Nebraska Gov. urges school superintendents to pass along new state funds as tax relief

LINCOLN, Neb. (Nebraska Examiner) — A tug of war is underway between local school officials and Gov. Jim Pillen on how the $300 million a year in extra funds for K-12 schools should be used.

In an unusual move, Pillen jumped on a Zoom call Sept. 1 with Nebraska school superintendents to urge them to utilize 97% of the recent increase in state aid to schools as property tax relief.

The call, arranged just a day earlier, was intended to remind school leaders that the $300 million increase in state funding was intended to reduce property tax bills, not to increase spending, according to Lee Will, Pillen’s budget director, who responded to questions because the governor is out of the country on a trade mission.

Will said the Zoom call was set up because there have been some “misunderstandings” about the intent of bills passed this year that increased state aid to K-12 schools but also imposed a new spending lid on districts.

Both Will and State Sen. Tom Briese — who sponsored the new law that imposes a revenue cap on school spending of 3% a year — said they are concerned that too many school districts are talking about exceeding the cap in their 2023-24 budgets and banking some of the extra spending authority for the following year.

The new law allows a school district to exceed the 3% cap by a vote of a supermajority (70%) of school board members or 60% of voters in a school district at a special election. Districts don’t have to use all of the additional spending authority — which is up to an additional 7% increase — and can carry over unspent funds to the next budget, in 2024-25.

‘Don’t abuse the system’

Will characterized the governor’s message as “Hey, there’s local control elements here, but don’t abuse the system.”

Briese was more blunt, saying the 3% cap was intended to insure that property taxpayers get relief.

“A concerted effort on the part of the education community to nullify the cap may fuel an effort to repurpose the education future fund dollars to a more direct form of property tax relief, such as the property tax credit fund,” Briese said.

“Nothing is off the table,” he said, adding that the cap may need to be tightened.

While some local school officials described the call as a “reminder,” others reportedly characterized it as a “scolding.”

But no one could recall the governor making such a plea to local officials for what is a local spending decision made by school boards based on recommendations by superintendents. This is the season for school budgets, which must be finalized by Oct. 1.

Dave Welsch, a school board member from Milford who frequently testifies at the Legislature, said the only reason the education community supported the new 3% cap was that they viewed it as a “relatively soft cap” that school boards could work around if necessary.

Welsch, along with the superintendent of the Plainview School District and the head of the Holdrege-based ESU #11, said the combination of high inflation, a shortage of teachers, the need to increase staff salaries, and increases in fuel, utilities and insurance costs, make it difficult to stay within the 3% cap.

‘Just trying to pay our bills’

“We’re just trying to pay our bills,” said Darron Arlt, the Plainview superintendent, who has recommended that the school board vote to exceed the cap, but to access about 1%-2% of the 7% extra funding. 

That proposal would still deliver some property tax relief to local patrons, Arlt said, but would also leave some extra funds as “insurance” for the school district if there’s an unexpected need.

“I want to protect my school district. And that supersedes the goal of lowering property taxes,” he said.

John Poppert, the administrator of ESU #11, which encompasses 13 schools in south-central Nebraska, said his schools are dealing with increases in teacher pay of 3.5% to 5%, insurance expenses rising 7%, and the price of diesel — to power buses — above $4 a gallon.

“Those numbers are really, really difficult to live with,” Poppert said. “I just wish the Unicameral and the governor understand that superintendents are doing the best they can with taxpayers’ money.”

He and others said they’re aware of several school districts talking about exceeding the cap, but not using their entire extra spending authority, thus leaving some carryover funds for the following year.

In Milford, the school board already unanimously approved exceeding the cap, and Welsch said the full extra spending authority may be sought.

Not spending ‘willy-nilly’

“We’re not spending money willy-nilly,” Welsch said. “But last year wasn’t a normal inflation time, and if you don’t pay your staff adequately, you’re going to lose them.”

Will, the state budget director, said the intent of the new state laws was to lower local property tax bills by providing foundation aid of $1,500 per student to all school districts and upping reimbursement for special education by nearly $200 million.

He said exceeding the cap, and banking some of the extra funds for next year — as Plainview is doing and several other districts, including Milford, are contemplating — amounts to “abusing the intent” of the new state funding.

The governor, Will said, realized it was wrong that Nebraska ranked near the bottom in state aid for K-12 schools. So Pillen sought to remedy that with the hike in state aid and the $1 billion Education Future Fund to insure that the increase in state aid was sustainable.

“It wasn’t meant as a windfall,” Will said.

He added that the funding influx, according to his calculations, would allow Nebraska to rise from 42nd to 26th in the nation in state funding of local schools.

Briese, a key player on property tax issues, said there’s been “a rush” by school districts to override the new revenue lid, and if too many districts do it, he will call for changes.

“These dollars were intended to take pressure off our taxpayers,” he said.

A ‘tax shift’

Rebecca Firestone, of the Lincoln-based OpenSky Policy Institute, said local school leaders are having a hard time navigating through the new cap on revenue, as well as prior lids on increases in spending and tax levies.

It is clear, Firestone said, that the increase in state funds for education was really a “tax shift” from local property taxes to state taxes and was not intended to help schools deal with their challenges of increased personnel expenses and inflation.

The new cap has already put a hold on a construction project at the Henderson-based Heartland School District. Last month, a local vote fell short of the 60% supermajority required to exceed the new revenue cap for the construction project, garnering only 55.6% support, the Heartland Beat reported.

In Plainview, Arlt said he knows the governor is sincere in his support for children and education, and he appreciates that Pillen has personally reached out to superintendents at recent meetings, as well as during the Zoom call. State aid to Plainview, he added, has risen from about $5,000 a month to $50,000.

The superintendent said he has “cooled” his enthusiasm somewhat for recommending the override of the 3% cap after listening to Pillen and Will. But, Arlt added, he feels that he has to do “what’s best” for his district at a time when staff salaries and cost of busing are rising faster than 3%.

Arlt said his school board’s budget committee will recommend the cap override at a meeting Monday, and the final budget will be considered Sept. 18.

“I hope (the governor) is not dissatisfied with our budgets come October 1,” Arlt said.

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