Nebraska Tax Farmers/Ranchers vs. Schools

[BigRedBuster]

Here is a Facebook post from York Public Schools.

 

What are your thoughts?

https://www.facebook.com/permalink.php?story_fbid=10153930797889324&id=339575024323&fref=nf&pnref=story

 

This is long but please read if you're interested in property taxes and how they relate to school funding.....

Some elected officials in Lincoln seem content to stand by and watch the battle for property tax relief drive a dagger between farmers/ranchers and school folks. What a shame it is that too many people in this great state blame schools for their high property taxes. What a shame it is that our state leaders sit back and let school board members and school administrators take the hits that they cause when they know the true culprit is really how they fund K-12 education.

We do have a property tax problem. School districts are too reliant on local property taxes. School leaders have been saying this for several years and it has only been accelerated with the massive swells in land valuation we’ve seen over the past 4-5 years.

School board members and school officials want to be able to provide property tax relief more than you can imagine! That’s why we’ve begun to make sure the public understands that Nebraska ranks 49th in the nation for the percentage of its state budget allocated to K-12 education. We’ve seen the percentage of the state budget dedicated to K-12 education dwindle from 32% in 1998-99 to 27.6% today. There’s a lot of property tax relief in that 4.4% reduction of state budget towards K-12 education!

Yet, some state leaders seem satisfied to sit by and blame high property taxes on “school spending.” Collectively, Nebraska public schools had an average annual spending increase of just 3.5% for the last decade. Much of that spending can be attributed to increased student needs. School spending has not caused the property tax crisis. The way the state funds schools is the problem, especially when land prices soar. York is a great example of what numerous school districts are dealing with. Our total annual revenue has only increased by an average of 2.5% since 2008-09 despite our property tax request increasing by over 45%. Our total spending only increased by an average of 1.8% annually.

Total State Aid for York Public Schools
• Was $3.7 million in 2008-09
• Was $2.2 million in 2014-15
• Is $1.56 million in 2015-16
• Is projected to be $560,000 for 2016-17

Total Property Tax Request for York’s General Fund
• Was $6,472,903 in 2008-09 (46.5% of our total revenue that year)
• Was $9,395,581 in 2014-15 (58.5% of our total revenue that year)

The dirty little secret is that when local school districts have valuation increases, the state funding formula reduces state aid so more of the burden can be passed on to large landowners. The numbers speak for themselves.

 

Our school is seeing the same amount of cuts in state funding as York is.

[Mavric]

This is a great topic and I'll put more effort into a response later.

But I've read another article from Lucas - and a couple other articles - from that side of the table in the last couple weeks. I find it interesting that he actually talks about the money they get from property taxes in this post. In his other article that was totally absent. I though that he wasn't presenting the whole picture before but this is much more balanced.

Here is his post from last month. I'm glad his tone has changed to provide a more complete synopsis of the situation:

I have sat back over the last two years or so and watched and listened to public education take a beating from folks around our great state and I can’t take it anymore.

I’ve seen and heard organizations like the Platte Institute, Farm Bureau, and even the State Chamber of Commerce take some cheap shots at us for spending and “under-delivering.” Heck, even some of our elected officials in the Capitol view public education as a burden.

As a career educator that didn’t grow up in Nebraska but has been here since 2000, I have come to love and appreciate what our great public school system offers.

• Did you know that over 86% of Nebraska Public High School students took the ACT in 2014? Their average composite score of 21.7 is the HIGHEST IN THE NATION for states that had 80% or more of their students taking the ACT!

• Did you know that Nebraska has one of the best high school graduation rates in the nation, with nearly 90% of our seniors graduating?

Now, we hear about how our spending is “out of control” and we’re the culprit for obscenely high property taxes. Well, we have spending lids and tax levy lids that we are mandated to adhere by. Many of our districts absolutely do have an overreliance on local property taxes and you would have to think that one of the main reasons is that Nebraska ranks 49 in the nation for the percentage of its state budget that goes towards K-12 public education.

In 1998-99, right at 32% of the state’s general fund was spent on K-12 educational aid. During this 2015-16 fiscal year, that percentage has plummeted to 27.6%. It is projected to be even lower in 2016-17. If K-12 aid made up the same percentage of the budget today as it did in 1999, the state’s general fund support would be over $187 million more than it is.

