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Nebraska schools rely heavily on property taxes

August 26, 2014

LINCOLN, Neb. (AP) — Nebraska's K-12 public schools rely more heavily on local taxes for funding than nearly every other state in the nation, according to a report released Monday.

The report by the OpenSky Policy Institute says Nebraska ranked 49th in the percentage of school funding provided by the state in fiscal 2012, the most recent year available.

The longtime focus on local funding has created wide disparities in property tax rates and led to increased state funding for fast-growing urban districts, according to the report.

Districts with the least property wealth, including many urban areas, tend to have the highest average tax rates, the report said. At the same time, many rural districts are losing state aid. Farmers in those districts often pay more in property taxes because they own valuable land — not because their incomes have risen.

It also has fueled a sometimes-heated debate among lawmakers over how to make state funding for schools equitable, said Renee Fry, executive director of the OpenSky Policy Institute. The group's report does not make specific recommendations, but could factor into debates next year among lawmakers who are looking at the funding formula.

"Nebraska's changing demographics — a declining rural population, skyrocketing agricultural land values and increased student needs in many areas — have made this balance even more challenging," Fry said during a news conference at the Capitol.

The report was released as lawmakers work on a new, long-term "vision" for Nebraska education statewide. Sen. Kate Sullivan, chairwoman of the Education Committee, has said the lawmakers are reaching out to schools and residents to help decide Nebraska's priorities for education.

The funding dispute in recent years has revolved around larger districts that are seeing flat-lined property values and larger student enrollments. Smaller districts complained about their higher expenses for student transportation and teachers, who are in demand in Omaha, Lincoln and bordering states.

Fry said lawmakers could look at several options, including a general increase in state aid for schools, or changing the kind of local tax that is allowed to support schools. Property value may not be the best indicator of how much a community can generate locally, she said; incomes of residents might be a better measure.

The report notes that about 58 percent of education funding in Nebraska came from property taxes and other local resources, according to the most recent U.S. census data from the 2011-12 school year. Nearly 32 percent came from the state, and 10 percent came from federal sources.

By comparison, property taxes and local resources accounted for an average of about 45 percent of school funding nationwide. Another 45 percent from state sources and 10 percent came from the federal government.

Nebraska's local tax rates vary widely by district. During the 2012-13 school year the rates ranged from 43 cents to $1.20 per $100 of taxable property value. The gap has narrowed over time, but the highest rates are still almost three times larger than the lowest rates, Fry said.

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