Shift in Taxes Used To Fund Neb. Schools Nears Approval

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A measure designed to shift the burden of financing Nebraska schools from local property taxes to state sales and income taxes appears headed for final approval by the legislature--and an almost-certain veto by Gov. Kay A. Orr.

Nebraska's unicameral legislature, which must vote three times on a bill before it is passed, last week approved the measure for a second time by a vote of 32 to 12.

Senator Ronald E. Withem, one of the bill's leading backers, said legislative support for the measure was "pretty strong" and it was likely to receive final passage this week.

But a spokesman for Governor Orr said she would veto the measure, Legislature Bill 1059, unless it was changed significantly in the third round of legislative debate.

"The only thing for certain about LB 1059 is that it is the largest4spending measure ever debated by the legislature, and for too many Nebraskans, a tax increase," the Governor said in a prepared statement. Too little is known about the bill's potential tax impact, she asserted.

The measure, modeled on the tax formula in place in Kansas, seeks to raise $211 million in new state aid for schools and decrease property taxes by a comparable amount. Under the proposed formula, the state's share of school operating expenses would rise from about 23 percent to 45 percent.

The state would raise the new aid funds by increasing the sales tax from 4 percent to 5 percent and hiking individual and corporate income taxes by 17.5 percent. The money would be used, in part, to provide equalization aid to address disparities in spending between school districts.

At the same time, the measure seeks to reduce local property taxes by imposing lids of 4 percent to 6.5 percent on the allowable annual growth of school districts' general funds and the budgets of other local government entities supported by such levies.

That provision aims to ensure that the increase in state aid would serve to decrease districts' reliance on property taxes and not be absorbed entirely by higher spending.

'Step in Right Direction'

The percentage range of allowable budget increases, which would be pegged to the wealth of local districts, would enable poorer districts to budget for more growth to catch up with wealthier districts in per-pupil spending.

In addition, districts could raise spending by an additional percentage point above the state lid with the approval of 75 percent of the school board. District voters, in a special election, could raise the ceiling by any amount.

Dale E. Siefkes, executive director for the Nebraska Association of Boards, said his organization and the vast majority of its member districts support the bill as "a tremendous step in the right direction" that addresses long-standing equity issues.

But Governor Orr has argued that the finance plan would be unfair to the one out of three householders in the state who rent their homes, and thus would receive no property-tax relief while seeing their other taxes increased.

Observers of Nebraska politics say any tax increase could be politically damaging to Ms. Orr, who is up for re-election next fall.

Vol. 09, Issue 27

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