benefit, my district could benefit, but I still think that at the present time I'm going to vote against it.

PRESIDENT: Thank you. Senator Landis, would you like to close, please?

SENATOR LANDIS: Mr. Speaker, members of the Legislature, this is supposed to be a new system of financing and it is a transfer of costs. It winds up, according to the Revenue Department, between 45 or $50 million would transfer from urban areas to rural areas basically, and that's all right with me, that's all

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right. Where income is generated, where sales are generated, that's an acceptable basis upon which to draw. But let me go through all of the elements that I find in which we have made attempts to recognize the legitimate needs of the varying school districts in this state. Many of you are from Omaha. When this bill was analyzed first with a standard tier for everyone, Omaha's interests were negatively impacted. The bill has a special tier for Omaha. Your problems were solved. Many of you had state aid reductions from our existing state aid levels. We passed first a diminishing hold harmless provision. Just recently we passed a 100 percent hold harmless for three years and with an examination I guess of the potential for the continuation of that. Your problems were-solved. Many of you have districts that have poor districts that will receive a significant amount of money under 1059. Your problems were solved. The engine of money in this bill are the sales and income taxes and unlike most of the rest of you, Lincoln winds up being an exporter of dollars. We wind up paying for that special tier in Omaha, we wind up helping pay for that hold harmless provision, we wind up helping pay for those poor districts, and that's all right with me. We've got a state system of education, that's all right. But now we're saying, listen, and we're not asking for state aid, we're asking for the right to use our own resources to run our schools. And to fail to adopt this amendment basically says that you're calling upon our taxpayers to export dollars to help other school systems while at the very same time limiting our own ability to meet the needs in Lincoln, and that's just too much, that's unfair. It's all right, we will help with that tier for Omaha, we'll help with the payments for the poor districts, we'll help with the hold harmless, but don't take from us our ability to fund education for our kids.. The opportunity for us, the obligation for us to assist you in getting better education for your kids is a reasonable one to ask us to do, but it should not be accompanied by the limitation on our ability to educate our own kids, and that's just too much to expect. We're not asking this in a form of a hold harmless or state aid, we're not asking for this to come out of a pot of money that you pay for. We're asking for this to come out of our own pockets to pay for the growth factor in our city. That's true of the situation in Millard, it's true of the situation in Bellevue, and it seems to me that gains for your education, for your kids for better school districts should not be at the concomitant loss of our ability to fund our kids. It's just not fair.

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PRESIDENT: One minute.

SENATOR LANDIS: I ask you to adopt the amendment.

PRESIDENT: Thank you. the question is the adoption of the Landis amendment. All those in favor vote aye, opposed nay. Have you all voted? Record, Mr. Clerk, please.

CLERK: 13 ayes, 16 nays, Mr. President, on adoption of the amendment.

PRESIDENT: The amendment fails. Anything further on it, Mr. Clerk?

CLERK: Yes, Mr. President, but may I read some items for the record?

PRESIDENT: Yes, please.

CLERK: Mr. President, a series of study resolutions. (Read introduction of LRs 343-364 for the first time. See pages 1489-1503 of the Legislative Journal.) Amendments to be printed by Senator Warner to LB 1031, Senator Lynch to LB 551A. (See pages 1504-05 of the Legislative Journal.) Mr. President, the next amendment I have to the bill is by Senator Ashford. (Ashford amendment appears on page 1506 of the Legislative Journal.)

PRESIDENT: Senator Ashford, please. Senator Ashford, do you want to see if your speaker works, or your system works? No guarantees.

SENATOR ASHFORD: Yes, I believe it does. Thank you, Mr. President and members, this amendment is on your desks and it relates to a very narrow issue concerning teacher contracts or collective bargaining agreements. As you know, most or many collective bargaining agreements are entered into between the teachers groups and the school boards and they are confirmed, many of them, by the Commission of Industrial Relations, either as a result of a decision by the commission or simply as the result of collective bargaining. The law is rather specific that these collective bargaining agreements are enforceable

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contracts and what this amendment does simply is say that if the contracts that are currently in force or that have been entered into call for an increase in wages over and above the growth rate allowable to that particular district, that the amount that the salary increase exceeds that growth rate would not come under the lid. Basically, the rationale for this amendment arises out of the, basically, an impairment of contract theory whereby the state I don't believe would even have the legal authority to intervene or impair the obligations of the school board to pay to the teachers the agreed upon amount. I think it's fairly straightforward. Senator Withem asked me if... I'll just shortstop this, whether if this passes I'd vote for the bill and I guess I'd have to say that probably not, Senator Withem, just to be honest with you. But in any event, this does deal with a very specific problem that I think is, I believe Senator Withem mentioned earlier, was something that was acceptable to him so I would just urge the adoption of this amendment. Thank you.

PRESIDENT: Thank you. Senator Withem, please, followed by Senator Moore.

SENATOR WITHEM: Yes, Mr. President and members of the body, this is the amendment I referred to a couple of moments ago and, again, referencing Senator Landis's speech at the conclusion of his remarks about not being blind to the concerns that exist within Lincoln, Nebraska, Lincoln, Nebraska, does, in fact, have a ... be going into a second year of a multi-year teacher contract. As I understand, they have a 6 percent increase in their salary due to the teachers. That's by contract. They have to do that. There is no way getting around that. The school district then-is left with the possibilities of meeting that contract, renegotiating that contract lower or cutting into other programs. It was not our intent and it is never the intent of legislation that is passed to impair the performance of contracts and in many ways this will do it, I think. In reading the Ashford amendment, I see that it is very, very well drafted as all of Senator -.Ashford's amendments that somebody else drafts for him are done, and it's a good amendment, Brad. It is very well drafted. Indicating that contracts that have been negotiated prior to the effective date of this act, this is not an ongoing exemption from multi-year contracts, but the school district happens to be in the middle of one where they have negotiated a particular agreement and that agreement puts them above the lid percentage. Whatever percentage they go

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above the lid would be exempt from the lid. In the case of Lincoln there is a 4 percent lid. The chart here shows that they would have a 6 percent increase that they would need to be funding and so 2 percent of that would be exempt from the lid requirement. Again, it softens up the lid, but I think it's only fair to do that because they didn't understand at the time they negotiated that contract that there would, in fact, be a budget limitation. I don't think many others, just scanning down the list here, it's not going to have a major impact in many other school districts in the state. Seward perhaps will, Columbus, some of the other places may, in fact, have ... be impacted by this, but Lincoln, Norfolk, North Platte, other places are the ones that are going to be the major beneficiaries of this and I think it's the fair thing to do. I'm going to support it.

