Neb. Lawmakers Override Orr Veto of Finance Bill

By Peter Schmidt — April 18, 1990 4 min read

Overriding a veto by Gov. Kay A. Orr, the Nebraska legislature last week enacted legislation aimed at shifting the burden of financing public schools from local property levies to state sales and income taxes.

Proponents of the revised school-funding plan, which had passed the unicameral legislature earlier this month by a vote of 30 to 16, were able to maintain their strength on the override attempt, despite a vigorous lobbying effort by the Governor to persuade several senators to switch their position.

The April 9 override vote was 32 to 16 in favor of the financing measure. Thirty votes were needed to override.

Douglas E. Parrott, communications director for the Governor, said Ms. Orr was “disappointed for Nebraskans because this definitely is going to be a tax increase.”

Mr. Parrott added that Ms. Orr has pledged to work with the legislature next year to correct what she sees as “major flaws” in the new law. The Governor is seeking re-election to a second term this fall.

Senator Ronald E. Withem, who served as chairman of the school-financing review commission that spent 18 months drafting the new plan, hailed the measure during debate for its efforts to increase the state’s share of education spending.

Currently, Nebraska pays for 23 percent of local schools’ operating expenses--a smaller share than any other state except New Hampshire. Under the new law, that percentage will rise to 45 percent. The national average is 50 percent, according to the National Education Association.

“It moves the state forward,” Mr. Withem said. “It moves the state from being next to last in terms of state support for education up to the middle.”

The law will take effect in July.

District Spending Capped

Modeled on the tax system used in neighboring Kansas, the new school-financing formula seeks to raise $211 million in new state aid for schools, while decreasing property taxes by a comparable amount.

The new aid funds are to be obtained by raising the state sales tax to 5 cents from 4 cents, and by increasing individual and corporate income taxes by 17.5 percent.

The money is to be used, in part, to provide equalization aid to address disparities in spending between school districts.

The new law seeks to reduce property taxes by imposing ceilings of from 4 percent to 6.5 percent on the allowable annual growth of school districts’ general funds, as well as the budgets of other local entities supported by such levies.

Backers of the measure argue that the spending caps will ensure that the increase in state aid will decrease districts’ reliance on property taxes--and not be absorbed entirely by higher spending.

The percentage of allowable budget increases will be determined by the wealth of local districts. Relatively poor districts will be able to budget more growth to catch up with wealthier districts in per-pupil spending.

With the approval of a 75 percent majority of the local school board, districts will be permitted to raise spending by an additional percentage point above the state cap. District voters, in a special election, could raise the ceiling by any amount.

Largest Tax Hike?

In her April 6 veto message, Governor Orr cited several reasons for her opposition to the bill. The measure does not achieve property-tax relief, does not promote educational equity, and contains several “hastily included tax provisions,” she argued.

Noting that the measure would raise state taxes by $179 million in the first year and $228 million in the second year, with no guarantee of property-tax relief, Ms. Orr said it was “simply the largest spending and tax measure to be considered in the history of the state of Nebraska.”

The Governor also described the bill’s limits on local districts’ spending as “too loose and too full of exceptions to have any impact.” The caps would prevent poorer districts from increasing their spending to achieve educational equity, she said.

The measure is especially unfair to the elderly and young couples, who are among the one-third of householders in the state who rent their homes, the Governor argued.

But Senator Withem argued during the overrride debate that, regardless of its flaws, the bill was far preferable to the status quo. “We took a problem that was troubling the state,” he said. “We dealt with it.”

Mr. Withem argued that, without the new finance plan, the aggregate property-tax rate in the state would increase by about 16 percent, while property owners in low-wealth areas would continue having to pay property taxes up to six times as high as those of residents of other areas.

Moreover, the courts were likely to find the state’s education-finance system to be inequitable and declare it unconstitutional, he warned.

The measure was opposed by several local business groups. But the Nebraska State Education Association and the Nebraska Association of School Boards backed the bill.

Dale E. Siefkes, executive director of the n.a.s.b., said the new law will help to resolve many of the financial issues that have blocked efforts to address the quality and effectiveness of education in the state.

A version of this article appeared in the April 18, 1990 edition of Education Week as Neb. Lawmakers Override Orr Veto of Finance Bill