LINCOLN — Another day and another rocky reception at the State Capitol for proposals to reduce property taxes in Nebraska.

This time it was representatives of local governments that levy property taxes, such as school districts, counties and natural resources districts, who told state lawmakers Wednesday that harder caps on spending and property tax would cause reductions in service, difficulty in hiring or retaining staff and an inability to keep up with the growth in salaries.

“Freezing tax revenue at current levels would be catastrophic for school districts,” said Shane Rhian, chief financial officer for the Omaha Public Schools, who testified against one bill.

Takes away local control

Tyler Newton, a member of the Heartland Community School Board in Henderson, said another bill might have blocked his district from hiring an additional elementary teacher this year to handle an increase in students.

“This takes away the ability of locally elected officials to make decisions in the best interest of their students,” Newton told the Legislature’s Revenue Committee.

To be sure, the committee did hear from a handful of homeowners and representatives of the Nebraska Farm Bureau and some business groups who said more needs to be done to rein in property taxes.

But most of the afternoon hearing was taken up with critics of proposals from State Sens. Brad von Gillern of Omaha and Lou Ann Linehan of Elkhorn to further restrict local spending.

Linehan said something needs to be done because, despite the Legislature’s best efforts, property taxes continue to rise. Gov. Jim Pillen has made property tax relief his top priority.

The senator, who heads the Revenue Committee and has been a key player in past property tax relief proposals, rejected the idea that school districts would “go broke” if they had tougher restrictions on budget increases.

A ‘bad relationship’

“We can’t keep putting money out for (relief of) property taxes — $1 billion in recent years -— and still they keep going up,” said Linehan, who likened the interplay between the Legislature and school groups as “a bad relationship.”

The two bills up for pubic hearing Wednesday were:

Legislative Bill 1241, which would require local political subdivisions, when they see an increase property valuations, to lower their tax levy so their total use of property taxes doesn’t increase.

Opponents called it a “freeze” and “zero based budgeting,” while von Gillern, who sponsored the proposal, said it would end “the windfall game” of school districts reaping an increase in tax revenue by keeping their tax levy at the same level when, as has happened in recent years, valuations of homes and farm shot skyward.

“Then there will be no more pretending that taxes didn’t go up,” he said.

LB 1316, from Linehan, which would take away a local school board’s ability to override a 3% cap on spending increases, adopted last year, with a vote of 70% of its members.

It would force districts to ask the voters, via a special election and with 60% voter approval, to exceed the spending cap.

Linehan said the higher hurdle was necessary after 188 of the state’s 244 school districts voted last year to override the 3% cap, a step she maintained was reserved only for “times of difficulties or emergencies.”

“I don’t recall that we had emergency situations across the state,” she said.

Testy exchange

The senior senator said the overrides spoiled the intent of last year’s efforts to lower property taxes, which included injecting an extra $328 million into aid to local schools.

“LB 1316 will continue the fiscal restraint and fiscal responsibility started last year,” she said.

Representatives of school districts, however, said there were good reasons to override the cap, including the need to hire new teachers or provide increases in teacher salaries, a priority expressed by the Legislature.

The hearing included a testy exchange between Linehan and Kyle Fairbairn, a lobbyist for the state’s 25 largest school districts.

Fairbairn said the school districts that overrode the 3% cap didn’t “break the law” and were well within their rights to vote to exceed the cap.

“And they’re glad they did,” he said.

Most districts didn’t spend their extra funds, according to Fairbairn, but kept the money in reserve in case the Legislature decided to further restrict their taxing authority and change the law again.

“Here we are, talking about a law change,” Fairbairn said.

Linehan said that for years, spending by school districts has outpaced inflation, a disparity that isn’t sustainable or responsible. She said a harder cap, as her bill would impose, is necessary.

‘A lot of mumbling and grumbling’

Liz Standish, an associate superintendent of the Lincoln Public Schools, testified that last year’s caps and fund increases for education haven’t fully been implemented yet. She and other school officials said those changes should be allowed to go into full effect, to see how they work.

As it stands, Standish said, the fast-growing Lincoln school district is facing a loss of $30 million in state aid next year and an expected budget decrease of several million dollars, because of the law passed last year.

Linehan said it will be up to lawmakers to make a stand in face of the opposition.

“So there’s a lot of mumbling and grumbling, and I hear a lot of people say (my bill) is not going to go anywhere,” she said. “We can’t walk away and say this is OK, what is happening.”

The Revenue Committee took no action on either bill, and both von Gillern and Linehan said they planned to amend their proposals to remove unintended consequences and allow some growth in local school spending.