PRESIDENT: Thank you. Senator Moore, please.

SENATOR MOORE: Well, unlike Senator Withem, I rise to oppose Senator Ashford's amendment. Senator Ashford's own admission is not, certainly is not bringing any support to the bill. He has a particular problem, I understand that. I happen to have some school districts in my area with the same problem. But if you do this you, you have an ongoing situation with comparability of peer groups. They are thrown out of whack. You once again just further erode that lid that we've talked about that some people will argue is too loose and it just...it's a special amendment, I believe once again, it's another amendment Lincoln Public Schools needs as well as others that are an extended year teacher contracts. You reward those that had the foresight to do that in front of a lid whereas if you pass this, you penalize those that didn't. I don't think you want to get into that game. I think you simply want to say if you pass LB 1059, you know, come 1990 everybody plays by the same set of rules. And if you start exempting school district by school district, at least with the special ed exemption, you treat all school districts the same. This particular amendment you're certainly discriminating, it's discriminating towards, in favor of certain school districts and I think you want to be very wary before you do that. I rise to oppose Senator Ashford's amendment.

PRESIDENT: Thank you. Senator Ashford, would you like to close, please, on your... Senator Lamb, did you wish to speak? His light just came on, Senator Ashford.

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SENATOR LAMB: Mr. President and members, well, Senator Ashford, you and I have similar problems and my problem has to do with sparsity. You know, this bill doesn't take into consideration sparsity. If you have high transportation costs out there where pupils are transported long distances, that's not taken into consideration in this bill and that, as far as I am concerned, is a big drawback. Another part of it is the fact that some of those tiers, the lowest tier is 100 pupils. We have so many schools out there with fewer pupils and as you get down to the low numbers, then it's very difficult to keep the cost down and so that's not adequately taken care of in the bill also because the first tier being 100 students, You know, that's clear out of the realm. So I don't know, I don't know What we're going to do. At one point we were going to ignore all those on the commission, but, you know, I'm going to agree with you, it's unfair, it's unfair, and it does not work the way it should. We look at the printout, we look at the printout here and we've got some school districts who will have a levy of 7 cents for $100, 7 cents per $100. one school district was zero, zero, zero, zero. Then we're going to have an amendment that is going to put some artificial minimum mill levy in there that's really artificial, I mean, it just masks the deficiencies in the bill which is the same thing the hold harmless does. But with a minimum levy there, you're virtually admitting that the bill is deficient, that under the formula you get the schools that have virtually no property tax at all, and then when I hear the proponents of this bill say, yeah,- we're going to equalize things, we're going to equalize things, but now we're going to have a whole bunch of school districts, if you don't put a minimum levy in there of some kind, which the original bill did not have, then you're going to have school districts with virtually no property tax at all. Now, maybe that's fair, maybe that's a kind of a formula we're looking at that we want, but I don't think it's fair, I don't think anybody in his right mind thinks it's fair.

PRESIDENT: Thank you. Senator Chambers, did you wish to speak on this matter? Your light is on.

SENATOR CHAMBERS: Just very briefly in response to my good friend, Senator Lamb. Senator Lamb, your question or the point you raised about the distances not being considered out there was in a sense answered by Senator Hefner this morning, and you are given consideration because diverting money to the Highway Trust Fund is going to build you better roads and Senator Hefner

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said better roads means better education. So, since you voted to keep it like Senator Hefner wanted it and you accepted his argument that better roads mean better education, putting an extra percent of sales tax on automobiles will produce those better roads, Senator Hefner, do you see where he's got an argument? Could you answer that for me. In view of what...

PRESIDENT: Senator Hefner, would you like to respond, please.

SENATOR CHAMBERS: Can you see where he's got an argument?

SENATOR HEFNER: Senator Chambers, coming from you, I can see your point.

SENATOR CHAMBERS: Thank you, and now, one other thing with reference to the tiers that he was speaking of, t-i-e-r-s, I believe he means, because he was certainly crying some crocodile tears over there, but I think he was referring to a different kind. He said when you reach a level where the number of students is few, that can be resolved through consolidation, couldn't it, Senator Hefner? Couldn't consolidation help remedy that problem to some extent?

SENATOR HEFNER: Senator Chambers, are you saying this is a consolidation bill?

SENATOR CHAMBERS: No, I'm asking a-question about how to remedy one aspect of what was bothering Senator Lamb.

SENATOR HEFNER: Yes, it could be, yes, it could be.

SENATOR CHAMBERS: And do you think that an amendment calling for a consolidation, wouldn't it be germane to this bill because we're dealing with some of the essentials of education. We're talking about equalizing the payment of property taxes and one of the big obstacles to consolidation has been what they called unequal property taxation. So if this bill is dealing with, in fact, an equalization of property tax payments, shouldn't it be something that would encourage consolidation?

SENATOR HEFNER: Well, it sounds to me like it could, but then Senator Lamb pointed out that under this bill, well, some of them have very, would have a very low levy so I don't know. Maybe we're not accomplishing what we want to accomplish.

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SENATOR CHAMBERS: Thank you, Baron.

SENATOR HEFNER: Toe-crusher.

PRESIDENT: Now, Senator Ashford, would you like to close, please?