Most states provide significantly more state aid to K-12 schools. In fact, Nebraska would have to increase state aid to K-12 education by more than $700 million just to reach the national average.

Here in York, we’ve seen our state aid go from $3.7 million a few years ago to $1.56 million this year. We are projected to lose another million for 2016-17 and receive just $560,000 in state aid. All the while, our total revenue, which includes state aid, federal monies, special education reimbursement, etc. has only increased by an annual average of just over 2%. We HAVE to increase local property taxes just to make up for the huge losses in state aid.

Local school districts are very wary of their spending. They have public board meetings every month where their bills are discussed and approved. Here in York, our spending is so “out of control” that it has grown by an average of 1.8% over the last six years. What other organizations, businesses, and institutes can say the same? Right at 33% of our spending increase has been for grant funded programming that we’ve added over the past size years for pre-school, children living in poverty, and before/after school programming. If we didn’t have these student needs, we wouldn’t have increased our spending!

We have lots of room for improvement in every public school district in this state. We will always be a “work in progress.” It just sickens me that people that have never walked a step in the shoes of our dedicated teachers, support staff, and administrators get to continually put us down.

Come visit a high needs special education room and help care for severely disabled students that can’t go to the bathroom on their own. Come visit a pre-school or kindergarten room and help provide meaningful instruction for youngsters that haven’t eaten anything since they left your classroom at 3:15 yesterday. Come deal with the mental health issues we have in our middle and high schools. Come deal with more and more unfunded mandates and school accountability. Come spend a day with your local school administrator and deal with the chaos that often begins before 7:00 AM and ends around 10:00 PM. We do it every day and love it and can’t wait to do it again tomorrow!

What services do they want us to cut? What are we providing for our students that is so out of line?

We’ll hear an awful lot this legislative session about how under-performing our state’s public schools are. Folks will be pushing charter schools and vouchers, spending lids, and all kinds of measures that paint public education as the enemy. We’re not. Come visit us and see for yourselves!

[BigRedBuster]

Like I said in the original post, our school system is seeing the same drastic cut in funding. I am slightly involved in our schools due to being on a committee trying to get a certain educational program started here that many other Nebraska schools have. I originally thought the funding problem was due to some mistake our administration had made. However, the York Schools post shows this is more wide spread than that.

 

We were slapped in the face with the fact that our state funding is cut almost 30%. I am also involved enough to firmly believe that our school system isn't drastically wasting money. They have pinched pennies constantly when trying to provide our kids with as many opportunities as possible (however, still not to the level that we would like).

 

At some point, there is a breaking point. I wish I knew more about the details of this issue. My fear is, the people of Nebraska put pressure on the legislators to cut taxes. The legislators find it much easier to cut school funding and put it out like it's the school system's fault than cut something else that affects more people and catch the flack from that.

[Mavric]

We were slapped in the face with the fact that our state funding is cut almost 30%. I am also involved enough to firmly believe that our school system isn't drastically wasting money. They have pinched pennies constantly when trying to provide our kids with as many opportunities as possible (however, still not to the level that we would like).

 

I think what is missing from whoever is pointing out to you how far your state funding is being cut and from the article I posted above is WHY your state funding is getting cut that much. It isn't because the state is cutting that much out of what they are paying schools. Generally speaking, that amount is growing and will almost certainly continue to grow. Possibly not every single year but generally over time.

 

The reason why your state aid is being cut is almost certainly because the valuation of your district is increasing. There are other factors in the TEEOSA formual (the model the state uses to determine how much state aid each district gets) but the biggest change year-to-year is how much your district is ABLE to levy for via property tax. It's not how much you are actually asking for but how much you CAN ask for. As your valuation goes up, how much you can tax for goes up and the state - in effect - says "we don't have to give you as much money because you can raise more of it yourself." You can see that in the York numbers. Their state aid dropped $1.5M from 08-09 to 14-15 but what they taxed for increased nearly $3.0M. So they were able to tax more, the state gave them less and they did tax more.

