State lawmakers gave initial approval Wednesday to preserving some $40 million for Nebraska's public schools by changing the school aid formula.

The bill (LB725) by Sen. Kate Sullivan of Cedar Rapids would change the school aid formula to keep funding for the 2014-15 school year close to the $940 million in the two-year budget passed last session. Without the bill, state aid would fall to about $900 million after annual adjustments are made. The bill advanced to second-round debate on a 29-0 vote.

Sullivan, chairwoman of the Education Committee, said keeping school funding near the budgeted amount is important because schools have struggled to weather recent cuts in state aid.

"I believe school districts stepped up to the plate during the recession," she said. "They endured the decreases in aid ... without a whole lot of complaining. The knew they had to do their part despite rapidly increasing numbers of students in some districts and certainly rising expectations on the part of patrons and families.

"Our children deserve to have their schools funded in a way that allows educators to focus on education instead of simply how to pay the bills," Sullivan said.

School aid is aimed at helping schools make up the difference between what they need to educate children and how much they can raise through property taxes and other sources.

At its most basic, the state aid formula, called the Tax Equity and Educational Opportunities Support Act, distributes so-called equalized aid to schools using an equation that determines the schools' needs, then subtracts their resources. Where it becomes complicated -- some would say incomprehensible -- is figuring out the needs and resources for each district.

The formula also gives more money to districts holding longer school years and employing more highly educated teachers.

Meanwhile, school districts are operating under two state-mandated caps.

The first caps the amount by which they can increase spending from one year to the next, historically, 2.5 percent.

The other caps how much money they can raise through property taxes. That cap now is at $1.05 -- the maximum tax a school district can levy against each $100 a property is valued at for tax purposes.

Most of the state's largest school districts -- Lincoln, Omaha and seven others -- are at or near that $1.05 limit, which can be exceeded only with voter approval.

The large schools, with high tax levies but low per-student costs, generally have not seen their residential property values grow much recently, leaving them clamoring for more state aid. On the other side, many small schools, with high per-student costs, have seen their state aid dwindle as the value of farmland has skyrocketed.

Of Nebraska's 249 school districts, 208 have fewer than 900 students.

About 55 percent of the money schools get comes from state aid. Sen. Tom Carlson of Holdrege said if lawmakers were to reduce that to 45 percent or 50 percent, as some have suggested, the money would have to be made up with income or sales taxes.

Carlson and Sen. Mark Christensen of Imperial say their constituents often complain that their property taxes are too high.

Christensen said school districts seldom use state aid increases to reduce reliance on property taxes.

"Every time we give people more money, they spend it," he said.

Sullivan said she would like to get her measure on the books before March 1, when the state certifies how much aid each school district will get for the coming year.

The bill would tweak the state aid formula to reduce what schools are expected to get from property taxes, which means more schools could get aid and more may be able to lower their tax levies. Under the bill, about half of the state's 249 school districts would get so-called equalization aid. But it would allow six districts to keep the equalized aid they would lose under the current aid formula.

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