SENATOR ASHFORD: I appreciate the fact that my amendment caused Senator Hefner and Senator Chambers to talk about the bill, finally, in any event, but in answer to Senator Withem, even though Senator Chizek drafted the amendment to the gun bill, that wasn't enough to cause you to vote for it, so I'm going to start drafting some of my own and see what happens. But... it would be interesting. I'm going to try and help this bill as much as possible before I probably have to vote no. In any event, in answer to Senator Moore's .... But... so I'm sort of a good guy, bad guy, but on this one probably more a bad guy, but on this amendment basically what we're doing, as I said, is that there are contractual obligations out there. It's a little different from the amendments that have come before it and a little bit different than the issue that Senator Lamb raised about transportation. These are ongoing contractual obligations of school districts, which, if this amendment does not go...that are now ongoing, these would not be new contractual obligations made after the bill goes into effect, but are ongoing contractual obligations that deal with teacher wages which are the largest percentage of costs in these school ... or the largest percent of the cost to the school district anyway. If we do not pass this amendment, it will be in all likelihood, as Senator Withem mentions, a dollar for dollar encroachment into other programs. So I think this is the kind of amendment that it's not really an exception or exemption because it is not an ongoing obligation of the Legislature, but it just deals with those contracts which are in force. With that, I would again urge the adoption of the amendment. Thank you.

PRESIDENT: Thank you. The question is the adoption of the Ashford amendment. All those in favor vote aye, opposed nay. Have you all voted? Senator Ashford.

SENATOR ASHFORD: Apparently, we'll have to have a call of the house and...

PRESIDENT: Okay, the question is, shall the house go under call.

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SENATOR ASHFORD: ... a roll call vote. Thank you.

PRESIDENT: Excuse me, and what?

SENATOR ASHFORD: Roll call vote.

PRESIDENT: Roll call vote. Okay. The question is, shall the house go under call? All those vote in favor vote aye, opposed nay. Record, Mr. Clerk, please.

CLERK: 13 ayes, 1 nay to go under call, Mr. President.

PRESIDENT: The house is under call. Will you please return to your seats and record your presence, and those not in the Chamber, please return and record your presence. Please record your presence. Looking for Senator Bernard-Stevens, Senator Lindsay, Senator Dierks, Goodrich, Senator Haberman, Senator Schimek, Senator Hall, Senator Hartnett, Senator Rod Johnson. Senator Hall, Senator Hartnett, Senator Haberman. Now we are looking for Senator Hall. Senator Ashford, we can't find Senator Hall. They can't find him, his office doesn't know where he is. Okay. Insist that everyone be here that is not excused. We should of quit talking about him, shouldn't we. Okay, the question, ladies and gentlemen, is the adoption of the Ashford amendment, and a roll call vote has been requested. Mr. Clerk.

CLERK: (Roll call vote taken. See pages 1506-07 of the Legislative Journal.) 28 ayes, 10 nays, Mr. President.

PRESIDENT: The amendment is adopted. The call is raised. Anything for the record at this time, Mr. Clerk.

CLERK: No, not at this time, Mr. President.

PRESIDENT: Okay.

CLERK: Mr. President, the next amendment to the bill is by Senators Hefner and Withem. (See AM3091 on page 1507 of the Legislative Journal.)

PRESIDENT: Senator Hefner, please.

SENATOR HEFNER: Mr. President, and members of the body, Senator

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Withem and I offer this amendment. This says, "and shall include proportional share of students enrolled in a public school program on less than a full-time basis." Several school districts across the state have parochial schools located within their districts, and in some cases, the public school may be educating a significant number of students enrolled in parochial schools but who are taking just one or two classes part time at a public school. The bill does not allow schools to include these part-time students in the average daily membership reports, and this isn't caused by this bill. I introduced this bill last year already because of the problems we were having. But this amendment allows schools to include any part-time students in the average daily membership reports on a proportional basis. It will provide an increase in aid for these schools but have little, if any, impact on the other schools. This provision, the provisions of this amendment are taken from LB 107, which was advanced from the Education Committee and is on General File. And we called this foundation aid in the previous state aid, and I believe in this change now we would call it equalization aid. But I have a couple of schools in my district that is affected in this way, and like I said, public schools receive state aid now only on full-time students and I think it just only fair that these public schools could receive state aid on part-time students and I would ask your support for this amendment.

PRESIDENT: Thank you. Senator Moore, please, followed by Senator Withem and Senator Hall.

SENATOR MOORE: Well, yes, if I may ask a question of Senator Hefner, I believe.

PRESIDENT: Senator Hefner.

SENATOR MOORE: Now, would that parochial school student that is attending the public school, would they count as. a full-time student then?

SENATOR HEFNER: No, they wouldn't count as full-time.

SENATOR MOORE: Only the proportion that they are using. Now, like an example, you listed they are taking one vocational agriculture class in public school, how would those students be counted? Maybe Senator Withem, if he knows the answer to this, how would...tell me how that is going to work in a scenario like

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that. If you can answer Senator Hefner, that is fine, or whoever can.

SENATOR WITHEM: Senator Moore, in the portion of the bill where we determine the needs of a district and multiply the students times their tier cost for education, I think the example that would be used in that school district is if they had one student from a private school attending one class, and assuming it is a seven-period day, it would be 1/7th of one student additional based on their needs. If they had a $2,800 need, it would be $400 additional needs for that student.

SENATOR MOORE: Just, Senator Withem, do you have any idea of the amount of this type of participation in, for instance, Omaha Public Schools, what impact it would have there?

SENATOR WITHEM: As I under...Senator Moore, last year, we did a little bit of a survey on Senator Hefner's bill and we found out that it is very, very few school districts in the state that are doing this. It is a very minimal impact; would have shifted maybe $15,000 out of our entire $133 million if LB 107 would have been adopted, as I remember it.

SENATOR MOORE: So, you could probably double that, it is going to be a 30, we are talking about maybe a $30,000 amendment is what we are talking about here, roughly?

SENATOR WITHEM: Who knows under this bill, but it would not be very great I don't think.

SENATOR MOORE: Okay, thank you.

PRESIDENT: Thank you. Senator Withem, please, followed by Senator Hall.

