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Nebraska Gov. Pillen wants $2.5 billion in new funding for schools, property tax relief

LINCOLN — Every school district in Nebraska would receive at least $1,500 per student in state aid for K-12 education, and the state would pick up more of the tab for special education, under a set of three school funding proposals that Gov. Jim Pillen unveiled Tuesday.

“All of us in Nebraska agree on two really simple things: that we never, ever quit on our kids … and we all agree that property taxes have gotten so out of whack in Nebraska that you don’t even need to own property to be affected,” Pillen said.

State Sen. Rita Sanders of Bellevue talks about her part of the broader education funding proposals unveiled Tuesday at the Capitol. (Aaron Sanderford/Nebraska Examiner)

To ensure that property-tax payers feel relief from the proposals’ projected $2.5 billion in new state spending by 2029-30, the package includes a “soft cap” on increased school spending, as proposed in Legislative Bill 589, sponsored by State Sen. Tom Briese of Albion.

The cap would allow spending increases of no more than 3% of a school district’s annual revenue growth. It would allow for additional spending to keep up with student population growth and increases in students in poverty and those learning English.

Districts would need the approval of a supermajority of their board or 60% of district voters to override the cap.

“It’s simply an effort to protect the property-tax payers and try to ensure that these dollars yield property tax relief over time,” Briese said in an interview after the announcement.

Baseline aid and special ed

Pillen’s push for a baseline amount of state aid for every student has been a goal for rural senators for decades. While campaigning, Pillen argued it was unfair that 158 of Nebraska’s 244 school districts receive no equalization aid under the current state aid formula.

Senators said the $1,500 in per student in baseline aid could reduce how much equalization aid larger districts are already receiving  by up to the same amount, but the detailed analysis may have to wait for the committee hearing.

Legislative Bill 583, which contains the proposal for baseline aid and special education, is sponsored by Sen. Rita Sanders of Bellevue. The baseline aid portion would cost $113 million a year, Pillen said. The special ed portion would cost $157 million each year.

That spending would be in addition to $1.1 billion the state’s taxpayers now spend on state aid.

Lynne Walz
State Sen. Lynne Walz of Fremont (Courtesy of Unicameral Information Office)

Opponents of baseline aid have argued in previous years that many rural school districts educate fewer students with special needs, English language learners and students in poverty than larger peer districts. Many rural districts also set their property tax rates lower than bigger districts.

Pillen said the new funding package would hold harmless all K-12 districts that receive equalization aid, including the Omaha Public Schools, Millard Public Schools and Lincoln Public Schools.

It would do so by spending more on special ed. Sanders said the state has fallen behind in its pledge to fund 80% of special ed costs with state and federal funds. Arc of Nebraska expressed support for the special ed funding.

“We are here today because the governor sat down and listened to all sides of the school funding discussion and is working toward a consensus,” Sanders said. “I look forward to the same process in the Legislature.”

‘Education Future Fund’

Sen. Robert Clements of Elmwood is expected to introduce the third and final part of the package Wednesday. It would use $1 billion from this year’s unexpected state windfall from inflation and federal money for COVID-19 to fund a “Nebraska Education Future Fund.”

Clements’ bill would expand on an idea put forward in recent years by Sen. Lynne Walz of Fremont. Walz on Tuesday praised the idea of a set-aside education fund, although she said she needed more time to read the rest of the bills to see where the funding would come from and how the models show the effect on individual school districts.

“I think a trust fund for public education in Nebraska is a good idea because we do have down times, and if we don’t have some type of reserve that we can rely on in a down time, we’re just going to be going back to the property-tax payers,” Walz said Tuesday.

Clements said the goal is to set aside $1 billion for the new fund this year from state general funds. Pillen and Clements said they plan to build the fund to $2.5 billion by 2029-30, with at least $250 million a year in new spending to boost the fund.

Clements’ staff said the state investment officer would oversee investments by the education fund and it would be placed under the guidance of the Nebraska Investment Council. The Governor’s Office expects to be able to use the fund and its investment proceeds to cover the annual costs of foundation aid and special ed funding, even while the fund is being built up.

