SEWARD AND VALLEY, Neb. (KMTV) — Merlyn Nielsen has lived on this Seward County farm for more than 20 years and has farmed and ranched on it full-time since retiring as an Animal Science Professor at the University of Nebraska-Lincoln.
His 2020 property tax bill for his Seward property and another, a smaller one out west in the Sandhills, is higher than many Nebraska residents' annual income.
“About $51,000 a year,” said Nielsen.
Nielsen is one of thousands of Nebraska ag producers that have the burden of funding his local school district.
Of that $51,000 more than $36,000 goes to schools.
With that $36,000 for education, less than $4,000 of it is paid for his home, with over $32,000 paid on his land and agricultural buildings.
“Everybody thinks in agriculture you got to be making so much money you can pay for it, not true,” said Nielsen.
He's not alone. A report done by Creighton economist Ernie Goss in 2019 shows that in a seven-year time span, the percent of Nebraska's income for payments on home and business property taxes remained stable — around three to four percent.
But tax payments on agricultural land skyrocketed to more than 12 times what Nebraskans paid on their homes.
“It shocks you off your shoes when you look at the data,” said Nielsen.
The reason they’re so high is that Nebraska needs the money to fund public schools.
The Goss report shows that the average Midwestern state uses property taxes to fund about 35% of public schools' total revenue. For Nebraska, public school revenues are funded about 55% from property taxes.
That's because the majority of public schools only get a small amount of money from the state to fund education with the rest coming from county property taxes.
That includes Douglas County West Community Schools.
“We really consistently get about 10% of state aid,” Dr. Melissa Poloncic.
Dr. Melissa Poloncic is the superintendent of DC West Community Schools, which gets a small portion of its budget from state aid.
This compares to Omaha Public Schools, which receives around half of its revenue from state aid.
“That’s really how the system was developed, was to not necessarily be equal, but be fair,” said Poloncic.
While property taxpayers pay the majority of the DC West budget, the district has helped them out by cutting the property tax rate over the last two years.
“Last year we dropped our levy 13 cents for our taxpayers. This year we’re dropping it another cent,” said Poloncic.
So, while many school districts across the state are tightening their belts, property taxes continue to go up.
Nielsen, who is with the activist group Fair Nebraska, has ideas.
One idea would be for the large chunk of property tax payments that exclusively goes to schools to continue coming from tax on residential homes and apartments, and leave businesses and ag land with no property tax payments to schools.
“The only way I can see that we can balance those, when it comes to taxation for schools, is to tax only residential property,” said Nielsen.
Obviously, this would leave a gap of hundreds of millions of dollars, so it would also include evaluating the state’s sales tax rate.
“I believe the ability to change our sales tax system is our largest opportunity for change,” said Nielsen.
Nielsen wants to raise Nebraska's sales tax rate, which currently sits at 5.5%, while adding sales tax to items and services currently exempt like groceries, plumbing, haircuts and car repairs.
While Poloncic is leaving policy to the experts, she believes the state should carry more of the load.
“Are we putting enough state resources into our local school districts?” said Poloncic.“It would alleviate the taxpayer so property taxes would decrease.”
These ideas have been tried and failed in the Unicameral in the past with Governor Pete Ricketts fighting what he believes to be tax hikes every step of the way.
The legislature has only been able to make modest fixes, like adding to the property tax credit relief fund and throwing in some tax credits, which Nielsen calls a band-aid that doesn’t fix the larger problem.
“It’s a tyranny of the status quo. We just can’t seem to budge off of what we did last year to do the same thing next year,” said Nielsen.
Poloncic is fine with change as long as she can give a quality education to her students.
“Anything that might rearrange our funding, but fund us at a consistent level, then we’re going to be supportive of that,” said Poloncic.
Until that happens, Nielsen will keep tending to his cattle, corn and soybeans and fighting, peacefully, for change in Lincoln.
“I’m just as optimistic as I can be,” said Nielsen.
A proposal that would cap how much local governments can raise their annual budgets failed in the legislature this year, with senators hoping to reformulate a plan in 2022.