SENATOR WITHEM: Yes, Mr. President, and members of the body, in answering the question, I gave part of my speech and probably will give it again, just so it is in the record. A couple of things I want you to know, that this is not... first of all, this is not an exemption from the lid. I know some people are nervous about the last two things that we have done on the lid requirement. This does not exempt anything from the lid, as I understand it. Secondly, it does not provide any aid to parochial schools. This is aid to public schools but it is aid to those public schools that are offering partial attendance to

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students that are attending parochial schools elsewhere. We... this, as Senator Hefner indicated, the history of this bill is a bill that went through the Education Committee. The Education Committee held up on it awhile saying it sure makes sense but let's do some work on it to find out how much of an impact it is going to be. And we found out in our survey it is a fairly minimal fiscal impact but it seems the fair and just thing to do if the public school is providing education to a student who may be enrolled primarily in a private school but they are receiving some education in a public school, that the public school ought to get credit for the amount of education that they are giving to that person. So I think it is a fair amendment that Senator Hefner is bringing to us.

SPEAKER BARRETT PRESIDING

SPEAKER BARRETT: An amendment on the desk.

CLERK: Mr. President, Senator Hall would move to amend Senator Hefner's amendment (See FA414 on page 1507 of the Legislative Journal.)

SPEAKER BARRETT: The Chair recognizes Senator Hall.

SENATOR HALL: Thank you, Mr. President, and members. The amendment is, basically, the General File status of LB 346, which is the tuition tax deduction for students, whether they be in a public or a private institution, it makes no difference. It seems interesting to me that no matter what the impact that we have no problem recognizing private school students, if it means they are going to bring more money into our districts, but we don't want to recognize them for any tax savings or tax benefits that they derive to that public school system by the costs that they pay for their own education outside of the public institution, outside of the public sphere. We want to recognize them for purposes of attracting more dollars to our districts, but we don't want to recognize them for the dollars that they save because 346 had a very minimal financial impact as well. I find it extremely interesting that on one hand we have no problem adopting, it sounds to me like the introducer of LB 1059 has no problem offering this amendment, Senator Hefner's amendment to the bill, and saying that we want to take. those private school students who have a very minor portion of their education, if you read Senator Hefner's explanation, it deals with 45 students that took some voc-ag classes and a couple of

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foreign language classes and 35 that took home ec. That is-fine in Senator Hefner's district. There may be a number of students, 35,000 to be exact, in the state who attend some private institution, who are going to be now counted into those formulas the way I understand this amendment if they take some type of program in a public institution. Now does that also include those students who receive Title I, Chapter 20, Chapter 1, Title XX, whatever the numbers are, do those students then become counted into the formula as well? I don't know. We want to recognize them because it will now bring more money into our district because we do a few things for them. We don't want to recognize the tax savings that those 35 to 40 thousand students provide the rest of the public school system. As a matter of fact, the public school system came out and opposed, the teachers, the school boards opposed LB 346, worked and formed an organization that would come out and oppose the fiscal impact, which is approximately... it was under $300,000. It was 600,000 on the fiscal note. The experience in Iowa showed that it was going to be under 300, probably right around $150,000, but we want to oppose that recognition when we see the tax savings that is into the tens of billions...millions of dollars with regard to what the private school people do in educating children and saving those dollars in the public institution, but at this point, now we want to take credit for them. We want to take credit and have more money run into our districts because those kids happen to live in this area even though the bulk of their education is provided for by -themselves in addition to paying property tax dollars which support the public school system. If this amendment isn't adopted to the Hefner amendment, I will stand to oppose Senator Hefner's amendment because it is hypocritical at best.

SPEAKER BARRETT: Senator Schmit, would you care to discuss the Hall amendment? Senator Schmit. Senator Abboud, would you care to discuss the amendment to the amendment?

SENATOR ABBOUD: Yes, Mr. President, and colleagues, I rise to support Senator Hall's amendment and I think this gets really to the essence of educating our youth in this state. These students would be going to public schools. These students would be resulting in increased classroom size, would be resulting in additional schools having to be built. These students that attend private schools would be costing our public school systems additional millions of dollars if they did not attend these private schools. I think we have to realize that when we

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talk about providing additional money to public schools, over $200 million we are going to be providing to public schools, that even a greater burden could be placed upon public schools unless we provide some support, minimal though it may be as Senator Hall pointed out in this particular amendment. it almost seems like these students, we don't talk about them until there is some way that we can somehow get some money, and I think Senator Hefner's amendment, I plan on supporting the amendment, even if this one isn't attached, because I think it brings up some good points, but it is hypocritical. And if these students were not attending these private schools, they would probably be attending the public schools in Senator Hefner's district. I support the Hall amendment.

SPEAKER BARRETT: Thank you. Senator Hefner, do you care to discuss the amendment to the amendment, followed by Senator Labedz.

SENATOR HEFNER: Mr. President, and members of the body, Senator Hall, I don't think you understand this amendment. What this amendment does is says that if they are going to a parochial school and go to the public school for some classes, then they would be able to get some state aid for that on a fractional basis. If they was there for one class, it probably would be 1/7th, and if they were there for -two classes, it would be a little more. But, Mr. Speaker, I would like to ask you to rule on the germaneness of this to my amendment.

SPEAKER BARRETT: Senator Hall, please.

SENATOR HALL: Thank you, Mr. President. The bill before us is LB, 1059. It is, basically, a school finance issue. The amendment that Senator Hefner is offering is an amendment that recognizes parochial school children that want to be involved in the school finance system, want to be recognized as a part of that system in terms of the formula for allowing state aid to flow. All LB 346 does is recognize students who are in a parochial or private school, as well as the public school system, with regard to their income tax deductions for expenses. We use income tax in 1059 as a funding formula. We add it to that mechanism to show that we need to restructure our school finance system. We now, with the Hefner amendment, want to try and recognize these students who are in private schools. I think it is appropriate that LB 346 find its way as a germane issue into the Hefner amendment.

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SPEAKER BARRETT: Thank you. Anything further, Senator Hefner?

SENATOR HEFNER: Mr. President, I do not believe that it is germane because my amendment says that if they are attending a parochial school and go part-time or take a class or two in a public school, then the public school could claim some state aid. Whereas, LB 346 says that this state aid would go to a parochial school. So I think there is quite a little difference.

SPEAKER BARRETT: Senator Hefner, in the opinion of the Chair, the matter is germane. It speaks to the. distribution formula and it occurs to the Chair that it does include all state aid. Any other comment? Back to a discussion, then, on the amendment to the amendment. Senator Labedz, would you care to discuss it?

