Aaron Sanderford
LINCOLN — Nebraska Gov. Jim Pillen plans to pitch a “transformational” proposal to reduce the amount of property taxes paid by capping local government spending and funding those services more through sales taxes.
Pillen outlined part of his plan during an interview with the Nebraska Examiner before the 2024 legislative session starts Wednesday. He said he wants lasting, structural tax change.
The governor also discussed another priority he intends to highlight during his annual State of the State address in mid-January: attracting and retaining a qualified workforce. That includes improving access to quality child care.
Among other topics, Pillen reiterated his decision to turn down $18 million in federal money for a summer food program for needy children, saying he and most Nebraskans don’t “believe in welfare.” He also said he wouldn’t push for new legislation on school choice or abortion while voters consider potential ballot measures on both issues.
Property tax proposal
Under Pillen’s property tax proposal, the state would set “hard caps” on spending growth by cities and counties and perhaps maintain last year’s “soft caps” set on K-12 school districts.
He aims to tamp down on local governments automatically collecting more in property taxes as valuations rise, although he did not specify how his plan would accomplish that goal.
He said his goal is to trim $2 billion of the $5 billion Nebraskans pay yearly in local property taxes. Most of that money funds local K-12 schools, in addition to local law enforcement, city and county roads and more.
The only way to get at that big a number, he said, is if every level of government takes a deeper look at spending. He expects local leaders to ask hard questions about whether particular services are still needed. He said the plan would make allowances for fast-growing areas, saying new development would not trigger the hard cap.
“It’s not a valuation problem,” Pillen said. “It’s a spending problem.”
He said criticism of spending caps by public school proponents carried more weight when the state paid for a smaller portion of K-12 education. Nebraska previously has ranked near the bottom nationally in state support. The state now spends in the middle of the pack, he said.
Pillen’s proposal would shift up to $1 billion of the property tax burden to the state, through changes in the sales tax. He envisions adding a cent or two to the state sales tax and taxing some goods and services that are now exempt.
He said he and state lawmakers would dig into current state sales tax exemptions and see where the sales tax base could be broadened. He did not say what taxes the state might raise but said he would not tax groceries.
The state does not collect sales tax on vehicle repairs or newspaper sales. It also does not tax lottery tickets, medication, medical equipment, laundromats, home repairs, agricultural chemicals or equipment used for farming and ranching.
Leaning more heavily on sales taxes, Pillen said, might help more senior citizens on fixed incomes stay in their homes. He called the proposal “a win-win for all Nebraskans” and said, “The biggest problem we all have is we pay too much for property tax for where we live.”
His proposal’s “minor changes” to taxing optional purchases would avoid taxing life necessities for Nebraskans on fixed incomes, unlike a competing proposal for an EPIC consumption tax, which critics have said could tax rent and medicines.
“It’s a big reason why EPIC is not ever going to go anywhere, because, you know, Nebraskans don’t believe in taxing our senior citizens and our neighbors on fixed incomes,” Pillen said.
Asked whether he was concerned about people crossing the state border for purchases, Pillen said his proposal was designed to minimize “border bleed.”
“By being able to switch the taxation to a discretionary consumer, all of us can make that decision if we want to pay for that or not,” Pillen said.
In addition, the proposal would make the state income tax credit for local property taxes “front-loaded” rather than make taxpayers apply for it after the fact, he said. Today, more than $128 million in state property tax credit has not been claimed, he said.
Part of his plan to ease property taxes is already in motion, he said. That includes shifting the $250 million cost of funding community colleges to the state and away from local property taxes. Another part is his planned $1 billion Education Future Fund.
The new fund began with an investment of over $250 million to help the state fund $1,500 per student in baseline aid to K-12 education and supplement federal dollars to cover about 80% of special education costs.
Pillen said his property tax plan will not change his commitment to invest $250 million a year to build that fund to the level where it can sustain about $113 million a year in baseline aid and about $157 million a year in special ed funding.
Pillen said his plan was informed by months of discussions with state senators, county and city leaders, business groups and Nebraska residents serving on a property tax and valuations working group that he announced in July.
