Gov. Ricketts calls for constitutional amendment to limit growth in local property tax revenues

January 17, 2019

LINCOLN — In his quest to limit government spending and provide property tax relief, Gov. Pete Ricketts is turning to a body that has helped him before — the voters.

In his fifth annual State of the State address, the conservative Republican outlined a proposed constitutional amendment to limit local schools and other property taxing bodies to increasing property tax revenue by no more than 3 percent a year.

The proposal would require approval in the Nebraska Legislature, and then an OK by state voters. But Ricketts has scored one victory by ballot initiative. He spearheaded the effort that ended with voters restoring the state’s death penalty in 2016, reversing the repeal by state lawmakers.

Overall, the history of Nebraska is littered with unsuccessful attempts to rein in spending and taxes via the ballot box, with voters rejecting initiatives in 2006, 1998 and 1996. But Ricketts, who often says property taxes cannot be reduced without controlling spending, said he’s ready to send the issue to the voters again.

“This is the thing that Nebraskans are most unhappy about,” the governor told reporters, referring to high property taxes. “We need to target the growth of government.”

The proposal, one of several outlined in the governor’s 18-minute speech, was met with mixed reviews.

Conservative senators like Elkhorn’s Lou Ann Linehan and Kearney’s John Lowe said that property tax relief can come only after spending restraint.

The proposal, Lowe said, “gives Nebraskans a vote on controlling the growth of property taxes.”

Linehan, recently picked to lead the Legislature’s Revenue Committee, said the 3 percent limit is workable, and might be a little high, given that inflation hasn’t reached 3 percent in recent years.

But representatives of schools, counties and other local governments that levy property taxes were not supportive.

“Nebraskans have on multiple occasions rejected unworkable constitutional lids,” said Karen Kilgaren of the state teachers union, the Nebraska State Education Association. “There are many unintended consequences to such proposals, including harming public education, public safety and economic development across the state.”

Some groups, like the Nebraska Chamber of Commerce and Industry, which has both supported and opposed such ballot issues in the past, want to see more details.

“It raised eyebrows, I can tell you that much. But not necessarily in a bad way,” said Jamie Karl, a spokesman for the state chamber.

Ricketts’ speech, which outlines his budget priorities for the next two years and legislative priorities for 2019, put property taxes front and center, while also funding the expansion of Medicaid approved by voters in November.

He called for increasing the state property tax credit program by 23 percent, which translates into about $20 more for the owner of a $100,000 home.

Renee Fry of the Open Sky Policy Institute said that the additional $51 million for property tax credits would not be “real” property tax reform.

“We hope there will be more comprehensive approaches to property tax reform put forth by lawmakers this session,” Fry said.

The governor’s proposed budget would increase spending by an average of 3.1 percent over the next two fiscal years, without a tax increase.

An additional $103.8 million over two years would be directed to state aid for K-12 schools, and $63 million would be earmarked for the state’s share of expanding Medicaid to an estimated 90,000 more Nebraskans.

His budget plan also calls for $49 million to build two prison additions in Lincoln for 384 high-security inmates, which Ricketts said would help the state avoid a prison overcrowding emergency in 2020 that would require the release of some inmates.

As he did last year, Ricketts included language in the budget to bar Planned Parenthood from getting federal Title X family planning dollars, which stayed in last year’s budget despite a lengthy debate.

That drew criticism from the Nebraska Democratic Party.

“He continues to use a deeply personal issue for his political gain,” said Jane Kleeb, the party’s state chair.

The governor’s budget plan would provide small increases in many spending items, including for special education and rates paid to providers in child welfare, Medicaid and other health and human services programs. Provider rates were held flat over the past two years.

Ricketts rejected a recommendation by a legislative committee to increase the state’s cash reserve fund to $800 million. Instead, he would add $15 million to the “rainy day fund,” bringing it to $348 million by the end of the two-year budget period.

“Tax relief is a bigger priority,” he told reporters during a media briefing.

State Sen. John Stinner of Gering, the Appropriations Committee chairman, said the committee will take a hard look at the governor’s cash reserve fund proposal as members work to craft the state budget.

He noted that the governor’s budget recommendations are only a starting point — governors rarely get everything they ask for. But Stinner said lawmakers generally incorporate about 95 percent of those recommendations into legislation.

Speaker of the Legislature Jim Scheer of Norfolk said he had a “fairly positive” reaction to the governor’s plans.

“He’s trying to accomplish a lot of things with existing revenue,” he said.

Scheer said that the property tax proposal may not be big enough to satisfy some senators but that he believes “we need to start taking something instead of ending up with nothing.”

The governor wants to add $51 million annually to the state’s Property Tax Credit fund, bringing the total to $275 million per year, and to see the tax credits become set in state law at a minimum of $275 million annually.

Ricketts said a law would give more “certainty” to the tax refund. Currently, the credit program is part of the state budget, which can be changed every two years.

The governor’s budget plan would cover the increases in salaries and health care costs for the University of Nebraska and the state colleges. He is also earmarking new funds for 2,500 “talent scholarships,” an initiative aimed at training college students for high-need, high-paying jobs in the state in fields like engineering, health care and math. A program that introduces middle school kids to careers in manufacturing and technology would also be expanded under the governor’s budget.

Another previously announced initiative would give retired military veterans a 50 percent exemption from state income taxes on their military retirement.