106B LB0974 LPS Testimony
January 22, 2020
Sen. Lou Ann Linehan, Chairperson
Sen. Tom Briese
Sen. Sue Crawford
Sen. Curt Friesen
Sen. Mike Groene
Sen. Mark Kolterman
Sen. Brett Lindstrom
Sen. John McCollister
Lincoln Public Schools offers this testimony in opposition to LB 974. It is important to note that this proposal identifies increased funding for PK-12 education. Increasing state funding is necessary to decrease the reliance on property taxes in Nebraska. However, the increased funding must be sustainable.
Lowering the taxable value for school districts will require the state to fully fund the loss. Under LB 974, Lincoln Public Schools’ access to property tax revenue decreases by approximately $12-13 million in the first year, scaling up to approximately $40 million in year three. Residential property tax payers in Lincoln would experience approximately $50 of tax relief in year one, $100 in year two, and $150 in year three per $100,000 of valuation.
L974 proposes to eliminate the allocated income tax provision and establishes foundation aid as a means to make up for the loss. Foundation aid does not make up for the loss in many districts across the state. In LPS, this represents an approximate loss of $4 million in the first year, which grows by an additional $4 million each of the following two years according to the fiscal office model from January 13, 2020. In review of the fiscal note, this gap appears to be less than modeled, but a gap still exists and increases dramatically in future years. It is important to note that this assumes the state fully funds the provisions. Decreasing valuations will shift funding significantly to the state. Schools are concerned, with a long history of data to support that concern, that the state will not be able to meet this obligation in future years. LB 974 provides relief for funding cuts with a provision to recover only 75% of the cuts. The impact of this provision compounds because the amount authorized is not counted as an expenditure for state aid. Funding for equalized school districts and potentially all districts will continue to decline.
Elimination of the averaging adjustment will disparately impact low spending school districts with high student needs taxing at high levels. The averaging adjustment is an important element in the formula that must be maintained.
The change in the maximum levy calculation from a maximum levy of $1.05 to six cents plus local formula contribution in this proposal is delayed until 2023-2024. Delaying the implementation makes it difficult to model the impact, none-the-less the impact will result in dramatically less revenue for schools and consequently further cuts than those outlined in the first three years of this proposal. In addition, the local formula contribution methodology has an overlay provision that limits growth with an arbitrary number. Growing districts and districts serving diverse populations often do not fit within arbitrary overlay provisions.
LB 974 increases the state’s investment in PK-12 education by almost $300 million in the next two years and shifts funding from large urban districts to rural districts. The fiscal note details reductions in TEEOSA through the elimination of the averaging adjustment. Providing an application process for transition aid makes it very clear that LB 974 cuts large urban districts who are up against the levy maximum and only aids the district if the budget has dropped at least 1%. Large urban districts are often experiencing student growth, increasing numbers of students with special needs and changing demographics. Communities often desire additional investments in career education, college-ready programs, technology, security, early childhood, and others. Driving down the budgets of large urban districts will result in cuts to many of the programs communities have advocated for and supported.
We ask that you not advance LB 974. The cuts proposed will devastatingly impact public education in Nebraska.
Sincerely,
Liz Standish MBA, EdD
Associate Superintendent for Business Affairs