He said he asked members of the group whether they wanted to consider ideas that would slow the growth of property taxes, hold the line or cut them. He said most wanted significant cuts.
Workforce development proposals
The first of Pillen’s proposals to address Nebraska’s workforce shortages will center on incentives to businesses to offer on-site child care to their employees or similar help. Helping communities increase preschool options is part of that effort, he said.
He said the state could help by giving tax incentives to businesses that offer child care benefits to their employees. One of his key challenges, he said, is communicating to older Nebraskans that child care can cost thousands of dollars a month.
Among the “innovative” ideas he’s heard businesses consider is creating a rotation of employees who take care of one another’s children for five hours a week, while being paid.
Pillen acknowledged that lack of child care was one reason some state employees, through their union, objected to his recent executive order moving state employees back into the office, after letting some work from home part of the time.
Asked whether he planned to set an example for businesses by offering state employees child care at their workplaces, he said he hadn’t “gotten into that piece.” Pillen said he would need to see how many need child care.
Under other parts of his proposal:
- The state would partner with businesses to encourage more high school students to consider trade school or community college over four-year degrees or going straight to work after high school.
- State, local and private seed funding would be used to boost the building of apartments and homes for workers in rural and urban areas with a shortage of affordable and quality options.
- To reverse the state’s “brain drain,” the state would revise its business incentives to reward companies that bring in or keep skilled workers.
LGBTQ legislation
Asked how he would square some of the Legislature’s more socially conservative stances on LGBTQ-themed legislation with recruiting and retaining young people, he said, “We all have to do a better job building relationships.”
He said he has had conversations with transgender adults who have asked him what his “problem is” with them. He said he tells them he has no problem and that he loves them “like any other Nebraskan.”
He said he tells them, “I just want to protect our kids so they can make decisions when they’re an adult to become a transgender just like you did.”
Pillen said LGBTQ Nebraskans should not let the comments last session from “two of 49 senators” cloud their judgment over how their friends and neighbors will treat them.
Pillen has hinted that he might support a bill limiting middle and high school sports participation to students based on their sex assigned at birth. The same bill, which was held over from 2023, also addresses what bathrooms students use. He acknowledged during the interview that the issue might come up this session.
He signed an executive order in August spelling out the legal definitions of male and female for state agencies under the governor’s control.
Summer food funding for needy kids
Pillen defended his decision to turn down $18 million in federal funds for a pandemic-era boost in food aid, saying he does not “believe in welfare, and what we’re doing is best for the kids.”
Rather than that program, which distributes food aid through grocery purchases, he said he preferred the current federal summer meal program, in which food is distributed at schools, camps and churches. He said the program, while more limited, does a better job of getting kids out to socialize and connect in their communities.
Asked about children who lack access to transportation to community meal programs during the summer, he said, “That would be a really, really small number.” He called them an exception and said most would be able to reach meal sites.
He did not answer a question about how his acceptance of federal pandemic relief funds for his hog operation in Columbus or grants for a meat-cutting operation in Fremont differed from accepting federal funds for the meal program.
School choice and abortion
On school choice, Pillen said he continues to support the Opportunity Scholarship Act that provides a dollar-for-dollar tax credit to private donors and trusts giving money that supports private K-12 scholarships for needy students.
However, he said, he has no plans to ask lawmakers to propose additional legislation that would expand the program. The new law initially provides up to $25 million a year in tax credits. The credits could rise to $100 million annually by the tenth year.
Pillen said he wants to help State Sen. Lou Ann Linehan of Omaha and other supporters of the scholarship law defeat a potential ballot measure aimed at giving voters decide whether to accept or repeal the law.
On abortion, he said his stance has not changed. He still would prefer that abortion be banned. But he said his focus this year would be on helping anti-abortion activists defeat a potential ballot initiative that would enshrine a right to an abortion in the State Constitution.
“The abortion conversation is about love and life, helping moms choose life and love, and giving them support,” Pillen said.
He said he is not interested in banning access to “prophylactics.”
“It’s not about in vitro fertilization,” he said. “It’s not about a conversation of embryos. It’s not about being involved in the patient-doctor relationship. It is simply about moving back and looking at 1972 and trying to save as many babies grown in mom’s wombs.”