Hughes and other state senators had said that some degree of tax sovereignty was necessary so that the districts were not completely dependent on the state treasury for funding.

The 244 school districts would save about $1 billion in operating expenses through property taxes. This does not include bonds or funds used for construction projects or other special purposes, for which the schools could still levy taxes.

“We will have more than enough money to do this and some other things for the districts,” Linehan said.

TEEOSA changes

Linehan said the committee will use LB 9 to significantly change the existing “equalization assistance” formula — the Tax Equity and Educational Opportunities Support Act (TEEOSA) of 1990, which is also intended to be used to reduce local property taxes.

TEEOSA assistance is determined by the difference between a district’s 18 “needs” and six “resources.”

“Needs” include number of students, poverty, and English as a second language. “Resources” include net enrollment, allocated income tax funds, and base funding per student.

Anger over Governor Jim Pillen’s initiative to increase property taxes spills over into the parliamentary debate

Another “resource” is based on potential property tax revenues, assuming a hypothetical tax rate of $1 for each school district. That’s the amount the state could collect based on its annual assessments if it had such a high tax rate.

The proposal would reduce this rate to 25 cents, thereby dramatically increasing state aid.

An estimated $501 million in equalization aid is expected for the coming school year. The change would increase that amount to $2.294 billion.

Under the current funding method, for the 2024-25 school year, 75% of school districts would likely receive no “equalizing aid” because their “resources” exceed their “needs.” All school districts receive state aid, mostly through “basic aid” – about $1,500 for each student in a district, established in 2023.

Hughes, who is not a member of the Finance Committee, declined to comment until the committee amendment to her bill is completed.

Reforms must be implemented carefully

Walz said one reason she liked the original LB 9 was because it was designed to be implemented in stages over a longer period of time. Every two years, lawmakers would have had to find additional revenue to further reduce school tax rates, starting at 65 cents per $100 of property value, then increasing by 10 cents every two years.

“We didn’t disrupt services. We didn’t disrupt people’s lives. We didn’t cause panic,” Walz said of the original plan. “It was a solid plan that could be paid for. We could find the money for it.”