Senator Sen. Kate Sullivan and Members of the Education Committee:
I write on behalf of the Lincoln Independent Business Association (LIBA) to express our opinion on the financing of public education in Nebraska and suggest changes which need to be made.
Nebraska’s school aid formula was originally developed to relieve property tax rates across Nebraska.[i] Today, in Nebraska’s largest communities, the school aid formula not only fails to meet the goal of property tax relief but actually requires the highest legal property tax rate. This formula penalizes school districts who do not levy up to their levy lid, forcing school systems such as Lincoln Public Schools (LPS) to levy the maximum possible amount or face a penalizing reduction in state aid. LPS currently educates 37,845 Nebraska students each year[ii] and does so at a cost of only $9,755 per student well below the Nebraska average of $10,710[iii] yet at a full 1.05 levy.However, any attempt by LPS to pass the cost savings achieved to Lincoln taxpayers would be penalized with an unsustainable reduction in state aid.
In order to create greater equity among Nebraska’s school districts and provide Nebraskans property tax relief, LIBA suggests that the Nebraska Legislature lower the property tax levy lid for school districts and correspondingly increase state aid to schools.
The State of Nebraska has several opportunities to reallocate spending from other programs to the state’s school system and therefore increase state aid without increasing taxes. For example, due to enactment of the Affordable Care Act, Nebraska will save more than $20 million each year that has previously been used to subsidize Comprehensive Health Insurance Pool (CHIP). According to Bruce Ramge, director of the state Department of Insurance, this $20 million will be split between the state’s general fund, schools, counties and cities[iv] and could be used to fund an increase in state aid to schools.
It is time for the state of Nebraska to provide tax equity to all Nebraskans, those in both large and small communities, by lowering the local levy and thereby giving much needed property tax relief.
President, Lincoln Independent Business Association
[i] LB 1059 Statement of Intent; Senator Withem; Committee on Education; 23 January 1990; http://schoolfinance.ncsa.org/sites/default/files/media/SF/Files/1990/LB1059_Intent.html
[ii] “Student enrollment at LPS soars with 943 more students;” LPS.org; http://www.lps.org/post/detail.cfm?id=7745
[iii] Lincoln Public Schools Budget presentation to LIBA; Presented by Liz Standish; 2 July 2013; derived from 2011-2012 date from the Nebraska Department of Education
[iv] “Affordable Care Act to replace high-cost state insurance plan;” Nancy Hicks; Lincoln Journal Star; 24 September 2013; http://journalstar.com/news/local/govt-and-politics/affordable-care-act-to-replace-high-cost-state-insurance-plan/article_0ab12056-daf5-5f13-b3ea-ffb0a4bb4032.html