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State of State, 1.15

Gov. Pete Ricketts is welcomed into the Norris Chamber by state senators before his State of the State address Tuesday at the Capitol. 

Gov. Pete Ricketts wants to take a major step in limiting property taxes, and he wants to carve it in constitutional stone. 

The governor proposed in his State of the State address Tuesday that he would like the Legislature to place a constitutional amendment on the ballot to limit property tax collection increases by schools, cities, counties and other local governments to 3 percent a year. 

Once it's enshrined in the state constitution, the only way around it would be for local politicians to ask voters to override the limit. Bonds would be exempted from the limit.

But first he has to get 30 members of the Legislature to agree to place it on the ballot. 

"Property taxes are the No. 1 thing people are talking about," he said at a budget briefing Monday. "This is the thing most Nebraskans are most unhappy about." 

Budget limits have not been effective, he said, because political subdivisions have figured out ways around them. 

Local governments have other sources of revenue, Ricketts said. Schools get aid from the state. Cities and counties have sales taxes. 

But they also already have a variety of levy and budget limits as prescribed by state law. 

Schools districts, for example, are subject to a Basic Allowable Growth Rate, which was reduced for the 2017-18 and 2018-19 school years to 1.5 percent from 2.5 percent. It is slated to return to 2.5 percent next school year.

They also must limit property tax levies to $1.05 per $100 of assessed property value and limit cash reserves depending on district size.

Government subdivisions, in times of rising valuations, can generate additional property tax revenues without raising their tax levy. For example, when property valuations in Lincoln Public Schools grew by nearly 8 percent in 2017-18, the school district was able to generate 9 percent in additional revenue by maintaining an essentially flat tax levy. This year, its tax levy went down but the district projects its property tax revenue to grow by 4 percent.

Under the Ricketts proposal, the district would have to lower its levy, if valuations increased, to not collect more than 3 percent additional tax. 

Sen. Lou Ann Linehan, Revenue Committee chairwoman, introduced the constitutional amendment resolution (LR8CA) Tuesday at Ricketts' request. She said if anything, the 3 percent limit is a little high. 

"Families have to live within their means, so you can't have the public expenditures outracing the private sector's ability to pay the bill," she said. "Three percent is higher than inflation has been for the last 20 years."   

Actually, for most of those years, inflation has been lower than 3 percent, but there's been a few years when it has exceeded 3 percent, but didn't rise to 4 percent. And previous to that it, at times, rose higher.  

She favors putting the limit in the constitution because nothing that has been done before to control spending has worked, she said. 

The challenge, she said, is how fast the Legislature can get something done to help homeowners and landowners this session. 

Sen. Steve Erdman of Bayard said the 3 percent limit on property tax collections is a fine approach, except for the unfunded mandates the state forces upon local governments. Erdman has served on both the Morrill County Board of Commissioners and the Bayard Public Schools Board. 

"Unless you're willing to eliminate or prohibit some of those unfunded mandates, it's not going to work," he said. "If we're going to do something like that, we also need to restrict the unfunded mandates that we place on those people. And that's going to be a difficult thing." 

Sen. Myron Dorn of Adams, a former Gage County commissioner, said that if the 3 percent limit on tax collections for counties was in place, it would severely limit the ability of Gage County to pay a federal tax judgment of $28.1 million to six people wrongfully convicted in a 1985 Beatrice murder.

The county collected $3.8 million this year to pay that judgment. 

With the current tax lid, he said, those federal judgments are exempt. It is not exempted from the Linehan resolution. 

Appropriations Chairman John Stinner questioned whether there is something in place already to restrict local growth of taxes, That will have to examined, he said. When more money is put into property tax relief — Ricketts is proposing $102 million more in state support to bring the fund to $550 million — and more money is given to schools, a restriction or deterrent at the local level would be necessary. 

"I hate taking away that local control. I'm an advocate of local control, but that will be the rub," he said. 

Other highlights of the governor's budget: 

* The Title X provision on funding of reproductive services to essentially exclude Planned Parenthood from the ability to get those federal funds caused a lot of angst last year. That provision will be in the budget again. 

Lincoln Sen. Kate Bolz: "My position as a member of the Appropriations Committee is that the budget is not the best place for any public-policy decision, whether that was related to Title X or the Second Amendment or any other issue that is better discerned by the issue area committee."

Lincoln Sen. Patty Pansing Brooks: "I'm very disappointed about that. ... It will cause another battle on the floor."  

* Prison expansion will get $49 million in investment to add two high-security housing units with capacity up to 384 beds at the Lincoln Correctional Center. 

Bolz: "When we're thinking about expanding additional facilities, and the significant cost associated with that, we also have to think about how we staff those additional facilities in addition to our current understaffing. And without a more significant increase to salaries, I'm not sure how we move the dial on addressing the staffing and overcrowding dilemma." 

See more photos from the Ricketts' State of the State address:

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Reach the writer at 402-473-7228 or jyoung@journalstar.com

On Twitter @LJSLegislature.

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State government reporter

JoAnne Young covers state government, including the Legislature and state agencies, and the people they serve.

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