The Legislature wrapped up its 60-day session last week, but Senators are likely to be back in Lincoln for a special session later this year focused on property taxes paid to fund local government services. 

Here’s a look back, and perhaps a look ahead, at some important aspects of the state’s fiscal debate.

No agreement on tax package

LB 388, the tax package that emerged after weeks of deliberations, stalled in the final round of legislative debate as Senators from both ends of the political spectrum voiced opposition to the idea of expanding sales tax revenues to fund property tax cuts. Modeling by OpenSky showed that for most individual taxpayers, the impact of the proposed tax shift boiled down to if they own property and if they are claiming the state income tax credit on property taxes paid to public schools.

OpenSky has long noted that a comprehensive look at state revenues is necessary to avoid tax policy reforms that create winners and losers. Nebraska’s state and local tax system is already upside-down, with affluent Nebraskans paying less than their fair share of household income in taxes relative to low- and middle-income families. Last year’s personal and corporate income tax cuts will widen that disparity.

As policymakers consider tax changes going forward, several options are available to address the comparatively high tax burden for hardworking families, including adoption of a state-level Child Tax Credit, removal of existing sales tax exemptions to reduce the overall sales tax rate, as well as circuit breakers and homestead exemptions that target a property tax cut to those who need it most.

Tax dollars for private schools

Of the nearly 200 bills passed by the Legislature in 2024, the final bill approved was a state appropriation of $10 million to put toward private school scholarships. LB 1402 repeals LB 753, a bill passed in 2023 that created state tax credits to individuals and businesses who donated to organizations granting private school scholarships. LB 753 is subject to a repeal vote in the November general election.

Achievement and accountability are at the core of why OpenSky opposes voucher programs. Public dollars should come with public accountability, but LB 1402 contains no reporting requirements to inform taxpayers if these vouchers are a sound investment. And in states like Arizona and Iowa, the drain on state funds has continued to grow as similar voucher programs have escalated in cost.

Investments in all Nebraskans

The OpenSky team engaged on 61 pieces of legislation this year, focused on our mission to provide impartial and precise research to improve opportunities for all Nebraskans. Some noteworthy items:

  • Budget challenges. Mid-biennium budget adjustments included a sweep of $198 million from cash funds – accounts holding fees collected for a specific purpose – to the state’s General Fund. This type of transfer is typically reserved for times of economic hardship. Instead, these sweeps were timed to boost the state’s bottom line as income tax cuts passed last year ramp up in cost and to mitigate against future budget deficits. By FY 27, the state’s General Fund balance is projected to fall below the required minimum reserve. 
  • Medicaid reporting. LB 62, passed by Senators, expands reporting requirements surrounding Medicaid coverage in Nebraska. With one month to go in the year-long review of Medicaid eligibility, 101,000 people are no longer enrolled, either for eligibility (51,666) or procedural reasons (50,183).
  • Summer EBT program. After weeks of engagement from Senators, community members and students, Gov. Pillen agreed to have Nebraska participate in the federal Summer EBT program, ensuring that 150,000 kids have consistent access to nutritious food when school is out.
  • Strategic investments. Bills passed this session will increase Medicaid reimbursement rates to hospitals and nursing homes, bolstering health care in rural areas, address affordable housing and expand eligibility for federal child care assistance to children of child care workers.

Save the date 

Mark your calendar for our Fall Policy Symposium on Wednesday, Sept. 18, at Nebraska Innovation Campus in Lincoln. Program details and registration information will be announced in the coming months.