State lawmakers shot down a proposal Tuesday that would have funneled millions in additional state funds to rural schools, though the issue of state aid to K-12 schools will come up again on Wednesday.
On a 23-12 vote — two short of what's needed to advance a bill — legislators rejected a bill from Sen. Curt Friesen of Henderson to provide extra state aid that would escalate to $130 million after three years to dozens of rural school districts that currently receive little, if any, so-called "equalization" aid.
Under the state's complicated distribution formula, school districts receive "equalization" aid from the state when a district's financial needs exceed its resources to raise the funds necessary to run the district.
In recent years, as prices for farm and ranch property have risen sharply, more and more rural school districts no longer qualify for equalization aid. That's because their resources — agricultural land — are sufficient, via property taxes, to fund the local school district's needs.
Friesen said Tuesday that there's something unfair about a formula that sends equalization aid to only 84, mostly urban school districts out of the state's 244 districts. Schools in Omaha and Lincoln are among the biggest beneficiaries of equalization aid.
Under his LB454, "unequalized" school districts that don't receive equalization aid now would split $65 million in year one, $95 million in year two, and $130 million in year three. Presumably, rural taxpayers would see a property tax decrease due to the increased state funding.
"I'm trying to right the wrong of how schools are funded in this state," Friesen said. Students in Venango, as well as Omaha, deserve to get some state support, he said.
But several senators spoke against LB454, questioning how the state could afford its high cost, and saying its distribution of state funds would probably be challenged in court.
"This isn't even close to being fair," said Elkhorn Sen. Lou Ann Linehan, the Revenue Committee chairwoman. She and other senators said that all areas of the state deserve property tax relief, and the answer was more complicated than increasing funding for rural schools.
“We can’t just keep throwing money out there,” Linehan said. “We need comprehensive reform.”
The senator has proposed a study of the state's tax system and action to address it in 2022. Nebraska ranks poorly when it comes to state funding for local education, which Linehan and others have said explains why local property taxes, which rank in the top 10 nationally, are so high.
The Nebraska Farm Bureau, the state's largest agriculture organization, expressed disappointment at the death of LB454. But the state aid issue will get more discussion — another proposal, LB132, is up for debate on Wednesday. It would create a commission to study state aid, with an eye toward lowering property taxes.
Before adjourning on Tuesday, discussion began on a proposal by the Urban Affairs Committee to set aside $10 million in emergency grants for small towns and villages hammered by high natural gas costs during the five-day "polar vortex" cold snap in February.
Omaha Sen. Justin Wayne said that communities like Wahoo, Stromsburg, Pender and Superior were socked by natural gas costs that jumped 100-fold during the cold snap that caused gas shortages and blackouts from Texas to Nebraska.
While some senators said it isn't the state's job to "bail out" municipal utilities that made bad business decisions, Wayne said the unprecedented rise in natural gas costs couldn't have been anticipated. He said that helping out communities with their gas costs was no different than helping Panhandle irrigators rebuild a collapsed irrigation canal there and aiding Gage County in paying off a $28 million court judgment involving the wrongful conviction of the Beatrice Six.
Debate on LB131 is scheduled to resume on Wednesday.
Meet the state senators making laws in 2021
Lou Ann Linehan
John Lowe Sr.
Patty Pansing Brooks
World-Herald staff writer Martha Stoddard contributed to this report.