Table 21

Sec.

Catch Line

Section Description

79-3801

Act, how cited

Sections 79-3801 to 79-3824 cited as the Tax Equity and Educational Opportunities Support Act

79-3802

Legislative findings and intent

Legislature finds that:

•  State under-supports education compared to other states;

•  State support has not kept pace with increased costs of operating schools;

•  Nebraska has higher per capita property tax burden than other states;

•  Over-reliance on property tax has resulted in disparities in property tax rates and created inequitable educational fiscal resources for students.

Legislative intent to create a finance system that:

•  Provides state support for 45% of aggregate general fund operating expenditures of districts;

•  Reduces reliance on property tax for support of schools;

•  Broadens support for schools by dedicating a portion of income tax for schools;

•  Keeps pace with increasing costs of operating schools;

•  Assures each district a foundation support for operation of schools with consideration of taxable wealth and other accessible resources;

•  Assures greater equity of educational opportunities for students and also property tax rates for support of schools;

•  Assures a shift to sustainable revenue sources, other than property tax, for support of schools through spending lids;

•  Insures state funds are used for the purpose of reducing property taxes in the district to which they are distributed.

79-3803

Terms, defined

Provides definitions for such terms as adjusted valuation, average daily membership, average daily membership tiers, categorical federal funds, formula students, general fund budget of expenditures, etc.

79-3804

Income tax receipts; use and allocation for public school system

Dedicates 20% of all income tax receipts collected by the state net of credits and refunds.  Provides for direct return of 20% of identifiable individual income tax receipts to the district where such originated.  Class I districts, Class VI districts and county nonresident tuition funds would receive a pro rata share of such income tax receipts.  That part of individual income taxes not identifiable to any district plus 20% of corporate, nonresident, trust and other non-individual income tax receipts would be distributed through the equalization formula.

79-3805

Tiered cost per student; general fund operating expenditures; calculations

Provides that the State Department of Education will place all school districts in average daily membership tiers of comparable size in order to calculate each school district's tiered per student costs for use in the equalization formula.

79-3806

State aid; amount

Provides that each school district will receive state aid to the extent that its "formula need" exceeds "formula resources."  Provides a hold harmless provision such that a district would not receive state aid for school years 1990-91, 1991-92, and 1992-93 that is less than 100% of aid received in 1989-90.  Creates a minimum levy provision.  No district receives state aid in an amount that would result in the district having a general fund tax levy of less than 60% of the local effort rate.

79-3807

Total formula need; computation

Total "formula need" of each district is computed by multiplying the number of students it educates in kinder-garten, grades 1-6, grades 7 and 8, and grades 9-12 times the tiered per student costs for each such grade grouping.

79-3808

District formula resources; local effort rate; determination

Each district subtracts from its "formula need" the local effort rate yield, which is the statewide local effort rate multiplied by each district's "adjusted" valuation.  The local effort rate is calculated annually by the State Department of Education based on available appropriations, school district needs and school district resources.

79-3809

Adjusted valuation; adjustment factors established

The Revenue Department will use adjustment factors to adjust taxable valuation to reflect as nearly as possible actual value.  Adjustment factors will be established based on best available assessment practices (sales assessment ratios, targeted appraisals etc.)  Adjusted taxable values will be used in the formula for purposes of computing school district eligibility for state aid.

79-3810

District formula resources; income tax liability allocation

Provides that districts will subtract from their total "formula need" the amount of individual income tax revenues returned by the state to the district.

79-3811

District formula resources; other receipts included

Districts will subtract from their total "formula need" all other actual, accessible resources.  The list includes all forms of local, state and federal receipts of school districts except federal categorical receipts.  Other actual receipts includes:

•  Public power district sales tax revenue;

•  Fines and license fees;

•  Nonresident high school tuition receipts;

•  Tuition receipts from individuals, other districts, or any other source except those derived from adult education;

•  Transportation receipts;

•  Interest on investments;

•  Other miscellaneous local receipts, not including receipts from private foundations, individuals, associations, or charitable organizations;

•  Special education receipts;

•  Receipts from state for wards of the court/wards of the state;

•  All receipts from the temporary school fund;

•  Receipts from the Insurance Tax Fund;

•  Pro rata motor vehicle license fee receipts;

•  Help Education Lead to Prosperity Act funds;

•  Other miscellaneous state receipts;

•  Impact aid receipts to the extent allowed by federal law;

•  Johnson O'Malley receipts;

•  All other noncategorical federal receipts; and

•  All receipts under Chapter 79, article 34 (option students)

79-3812

School District Income Tax Fund; Tax Equity and Educational Opportunities Fund; created; investment

Creates the School District Income Tax Fund and the Tax Equity and Educational Opportunities Fund for receipts and distribution of income tax funds and state aid funds.

79-3813

Distribution of income tax receipts and state aid; effect on budget

Provides for distribution of income tax and state aid payments to school districts.

79-3814

General fund budget of expenditures; allowable growth limitation; Legislature; duties

Limits growth in school district budgets based on allowable growth rates to be set annually by the Legislature.  The basic allowable growth rate will be based on projections of available state revenues and school district costs.

79-3815

Budget statement; submitted to department; Auditor of Public Accounts; duties

Provides that each district must submit a copy of its budget statement to the State Department of Education.  The State Auditor will make necessary changes in budget documents to facilitate implementation of the budget limitation provisions.

79-3816

Basic allowable growth rate; allowable growth range

The basic allowable growth rate is set at 4%.  The allowable growth range will be 4% to 6.5%.

79-3817

Applicable allowable growth percentage; determination

Provides for the State Department of Education to compute each district's "applicable allowable growth rate."  Each district's growth rate will depend on whether it has budgeted expenditures of more or less than the average of comparable size school districts.  Those districts spending below average will be able to spend above 4%, up to 6.5%.

79-3818

Budget; restrictions

Limits school districts in budgeting of cash reserves, depreciation funds and contingency funds to a range of percentage levels based on school district size.

79-3819

Applicable allowable growth rate; district may exceed; situations enumerated

Provides for exceptions to the growth limitations in the following cases:

(1)    New or expanded programs or services mandated by changes in state or federal law;

(2)    Districts' project enrollment increases for the ensuing school year, in which case the Department will compute additional allowable growth capacity;

(3)    Construction, expansion, or alterations of school district buildings will cause an increase in building operation and maintenance costs;

(4)    Additional special education students enroll in the district for the ensuing school year and will result in an increase in expenditures for special education; and

(5)    The extent to which the terms of a long-term collective bargaining contract exceeds the district's applicable allowable growth rate.

79-3820

Applicable allowable growth percentage; district may exceed; vote required

Provides that school districts may exceed allowable growth rates by an additional 1% upon a 75% majority vote of the school board or by any amount upon the approval of voters at a special election.

79-3821

Unused budget authority; carried forward

Provides that school districts may carry-over to future years unused budget authority if a school board does not choose to budget the maximum allowed by law.

79-3822

Department; provide data to Governor; Governor; duties

Provides that the Department of Education will provide data to enable the Governor to introduce legislation to appropriate funds to reach the goal of 45% state support for schools to appropriate 20% of income tax receipts and to set allowable budget growth rates for the upcoming year.

79-3823

School Finance Review Committee; created; members; duties

Creates a school finance review committee to monitor implementation of the new finance plan and suggest needed revisions.  In particular, the committee would review the implementation and operation of the average daily membership tiers, budget growth limitations, the need for a continuing hold-harmless provision for state aid, and expenditures of districts.

79-3824

State assistance; payments; reports; use; requirements; early payments

Provides for reporting of data by school districts on which state aid payments will be computed.