While property tax relief for Nebraska’s farmers and ranchers remains sorely needed, the coronavirus has very likely killed the bill that has, for months, been the focus of the Legislature’s property tax relief efforts.
An amendment to LB1106 from Sen. Lou Ann Linehan, the bill’s primary sponsor, proposes that $120 million received by the state from income and sales taxes be diverted to schools to reduce property taxes.
With the unprecedented instant drop in economic activity and the accompanying record increase in unemployment filings triggered by the virus, state tax receipts will be significantly lower than anticipated for at least three months and, realistically, far more.
That, put simply, means that the state will not have sufficient income to fund the property tax relief proposal without decimating the remainder of the discretionary budget -- the part that funds the University of Nebraska and state agencies, whose services will be needed in the upcoming recovery.
With economists predicting that the coronavirus shutdown has pushed the national economy into a recession that could very well be deep and long, the long-term spending envisioned in the bill, some $680 million over three years is also unlikely to be available.
Combine that fiscal realism with the political reality surrounding the bill and it is hard to find a reason why the Legislature should spend any more time debating an effectively dead proposal.
As of last week, with the Legislature in recess, Linehan said there has been no movement of senators on either side of the bill. Enough opposition to LB1106 exists to prevent it from overcoming a filibuster, and more discussion of what could happen if the bill doesn’t pass isn’t likely to change any votes.
So it is time to pull LB1106 out of limbo, put it on the shelf and spend the time between sessions taking an overall look at Nebraska’s tax policy and crafting a bill, with input from all affected parties, not simply a group of senators, that addresses property tax relief by rebalancing property taxes with sales and income taxes.
That effort should also look at changing the way agricultural land is valued, moving from a sales basis to production-based system, as is the policy in most surrounding states.
K-12 education, the primary recipient of property tax funds, shouldn’t be exempt from the examination as well. But any plan that emerges should not hamstring schools or severely cut anticipated revenues for some districts as did LB1106.
That’s admittedly a tall order. But property tax relief will still be needed after LB1106 meets its ultimate fate and should be one of the priorities in the 2021 legislative session.