Sens. Lou Ann Linehan and Robert Clements
Sens. Lou Ann Linehan and Robert Clements chat on the floor of the Nebraska Legislature at the Nebraska State Capitol. (Rebecca S. Gratz for the Nebraska Examiner)

Sen. Mike Moser of Columbus, who represents Pillen’s home district, said the goal is to build the education fund to the point that the state can more easily absorb swings in the economy, including a predicted recession.

Pitfalls ahead

Political observers, including former state senators, have said the disagreements will come when individual senators considering the ed bills “get the sheets” — the printouts showing funding for individual districts and which gain or lose based on current funding.

Walz and Sen. Lou Ann Linehan of Omaha said they expect disagreement on the spending cap bill. Nobody likes to be told what they can and cannot spend, Linehan said. But the proposals appear to have a better chance to pass this year, she said, because “they have a billion dollars.”

“The constant pushback was you can’t afford to do more because you’ll have to cut us,” Linehan said. “Now we have the money.”

It was not immediately clear whether the proposal for baseline aid might cost urban and suburban districts any equalization aid. Omaha Public Schools Superintendent Cheryl Logan declined to comment until she had time to review the bills.

Lincoln Superintendent Paul Gausman said Tuesday he agreed with the focus on special education, mentoring and teacher recruiting and retention. He said the district is still analyzing the proposals’ impact on his district.

Districts that receive equalization aid now, including Lexington, Grand Island, South Sioux City, Omaha and Lincoln, sued the state in the early 2000s asserting, among other things, that the state formula didn’t adequately address their students’ needs.

Sen. Justin Wayne of Omaha has proposed a separate plan, Legislative Bill 475, that would scrap the school funding formula entirely and replace it with a commitment to fund 48% of general fund operating costs for schools and, among other changes, would provide more money for schools with more kids receiving free- and reduced-price lunch and kids in sparsely populated areas.

The Nebraska State Education Association
The Nebraska State Education Association building is shown on Jan. 18, 2022, in Lincoln. (Rebecca S. Gratz for the Nebraska Examiner)

He said he had not had time to read the governor’s package but said he wanted a bill in place that would make sure the needs of urban students and the Omaha Public Schools are part of the broader school-funding debate this year.

“I’m trying to simplify our funding formula where every student gets something,” Wayne said. “I knew the governor was doing something. I didn’t hear a lot of Omaha senators doing something.”

‘A change in tone’

The Nebraska State Education Association was cautiously optimistic about the package. Tim Royers, president of the Millard Education Association, speaking on behalf of the state union, said teachers heard a lot they liked Tuesday, but have a few questions.

“The biggest thing that we heard that we’re really excited about is, the governor acknowledged something that we’ve been talking about for a really long time, that the state had to increase its investment in K-12 education,” Royers said.

Nebraska ranks among the lowest states nationally in the percentage of school funding provided by the state.

It also helped to hear Pillen acknowledge the need to use some of the new funding to recruit and retain teachers, he said. And they are happy to see the state pressing to fund special education at a more responsible level.

Royers said the NSEA and his Millard union heard “no poison pills” so far in the proposals, including the spending cap, but will wait to see more details to make sure no students are negatively impacted by the changes.

“The philosophy behind the bills is such a change in tone from what we’ve heard historically from the Governor’s Office,” Royers said. “Historically, it’s been shared that the schools have a spending problem. We heard today that the state needs to invest more.”

Rare agreement

Think tanks from both sides of the aisle appeared open to the proposals. Rebecca Firestone, executive director of the OpenSky Institute, which typically advocates for additional funding, said the group appreciates “the governor’s interest in increasing state aid to public education and investing more in our state’s children.”

She said her organization needs more information to understand whether the spending is sustainable and the impacts of the local spending cap.

The Platte Institute, a conservative think tank Gov. Pete Ricketts helped found but stepped away from in 2013, credited Pillen and the senators for proposing something “bold” on school spending and property tax relief.

The Platte Institute supports “creating a sustainable source of education funding that allows for a reduction of property taxes” and managing the growth of property taxes moving forward, said CEO Jim Vokal.

Pillen, asked how he can square $2.5 billion in additional spending with running as a fiscal conservative, said:

“There’s a big difference between spending and investing. These are investments into the future of our kids, and these are investments that will also allow us to have a great impact on cutting property taxes across the state.”

Pillen did not have an estimate of how much the bills might relieve the average Nebraskan’s property taxes.

“It won’t be enough,” Pillen said. “But it’s a heck of a good start.”

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