SENATOR LABEDZ: I thought we finished that this morning but I rise, again, in strong support of Senator Hall's amendment, and I could tell by the tone of his voice, he is serious and he wants this and I want it, so I urge the members of the Legislature to adopt the amendment to Senator Hefner's amendment. It is a good thing to do. Thank you.

SPEAKER BARRETT: Thank you. Senator Bernard-Stevens, would you care to discuss it?

SENATOR BERNARD-STEVENS: Thank you, Mr. Speaker, members of the body. It is getting that time of day where we have been here quite awhile. Tensions, as people have mentioned, the levels of frustration have been pretty high, particularly with 12 days remaining. A lot of times you don't get this type of frustration until you get to the last three days. And if I were someone opposed to 1059, 1 would be hoping for a moment like this. I would be hoping that there they have gone, they have done it now. Those that are in support of 1059 are starting to fight among themselves. There it is, if I don't get mine, I might be off the bill. If I don't get this, I might be off the bill, and if I were in opposition to the bill, I would say, hooray, hooray, we found our way, 1059 come again another day. My point is this, on LB 346, Senator Labedz's argument this morning were a valid argument, and as she knows, I voted in favor of LB 346 and would continue to vote if given a chance to vote on LB 346 up or down by itself in favor of that, or if it was attached on another particular bill. However, on 1059,

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obviously, in my opinion, and I may not be correct but the votes .aren't there because of the nature of the bill, and Senator Hall has a very, very good point. He has a right to be a little bit upset because, in essence, what we are, basically, saying is though we did not support LB 346 on one side, here we go for a different reason saying that because of public schools taking some private schools, we want to make sure that they can have some increased state aid, but we are not willing to recognize the other benefits. And I can see and share his frustration on that, but I also, Senator Hall, understand that the politics of division can bring down the mightiest of goals, and the picture of 1059 is one of those where we have a chance to refinance our public schools, give an equal opportunity for education, to be a little proactive instead of waiting for the courts to decide that our system is unconstitutional and we lose that local control, the goals of what we are trying to accomplish in 1059 are still the same. Senator Hefner offers an amendment, it gets Senator Hall very upset, and I can certainly understand that. I think if the situation were reversed, Senator Hefner would probably be a little bit steamed right now as well. But what I would ask for people on both sides is that maybe this is not the time to solve this particular issue. Maybe this is one we can pull back from a-little bit so that the attempts and the goals of 1059 are not compromised to the point that we gain nothing, lose everything, and for particular pieces that were not in the long run that important. And, Senator Hefner, I might just put a thought out there that the impact is small, no question about it. We are looking at about $30,000, and I understand that, but for so small a gain, if, in fact, we may begin to lose a great deal, I wonder if-maybe now is the time that we could go back, maybe have some discussions with Senator Hall, maybe withdraw the amendment at a time, at this point, and maybe we would be able to get together and see if we can work on some type of...

SPEAKER BARRETT: One minute.

SENATOR BERNARD-STEVENS: ... finding some common ground on this, and I think -:hat way we can' move forward on the bill, and we can try to take care of some of these difficulties that have arisen. Thank you, Mr. President.

SPEAKER BARRETT: Senator Landis, on the amendment to the amendment.

SENATOR LANDIS: Mr. Speaker, members of the Legislature, I am

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going to vote against the Hall amendment and the I am going to vote against the Hefner amendment. I was not here at the time of the vote on General File on LB 346, and I have not supplied a vote explanation to the Clerk. Had I been present, however, I would have voted no. Let me tell you why. If you were running a program, a state program, for education and you had 40 percent administration costs, you would have a tough time with your constituents. You would have a tough time with the public, I think, and LB 346, or in this case, the Hall amendment, has that kind of phenomenon in it. It is not 40 percent for administration, but according to even the proponents' allegations under LB 346, about 60 percent of the users of that tax credit are public school parents who receive about 40 percent of the tax credits. Now the whole purpose of LB 346, basically, is as a rationale to give money to private school students' parents, but to do that constitutionally, you have to create a system that gives 40 percent of your benefit to the public school parents. That-is not part of the rationale. it is not part of the justification. It is not part of the theory that says, listen, private schools are saving you a lot of money in tax dollars. Let's have a recognition of it. Basically, you have constructed that and you take 60 percent of the recipients who receive 40 percent of the money and they are really for public school parents receiving tax credits for sending their kids to school. I don't think we ought to get a tax credit for sending our kids to public schools, and yet that winds up being 40 percent of the money spent under -that bill. It would be much the same thing as if it was 40 percent spent for, let's say, administration, where you are spending money not for the actual good that you want to accomplish by the bill, but by a necessary obligation for bookkeeping to do the job. Now, certainly, the private school advocates have a tough time because they can't get a rifled tax credit just to go to private school parents because that winds up being unconstitutional, and LB 346 would stand federal constitutional muster in my estimation. It is constitutional under the U.S. Constitution, That doesn't ensure, however, that it is a wise idea or a wise way of appropriating money. Secondly, there can be no doubt that over time there will be immense pressure to raise that sum, and to raise that credit. We are looking at the beginning of an expensive program. Third, we have moved away from linking our income tax system to the federal system only about three years ago. One of the virtues of that old system, besides its progressivity, was the fact that by being linked to the federal tax forms, state tax credits were uniformly unsuccessful. In

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the intervening time, we have begun slowly but surely to create a system of tax credits. We have one now in recognition of child care. We are going to have more over time it looks like, and here is another one. They all have rational', sensible public policy purposes, but if you take them one at a time and add them to your tax code, your tax code gets very, very complex.

SPEAKER BARRETT: One minute.

SENATOR LANDIS: It starts hurting some people and helping others, to fall on people certainly less than uniformly. it becomes the kind of situation where five or eight, I guess maybe eight or ten years ago now, Ronald Reagan came in and said, gosh, let's just throw all of those old systems out and simplify the tax codes, and it was successful because the tax code had become so complex with so many exemptions. Open up your tax code, take a look at the sales tax exemptions, and look at how many we have built in over time to our sales tax code. Once you start that process, it is very easy to continue. We should stop that same kind of phenomenon from occurring in our income tax. The previous wall that we had, linkage to the federal system, has now...

