Nebraska lawmakers hear plan for $1.25 billion fund to boost school aid, ease taxes

Education officials lined up in near unanimous support Wednesday of Gov. Jim Pillen's plan to create a $1.25 billion fund to boost state school aid.  

Legislative Bill 681 would put $1 billion into an Education Future Fund in the fiscal year ending June 30, 2024, then provide for a $250 million infusion each following year. The bill was introduced by State Sen. Rob Clements of Elmwood on the governor's behalf.

The new fund would be used to provide per-student payments for all Nebraska school districts and boost state support for special education funding, with the goal of reducing property taxes. The fund also would be used for grants to promote teacher retention, career and technical education and mentorship programs.

At a hearing before the Appropriations Committee, Pillen offered an amendment to ensure the fund's first priority during tight budget years would be to support the current school aid formula. 

"His purpose is to assure those schools the funding is sustainable," Clements said, noting the governor had worked with both large and small school districts to develop his plan. 

But Omaha Public Schools officials questioned whether the state would maintain its commitment to add $250 million to the fund during down years, especially given the ambitious tax-cutting proposals that lawmakers are considering. 

"We have concerns that a future economic downturn or recession would once again result in the undoing of this Legislature's good intentions," said Bri Full, an OPS board member. 

She also noted that the $250 million annual investment would not be enough to cover the $300 million or so cost of Pillen's proposed state aid changes over the long run. 

State Budget Director Lee Will acknowledged that the fund would dwindle over time, even when accounting for interest on the initial investment. He estimated it would have a $500 million balance by 2030. 

"Eventually we'll have to replenish some of that fund," he said. 

Still, Will said the administration believes the state can afford both the tax cuts and school aid changes. He said officials have studied future possibilities and past trends and concluded that Nebraska has enough in its cash reserve fund to weather potential recessions.

Nebraska Farm Bureau President Mark McHargue urged support for the education fund, saying the state needs to do more to support schools.

But he said the fund should be coupled with legislation ensuring that the increased state dollars actually produce property tax relief. Pillen's plan includes a 3% cap on school revenue growth. 

"The state has the money. It's the right thing to do, its the right time to do it," McHargue said. 

Representatives from large, medium and small schools also testified for LB 681.

Millard Public Schools Superintendent John Schwartz said he was speaking in favor of the plan because of the amendment giving priority to the existing school aid formula. He said he didn't know how much the governor's proposed changes in school aid would help Millard. Those changes are included in a separate bill and are the subject of negotiations. 

Jack Moles, executive director of the Nebraska Rural Community Schools Association, said the fund would provide some stability for schools. He also liked the grant programs that the fund would support. 

LB 681 was the last piece of Pillen's tax cut and school aid package to have a hearing. Earlier Wednesday, the Revenue Committee worked on putting together his income tax proposals with other income tax-related measures. The committee is expected to take up property tax proposals next week.