The governor’s proposed education finance plan to be debated next week commits significant state resources to Nebraska’s public schools. But when combined with proposed revenue caps included in a package of property tax provisions, any pledge of new state aid is essentially revenue replacement.
Changes in state aid to schools included in LB 583 call for foundation aid of $1,500 per student and an increase in state reimbursement of a district’s special education costs. Some of these investments would be paid out from a newly created Education Future Fund.
A look at the numbers
We looked at FY21 and FY22 actual school revenues and property tax requests and then modeled the combined effects of LB 583 and LB 243, the property tax package with proposed revenue caps, to understand the potential impact to school districts’ bottom lines.
For Millard Public Schools, Nebraska’s third-largest district, the state would have provided an additional $11.8 million in FY22 if the new Education Future Fund had been in place. However, the proposed 3% cap on revenue growth would have required Millard to reduce its property tax request in FY22 by $19.7 million.
To overcome that deficit, a supermajority of school board members or district voters would have had to approve exceeding the base growth percentage used to determine a district’s maximum property tax request.
For other districts, however, not even an override vote would have kept revenue whole. Using the same modeling approach for FY22, Bennington, a rapidly growing district with fewer special education students, would have seen an additional $1.7 million from the Education Future Fund but would have had to scale back its property tax request by $2 million. Without a school board vote to increase the base growth, the required property tax loss would have been $4 million.
Superior, a rural district educating 372 students, would have had to cut its property tax request by $710,000 in exchange for $360,000 in Education Future Fund aid without a school board vote to increase the base growth.
Debate expected on Monday
In conjunction with the education funding plan included in LB 583, the governor proposes to initially send $1 billion from the state’s general fund to the Education Future Fund, with future legislatures committed to adding $250 million a year. But with special education costs expected to grow annually, the Education Future Fund could require an additional investment down the road.
At the same time, the revenue cap included in LB 243, the property tax package, annually limits what a local school district can receive in property tax revenues.
Each year, LB 583 calls for every school district in Nebraska to send the governor and Legislature a report that specifies the amount of new state aid received and the amount that the district reduced its property tax request.
With the state on sound financial footing, there is an opportunity to invest in improving student outcomes and assisting schools dealing with inflation and staffing issues. But with the 3% revenue cap, whatever the state provides in additional foundation aid and funding for special education programs is simply a shift from local funding that’s already in place.