Bill Summary, LB
1059 (1990)
One of the most significant bills
discussed during the 1990 session was LB 1059, which proposed a major shift in
the source of funding for Nebraska’s elementary and secondary schools. The bill received substantial support
from legislators during the three stages of legislative debate, but was subject
to strong opposition and an eventual veto from the Governor. The bill’s support held through an
override vote, which succeeded 32-16.
As in other cases where the
Legislature has sought to enact major changes in school finance, LB 1059 will
be the subject of a petition drive to place the issue on the ballot. Signatures are being gathered on a
petition seeking the repeal of the school finance legislation, as well as other
recently-enacted school laws, including a bill on school district organization
(LB 259). If the petition drive is
successful, the question of repealing the bills will be put to the voters at
the November, 1990, general election.
The intent of LB 1059 is to
increase state financial support for less-wealthy school districts by shifting
a substantial portion of the funding for K-12 education from property taxes to
sales and income taxes and revising the method of state aid distribution (see
pages 17-22 on Tax Policy).
Proponents of the bill pointed to
Nebraska’s status as one of the nation’s highest-ranking states in terms of
property tax support for education.
Nearly three-fourths of the funds for Nebraska schools come from
property taxes.
The increased support from sales
and income taxes and the lid on local government expenditures contained in LB
1059, proponents argued, should serve to make the system of school finance in
Nebraska more equitable. Without the
bill, supporters said, property taxes are likely to increase by over 16% next
year.
Supporters of LB 1059 also used a
pending lawsuit seeking invalidation of the current school finance system as a
rationale for passage of the bill.
Courts in several states have thrown out existing school finance
provisions, and proponents foresee a similar situation for Nebraska in the
absence of substantial changes in the current system.
Opponents of LB 1059, including
the Governor, argued that the bill contained no guarantee of reduced reliance
on property taxes, in spite of the bill’s lid language. They also argued that LB 1059 amounted
to a tax increase on certain portions of the state’s population, such as those
who rent housing and farm land.
The provisions of LB 1059
include:
• The
addition of nearly $180 million in state funds for aid to education, on top of
the current $134 million in state aid.
Each school district would receive a 20% rebate of state income taxes
paid by residents of the district, and additional aid would be provided based
on a formula designed to direct additional state funding to students in poorer
districts;
• Financing of
the additional state aid through increases in the sales tax (one cent effective
July 1, 1990) and individual income tax (8.75% effective July 1, 1990 and
another 8.75% effective January 1, 1991);
• A lid on
annual budget increases for school districts and other units of local
government. The school district
lid, which has no expiration date, limits budget increases to between 4% and
6.5%, with an additional 1% authorized upon approval by a three-fourths vote of
the school board. The lid on other
units of local government, which expires on July 1, 1992, is 4% with a similar
1% additional increase authorized by a three-fourths vote of the governing
body. In both cases, increases
beyond the lid (with the exception of the additional 1% authorization) must be
approved by the voters.
The legislation was developed
during 1988 and 1989 by the School Finance Review Commission, a sixteen-member
body established by the 1988 Legislature through LB 940 and appointed by the
Governor. Commission members
included legislators, representatives of the Governor, and representation from
several school districts of varying sizes as well as other interested
organizations.