SENATOR LABEDZ PRESIDING

SENATOR LABEDZ: Your time is up, Senator Landis. Your time is up.

SENATOR LANDIS: Thank you.

SENATOR LABEDZ: I am sorry. I just took the Chair, otherwise I would have warned you at the minute. Senator Schmit. He is waiving. Senator Abboud. Senator Hall.

SENATOR HALL: I will wait and close.

SENATOR LABEDZ: There are no further lights, Senator Hall, you may close.

SENATOR HALL: Thank you, Mr. President, and members. The amendment, as it has clearly I think and very honestly been pointed out by Senator Landis, is one that deals with a tax deduction. We have been talking tax credit but it deals with a tax deduction, which means that you put those numbers in, those

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expenses, for an example, a biology kit, a pair of tennis shoes that are used in P.E., a P.E. uniform, tuition, books, the nature anything other than that that would be of a religious nature, would be allowed to be deducted off my adjusted gross income before you figured the Nebraska tax liability. It would not be a credit. It would not be a credit. That goes back to our old income tax system. This deals with the deduction. What does it amount to in terms of dollars? Not very much, very little in fact, in the estimates that we have looked at in comparison to both the Minnesota and the Iowa laws that have been passed and have been found to be constitutional, our estimates based on our population, the number of students we have here in this state in private schools, is approximately $150,000, if that. The only good argument I have heard so far is Senator Landis's and he said that the pressure will be there for down the road to increase it. Very likely that is true with any amount that is put in place. But, ladies and gentlemen, that gets right to the heart of why I offered the amendment to Senator Hefner's. Because what do you think the pressure is going to be with that amendment, and Senator Landis was very honest and said I am going to oppose that one, too, because the pressure is going to be to say, now, we want to count all your students. We want to count every single student that is in our district whether they are in a public institution or a private one for purposes of receiving that equalization because those are students and they live in this district and we ought to be able to count them. Even though we-spend little if nothing on them, we ought to be able to count them. These same people who come in and oppose this type of legislation, who fought textbook loan programs, now, all of a sudden, see a need to recognize those students who are in a private institution for purposes of what? For purposes of lining their pockets to a greater extent. They want to recognize them for the almighty dollar, ladies and gentlemen. That is what it boils down to. They want to recognize them, and that is an appropriate thing for schools sometimes, to recognize them because of the money that it will bring to their district, and that is all. That is all. They don't recognize them... you don't see them rushing in here and saying, there is all the people that we served. You see them fighting special ed kinds of things and helping those private institutions when it comes to spending more money, but when it comes in terms of recognizing them now so that their equalization formula is padded, only to the extent, the percentage that Senator Hefner would have them at this point, then we feel that these students are appropriate to recognize

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and then they are a part of the system. But any other time, we treat them like the bastard child, and they have no father on the birth certificate as far as we are concerned. We don't want to recognize them. We don't want to recognize the fact that they are being educated in this state, that there are savings for those school boards. I have time and time again said let's close them all down if we don't want to recognize them to the tune of 150, 165 thousand dollars in a textbook loan program, approximately the same amount in a tuition tax deduction, 300,000, maybe five in a single year, a million dollars over a budget biennium. We don't want to recognize them to that extent...

SENATOR LABEDZ: One minute, Senator Hall.

SENATOR HALL: ...even though they save hundreds of times that amount of money in terms of what they do. It is simply the recognition factor, not the benefit that is derived. The benefit derived is a very small portion of what we do in this amendment as we did in the textbook loan program, and that was 18 years of trials and tribulations through the court system to get that recognition passed. All we do in LB 346 is recognize that these people are part of the system. I referenced the higher education study when we dealt with this on General File, and how we had to bring in every aspect of that from community colleges all the way through the university system. Now recognize fully what we do in elementary and secondary education with our private institutions, because, 'Ladies and gentlemen, this is not just a private bill. It is for public school parents who have expenses as well. I would urge the adoption of the Hefner amendment.

SENATOR LABEDZ: We are voting on the amendment to Senator Hefner's amendment. All those in favor vote aye, opposed nay. Have you all voted?

SENATOR HALL: May I have a call of the house and a roll call vote.

SENATOR LABEDZ: Yes, you may, Senator Hall. All those in favor of the house going under call vote aye, opposed nay. Record, Mr. Clerk.

CLERK: 26 nays, 1 nay to go under call, Madam President.

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SENATOR LABEDZ: The house is under call. All those unauthorized on the floor, please leave the floor, and all senators in their offices, please return to the floor and record your presence. Senator Bernard-Stevens, would you please record your presence. Senator Peterson, Senator Pirsch, would you please record your presence. Senator Owen Elmer, would you please record your presence. Senator Wesely. We are looking for Senator Scofield and Senator Peterson. Please return to the Chamber, the house is under call. Senator Haberman, would you return to your seat, the house is under call. Senator Hall, did you request a roll call vote? Mr. Clerk, proceed.

CLERK: (Roll call vote taken. See page 1509 of the Legislative Journal.) 22 ayes, 20 nays, Mr. President.

SENATOR LABEDZ: The amendment fails. We are now back on Senator Hefner's amendment. Senator Withem, on the Hefner amendment. The call is raised.

