Property Tax Relief Leveraged Against Private School Funding, Both Advance

Though there were only three session days last week, senators crammed in more action in those long days than in some early session full 5-day weeks.

To start the week early Tuesday, all eyes were on LB 1402, Sen. Linehan’s priority bill that she has called an “end-run” way to sidestep the referendum vote on LB 753 (her previous effort, dubbed the Opportunity Scholarships Act) set to appear on Nebraskans’ ballots for possible overturn this fall. LB 1402 essentially cuts out the middleman in the current law, which provides dollar-for-dollar income tax credits to Nebraskans who donate to private school Scholarship Granting Organizations. Instead, this bill appropriates General Funds to the state treasurer to fund private school scholarships. If passed into law, it would repeal LB 753 and nullify the referendum.

Word on the street was that LB 1402 might not have had the votes, but that Linehan was willing to do whatever it took not to lose, and that she was working multiple angles with target senators to secure 33 for cloture. One clear strategy that appeared to ease some concerns was a compromise amendment that knocked the amount of state funding in the bill down to $10 million from the previous $25 million per year that could have grown up to $100 million with annual increases.

The other less visible tactic Linehan hinted at on the mic but which mostly took place behind the scenes was that she essentially linked the outcome of her bill to that of the property tax package, including a potential boost in state funding for public schools and agricultural land tax relief — policy items which might be high value to key senators whose votes she needed. In other words, I heard she threatened a handful of conservatives that might have been swing votes on the private school funding issue that if she didn’t get their votes on LB 1402, she’d pull the property tax relief package — and their opportunity to vote to pass it — off the table.

Some combination of the above apparently worked, as LB 1402 cleared both of the first two rounds with 33 cloture votes. The swing vote senators in question could have been motivated by a number of factors: the political points they might gain in a re-election campaign by stating on mailers that they voted to reduce property taxes; a genuine desire to see property tax relief pass outweighing issues they had with LB 1402, especially if they’re in districts where ag land property values or taxes are of particular concern; or the compromise amendment reducing the state’s obligation for funding the bill easing their concerns about the amount of dollars diverted from public schools.

While Linehan, Education Chair Murman and other supporters of LB 1402 frequently made the point that the amended bill’s $10 million annual price tag is a drop in the bucket relative to what the state spends on education in the general fund budget, there is some concern that this was just the beginning: that supporters of school privatization wanted to push to get this into law now and while the amount may be small, future legislatures could continue to gradually expand the statute and weaken public education in our state over time.

LB 1402 is now poised for a final vote and potential passage when the legislature returns for its final day on Thursday. If passed, there’s a substantial possibility that the bill’s mechanism of appropriating state dollars expressly for the purpose of funding private school scholarships will see a constitutionality challenge.

Property Tax Relief Plan Evolves, Advances

After Linehan got her way on the first round of LB 1402, lawmakers took up and adopted a substantial new amendment to the Governor’s property tax relief package, which is now moving forward only in LB 388. As part of a compromise to appease opposition and attempt to win the votes necessary to get at least some form of relief across the finish line, Linehan and proponents have made several significant changes from what was initially proposed. The highly contentious sales tax increase is gone. Proposed taxes on hemp and vape products have been cut down to 25% and 20%, respectively, while the excise tax on cigarettes will jump from $0.64 to $1.

The approach that was LB 1331, which contained a large increase in state aid to public schools, has been abandoned for now in favor of a new School Property Tax Credit Fund that is in the amended LB 388. With this fund, the state will distribute $750 million to counties, who will use these dollars to reduce the amount of taxes owed to schools on property taxpayers’ statements. This amount is set to grow by $30 million annually, and would replace the LB 1107 income tax credit for property taxes paid to schools and community colleges that Nebraskans currently have to fill out a form to claim on their income tax returns.

In good news, they’ve added an increase to the Earned Income Tax Credit (from 10% up to 15%), in an effort to sway members that had concerns about the package not benefitting lower income Nebraskans. This will put a little more money in the pockets of hardworking families as the costs of day-to-day essentials continue to increase. While the new version of LB 388 is still generating a variety of concerns, we can celebrate the wins: In the face of overwhelming pressure from the Governor’s administration, special interests that want to see tax breaks for the wealthy, and influence from majority political leaders, senators who advocated for everyday low-to-middle income Nebraskans were successful at negotiating on pieces like removing the sales tax increase and including the EITC increase to make it a bit more equitable.

However, this version of the bill is estimated to deliver only 22% of Pillen’s desired 40% property tax relief, further fueling expectations of a call for a special session later this summer.

Thursday, April 18 is the final day of the session and the biennium. I’ll have one more post for you next week — my final of the year — looking back on highlights of the session.

Until Next Week,
Your Capitol Fly on the Wall