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Studying Nebraska's history of funding its public schools, Sen. Mike Groene of North Platte on Friday said the squeeze felt by taxpayers now is no different than the squeeze felt decades ago.

When the state failed to adequately fund Nebraska's public schools, those districts in turn raised taxes on local landowners, relying upon property taxes to fund 70 percent of their school's operations in some cases.

Measures passed to inject new revenue raised through income or sales tax into school districts, and thus allow school boards to relieve the pressure created by property taxes, would later be diverted or slashed.

The theme reflected throughout: "Promises unfulfilled," Groene said.

The chairman of the Legislature's Education Committee called together a working group of state lawmakers who have introduced property tax reduction packages, with the goal of studying Nebraska's school funding formula. 

Friday, the working group of senators, legislative staffers and those with a perspective on the history or the shortcomings of the formula huddled in a committee room at the Capitol for its first meeting.

There, Legislative Fiscal Office staffers Tom Bergquist and Sandy Sostad walked through the function and history of the state aid formula, from the state's revenue crisis in 1967 to a snapshot of how Nebraska schools are funded today.

In 1985, the Legislature passed LB662, which required elementary-only districts to merge with K-12 or high school-only districts, while also setting a 45 percent ceiling on property taxes to support schools. A petition drive led to the repeal of the ceiling.

Three years later, the Legislature created the School Finance Review Commission to study ways to lessen the burden on property taxpayers, who at the time provided 70 percent of the funding for districts in Nebraska, compared with 43 percent nationally.

State support for Nebraska schools at that time was about 25 percent, while the national average was 50 percent, and the aid formula “had never been adequately funded,” said Sostad, a program analyst within the Legislative Fiscal Office.

Over 18 months of work, the 16-member commission also looked for ways to bring equity to school funding between land-rich districts and schools with a wealthy tax base, and with the help of a national consultant, developed the state aid-to-schools system now in place in Nebraska.

The current state aid formula — the Tax Equity and Educational Opportunities Support Act, or TEEOSA — was enacted in 1990 through LB1059, based upon the recommendations of the School Finance Review Commission.

At its most basic, TEEOSA calculates the difference between the money schools need to educate every child and what resources are available to each district through a property tax levy in order to determine how much state aid districts should receive.

Education Commissioner Matt Blomstedt said the formula was designed to provide equity between similar school districts, as well as justifiable treatment of different situations, while also encouraging similar spending practices among districts in affluent and non-affluent areas.

Through LB1059, Sostad said, the Legislature aimed to increase state funding to each school while also loosening the dependence upon locally assessed and collected property taxes.

Groene said while that might have been the goal of previous legislatures, lawmakers haven't always made good on that promise — which, combined with skyrocketing ag land values, has caused a different crisis.

"It explains to me why school administrators are so scared of relying on the state for money," Groene said after the meeting. "We never kept our promise.

"And that's why the taxpayer doesn't trust anybody," he added.

Groene said he hopes to meet several more times throughout the fall with the goal of drafting a bill by Dec. 1 that provides property tax relief to Nebraskans while also adequately funding the state's public schools.

The bill could then be introduced on Day 1 of the 106th Legislature set to begin in January, he said.

Just what focus the bill might take is unclear, and discussion between senators and analysts covered topics ranging from school consolidation to implementing spending controls on districts.

While lawmakers hear how schools need to cut spending in order to control property taxes, Sen. Curt Friesen of Henderson said providing taxpayers relief will need to be a combination between spending cuts and new revenue.

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He suggested that consolidating some schools could achieve both lower levies and adequate revenue to operate a school.

But Sen. Lou Ann Linehan of Elkhorn pointed out tax levies could be wildly different between neighboring school districts, potentially forcing property owners in the lower-taxed district to be hit with a tax hike.

Sen. Tom Briese of Albion asked Blomstedt if it was possible to "achieve goals of education equity and taxpayer equity without injecting additional or new revenue into the current formula" or a revised formula.

Blomstedt said that would be a difficult goal to achieve "without making some other hard decisions." Kansas and other states can levy a statewide property tax to drive revenue, he said, which is forbidden under Nebraska's state constitution, requiring lawmakers to identify another funding source to achieve that goal.

Briese said while he believes schools have been responsible stewards of the taxpayer dollar, he also wondered about additional restraints or controls the Legislature could impose on local school districts.

After Friday's meeting, Linehan said she believes the working group is an opportunity to educate Nebraskans about how their public schools are funded.

Larger districts receive 40 to 50 percent of their funding from the state, she said, while smaller districts, particularly in rural areas, may only receive 10 to 15 percent of their funding through the state.

"On its face, I don't think Nebraskans would think that is fair," she said.

Linehan said she believes there are other options lawmakers could examine to provide quality education to Nebraska's youth, such as distance learning and offering more nontraditional school settings.

"There's a lot of things we can do that would not drive up the cost, which would help the taxpayer, and most importantly, help the kid."

Reach the writer at 402-473-7120 or

On Twitter @ChrisDunkerLJS.


Higher education reporter

Chris Dunker covers higher education, state government and the intersection of both.

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