SENATOR WITHEM: Yes, Mr. President, and members of the body, when Senator Hefner brought this amendment to me this morning, it seemed to be a small', rational thing to do. It does, and to correct some of the comments that were made on the floor about the previous amendment, it doesn't count students simply who live in public school districts for the purpose of giving dollars to the public school system. It only counts them to the extent that they are served by the public school. I think that is one keen distinction. I did vote for the last amendment, though, because I think Senator Hall maybe tweaked my conscience a little bit on the whole question of how we deal with private education in our state. I think LB 346 is one way of doing that, to give a recognition to the fact that public schools, the public school system is served by having a competent, capable, well-funded, well-financed private system out there. That private system has to function on contributions, tuition, pickle cards, bingo, all of those other types of things in order to function. The public school system has taxpayer dollars. Both of them are funded unfairly and inadequately, and it has been one of my frustrations as the Chair of the Education Committee that those two entities have to square off against each other instead of putting their differences together and coming forward with proposals that will fund education fairly and honestly for everybody in our state. They fight over the crumbs that are at the bottom of the table that are left after the other entities that feast on our tax dollars are through feasting. One of the

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purposes of 1059 is to get a much more rational system for funding elementary-secondary education in our state. LB 346 is a small step forward toward funding private education or at least giving some recognition to the contributions that private education gives. It doesn't fund private education at all, and Senator Hall and Senator Labedz would take exception to the way I started to characterize and they would be right. I think we need to do something with that and, unfortunately, I think-that is going to be one of the unfinished pieces of business that is left at the end of this session. I hope that we get a chance to address LB 346 straight-up one more time and I plan on being a more vocal, more active supporter of that legislation than I have been to date. We are back though, what is left now is the Hefner amendment. The Hefner amendment does not give a windfall to the school district that happens to have a private school in that district. It gives benefit recognition to those school districts that service students that are attending private schools primarily, that to the extent to which they serve them. It is a fair, legitimate thing to do I think, if you look at it on its surface. I know people are getting frustrated now with the amendments that are coming on this bill. Ideally, a lot of these things would be published in the Journal and would be allowed to be laid over, so we could all analyze and we could do some analysis of them. We attempted to do that with the amendments on 1059 the other day. We had a briefing session on the amendments on 1059. I know there is frustration that there are things being thrown up on -the desk and we have to make decisions on them. We have our staff available over here to give you as much input on what the effects of these will be.

SENATOR LABEDZ: One minute, Senator Withem.

SENATOR WITHEM: Pardon me?

SENATOR LABEDZ: one minute.

SENATOR WITHEM: Okay, one minute, thank you. So I guess I am apologizing to people here-also for these amendments coming up. I don't know what else to do with them, when you have 11 days left in the session, you have a bill on Select File, one that it is going to be very difficult to move back from Final Reading to offer new amendments; you throw your amendments up when they come, when they are available, and if they aggravate some people, I apologize for that. The Hefner amendment, though, I think is... this isn't anything new to us on the Education

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Committee. This is a proposal that we have been able to sink our teeth into, fairly controversial when it was put into the bill, and it came back out, and this doesn't show an unfair windfall I think to -those school districts that are serving students. It gives them benefits the way they are serving students, and if you agree with that analysis, I think you ought to support the Hefner amendment. If you don't think it ought to do...

SENATOR LABEDZ: Time has expired.

SENATOR WITHEM: ... that, then you shouldn't support the Hefner amendment, but I plan on supporting the Hefner amendment, and I guess I am using this time to think through my own thoughts...

SENATOR LABEDZ: Your time is up, Senator Withem.

SENATOR WITHEM: ... that have been going through my mind regarding the support of private education. It is an unfinished piece of business that I think we need to address as a Legislature, if not in this bill, through some other mechanism.

SENATOR LABEDZ: Senator Hall, on the Hefner amendment.

SENATOR HALL: Thank you, Mr. President, and members. Again, I rise to oppose the Hefner amendment, but for clarification purposes, would Senator Withem respond to a couple of questions?

SENATOR WITHEM: Yes, I would.

SENATOR HALL; Senator Withem, the Hefner amendment deals with Section 3, page 5 and it talks about, basically it is a definition of what the average daily membership will be. Can you tell me what is taken into consideration with regard to when you look at adding the Hefner amendment, it says "and shall include the proportional share of students enrolled in a public school program on less than a full-time basis." When you go to the language that it is amended to, or that it attaches itself onto, we talk about "as provided in each district's annual financial report and annual statistical summary." What children are included in an annual financial report, and an annual statistical summary. What type of students are we talking about here, because my question is this...

SENATOR WITHEM: People enrolled in that school attending on a

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full-time basis.

SENATOR HALL: okay, now does that included, since you add the Hefner amendment to that, hypothetically, we add that, and we say then we can add students who are on a less than a full-time basis, right?

SENATOR WITHEM: Correct.

SENATOR HALL: Okay, does that include folks like special ed children?

SENATOR WITHEM: I believe it ... my committee counsel says, no, it wouldn't.

SENATOR HALL: Okay,...

SENATOR WITHEM: If they are enrolled in a public school program for special ed purposes, it would. Most of them are ... special ed is provided in there, by the public school, in the ... it is a private school program.

SENATOR HALL: Okay, well, my point is this and many private schools have special ed, Chapter 1 vans, that... and we no longer allow the public schools to enter... teachers to enter a private school, so what we do is we pull up a van along side and we plug them in?

SENATOR WITHEM: Right.

SENATOR HALL: Right. Now are those students considered ... would they be added by the Hefner amendment? Would they be counted by the Hefner amendment or would they not?

SENATOR WITHEM: Depends on whether that is a public school program or whether it is...

SENATOR HALL: It would be a public ... the one I am talking about is a public school program.

SENATOR WITHEM: If it is defined as a public school program, it would count under the Hefner proposal. I am just not sure that the one you are talking about would be considered a public school program.

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SENATOR HALL: If it is not considered a public school program and there are no private school dollars going to provide it, what is it?

SENATOR WITHEM: If there are no private school dollars going to provide it, it would probably be a public school program. I just don't know, Senator Hall, about the van program.

SENATOR HALL: And I appreciate that, I don't either. I mean that is the reason why I am asking the question. My point is this is that I don't...I think in terms of the amendment as Senator Hefner offers it, and the example that he gives with regard to Hartington Cedar Catholic, I-clearly can understand the financial impact because what happens there is those kids pick up and they go to Hartington High and they take these classes, isn't that right, Senator Hefner? Yeah, they just go over there and take shop or they take home ec or whatever, but in the case... in my district, for example, and I happen to sit on the local school board, private school board, and it is ... we had to redo the electricity because the van kept blowing out our... we were so poorly put together, we had to, whenever the van would pull up, all the computers would shut down in the school, both of them. My point is this is that do we count those people in my case because I don't know that, and if we do, it is my belief when you are dealing with 35,000 kids, in the school down in my area very many of them use that service, that special ed Chapter 1, that remedial reading, math and other things in those programs. That van is there I think a couple days a week. Do we count those, because if we count those on a proportionate...

SENATOR LABEDZ: Thirty seconds, Senator Hall.

SENATOR HALL: ... basis, then that is -a heck of a lot more of a fiscal impact than $30,000, and I think before we adopt this amendment, we ought to know that because that has a big impact on a district the size of Omaha's OPS.

SENATOR LABEDZ: Thank you, Senator Hall. Senator Korshoj.

SENATOR KORSHOJ: Question.

SENATOR LABEDZ: The question has been called. Do I see five hands? I do. All those in favor vote aye, opposed nay. Have you all voted? Have you all voted? Record, Mr. Clerk.

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CLERK: 14 ayes, 17 nays to cease debate, Madam President.

SENATOR LABEDZ: Debate has not ceased. Senator McFarland.

SENATOR McFARLAND: Thank you, Madam President. This amendment has raised an issue that has always troubled me and it is something we have discussed in the Education Committee. Senator Hefner's amendment, as I understand it, would count parochial students who attend public schools on a part-time basis in the distribution formula. I can see the basis for it but I* really think a better solution to it would be count all of the students who are of school-age eligibility in the distribution formula whether they attend public, private, or parochial schools. My general view on this whole issue has been that everyone, regardless of where they send their children to school, or regardless of whether they have children or not, or whether they are senior citizens, or whether they are a young couple without any children, or whether they are single people, or whatever, all of us have an obligation to support the public school system. The question for me is not giving tax credits to parochial schools necessarily or tax credits to private...to parents who have sent students to private schools or parochial schools, the question for me is, what is the fairness of the distribution of state aid? Right now in the distribution of state aid, we are distributing that on a proportional basis based upon the number of students attending public schools. That, to me, seems an unfair method of allocating the distribution of state aid funds. What we should be doing is distributing it on the total number of students within the school district because everyone is paying, in the district, paying a tax burden proportionate to pay for public education for all of those students, and so that state aid should be distributed accordingly in my view. I had a bill like this in the Education Committee. I don't recall whether we advanced it out or not. It generated some debate, and as I recall in the Education Committee, there was a grudging acceptance of the philosophy of it. My view is that if you really want to count and distribute state aid on a proportionate basis, don't just count the students in the public schools because then you are penalizing the whole district and all the taxpayers of that district just because some parents choose to send their students to private or parochial school, and I think they have that legitimate right. What I do say, however, is in fairness to the taxpayers of that district, then distribute state aid

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proportionately in the formula that is being used on the basis of the total number of students, not just on the basis of the total number of public students. For that reason, I plan to vote against this amendment, and it may be that I would like to see another amendment considered whereby not only do we count the students who attend public schools on a part-time basis, but also count all students in the district who are of school age and who could attend the public schools if they desire. And I think that would be a much more fair...

SENATOR LABEDZ: One minute, Senator.

SENATOR McFARLAND: ... and a much more reasonable and much more sensible way to try and address the problem.

SENATOR LABEDZ: Senator Withem, on the Hefner amendment. Senator Hefner. I don't see Senator Hefner. We will go to Senator Abboud. Senator Abboud, on the Hefner amendment. Senator Morrissey, would you like to speak on Senator Hefner's amendment. The question has been called. Do I see five hands? I am sorry, Senator Morrissey, we have no further lights on. We will go to Senator Hefner for closing.

SENATOR HEFNER: Mr. President, and members of the. body, I apologize for causing all this confusion but it really shouldn't be that confusing because all I am trying to do is help two schools in one community, a parochial school and a public school. At the present time, the public school is letting some of the parochial students come over to the public schools for one or two classes, and like I said in my explanation, some of them attended vocational agriculture classes, some of them took art and foreign language classes, some of them took home economic classes, and we do have these in a few other communities. What I am trying to do here is get the parochial schools and the public schools to work together, but in order to do this, the public schools want a little state aid for doing this. Now to receive state aid, they have to have a full-time student, and what this amendment would do would say if you attend one class that we would be giving you the opportunity to get state aid on a fractional basis. And I certainly don't see anything wrong with that. And, Senator Hall, I wish I would have explained it a little bit better to you before. I think where you are talking about what you were talking about, I think those are federal programs, and this isn't covered in LB 1059. But the last information that I have received, and this comes

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from the staff of the Educational Committee when they prepared a worksheet on LB 107 that I introduced last year. They have come up statewide, total students, of 246, and total aid would amount to just a trifle over $30,000. So with that explanation, I would like to ask your support for this amendment to 1059.

SENATOR LABEDZ: Senator Hefner was closing on his amendment to LB 1059. All those in favor vote aye, opposed nay. Have you all voted? Senator Hefner.

SENATOR HEFNER: Madam Chairman, I'd ask for a call of the house and a roll call vote.

SENATOR LABEDZ: Senator Hefner is requesting a call of the house. All those in favor vote aye, opposed nay. Record, Mr. Clerk.

CLERK: IS ayes, 2 nays to go under call.

SENATOR LABEDZ: The house is under call. All unauthorized personnel, please leave the floor. All senators in their offices, return to the Chamber and record your presence. Senator Schmit, the house is under call. Senator Chambers, Senator Langford, the house is under call, please return to the Chamber. We are looking for Senator Chambers, Senator Schmit. We are looking for Senator Chambers, the house is under call. Senator Hefner, can we proceed. I believe Senator Chambers is on his way up. Mr. Clerk, call the roll.

CLERK: (Roll call vote taken. See page 1510 of the Legislative Journal.) 19 ayes, 19 nays, Mr. President.

SENATOR LABEDZ: The amendment fails. Do you have anything else on the bill, Mr. Clerk?

CLERK: I do, Madam President. May I read some items in the record?

SENATOR LABEDZ: Yes, you may.

CLERK: Madam President, I have a series of study resolutions, LR 365-378 offered by a number of members.

SENATOR LABEDZ: The call is raised.

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