 

I'm not saying that's the right way to do it. I'm just saying that's how the game is set up right now. I don't think it's right that basically half the school districts in the state get no state aid. But that's how the formula works. And to complain that your district is losing a bunch of state aid without explaining WHY your district is losing their state aid seems to me like you're more interested in complaining that working to find a solution. (None of that is directed at you, BRB. I'm talking about Lucas, other articles that I've read and possibly whoever is talking to you about losing state aid.)

[Mavric]

To the title of your thread, I think that people are unfairly characterizing this debate as "farmers vs. schools". It's another way to try to blame the boogeymen man instead of really working to understand other points of view and work together to find a solution. It's not that the farmers, etc. are against the schools, it that they don't think the funding mechanism is fair.

 

I think the major problem is the system was set up many years ago and probably worked really well for everyone at the time but the situation has changed drastically. Obviously the main people complaining - and being villified - are large land-owners. That situation has changed significantly from when the system was first set up. At the time, most people owned at least some real estate and very few owned a significant amount. Thus, (basically) everyone was contributing to the government projects in their towns and counties. Though schools get brought up the most in these debates, it's also county government, city government, hospitals, fire districts, community colleges and other government agencies. Now, property ownership has shifted dramatically such that a few people are paying for most of it while many pay relatively little and more than a few pay none at all. Yet even those who pay none at all get a vote in what should get paid for - so they can vote to spend other people's money. That's what doesn't sit well with many.

 

And the thing is, agriculture has the biggest share of pie but I'm not sure it's fair all the way down the line. If you own a $100,000 house, you probably pay anywhere from $500 to $1,300 per year to your school district. That's not necessarily a huge amount but is it fair that you have to pay that while your neighbor down the street in the rental house doesn't have to pay anything? (You can make the argument that they're indirectly paying it but you see the point.)

 

You'll also probably see it brought up that Nebraska is one of the lowest states in state aid to schools. But it's almost never brought up that we're one of the highest in property taxes to schools. That's simply a fact but many like to leave that out to make their point.

 

As far as property tax reform goes, I haven't really seen what anyone's exact proposals are. The only generalities I've seen are to reduce the valuation of ag property to try to lessen the burden on that sector. I don't know if that would really change things a lot because in a lot of Nebraska school districts the valuation from ag land dwarfs the rest of the property such that reducing ag valuations wouldn't make any noticeable difference. About the only thing you can do - as far as I can tell - is to increase what the state is paying to schools so they don't have to get as much of their revenue from property taxes. And to do that they would need to raise revenue. And to do that "fairly" you'd have to raise taxes. Raising income taxes would be one option but I don't know how much that would shift the burden. I would think the "best" way to do that would be to increase sales taxes with that increase going to fund schools. Then everyone would be sharing the costs more.

 

It won't ever be equal - nor should it be - but I think it would be better to tilt the field back towards level to some extent.

[Stumpy1]

 

We were slapped in the face with the fact that our state funding is cut almost 30%. I am also involved enough to firmly believe that our school system isn't drastically wasting money. They have pinched pennies constantly when trying to provide our kids with as many opportunities as possible (however, still not to the level that we would like).

 

The reason why your state aid is being cut is almost certainly because the valuation of your district is increasing. There are other factors in the TEEOSA formual (the model the state uses to determine how much state aid each district gets) but the biggest change year-to-year is how much your district is ABLE to levy for via property tax. It's not how much you are actually asking for but how much you CAN ask for. As your valuation goes up, how much you can tax for goes up and the state - in effect - says "we don't have to give you as much money because you can raise more of it yourself." You can see that in the York numbers. Their state aid dropped $1.5M from 08-09 to 14-15 but what they taxed for increased nearly $3.0M. So they were able to tax more, the state gave them less and they did tax more.

 

I think this is where it goes all wrong or is misinterpreted by the state. In the last couple years, our town has built a new hospital, just passed a vote for a new aquatic center and have done some other town improvements. This has raised our taxes to where they are some of the highest in the state and yet, the school has been lobbying for more money to do some updates and they have been denied the funds. The state might see an increase and think that the school will get some when in reality, they might not be getting any.

[BigRedBuster]

Mavric, two good posts.

 

My lack of information on the subject is one of the main reasons I started this thread. I also had a brief discussion with our Principal and Superintendent yesterday. I also wrote an email to our state Senator, who I know personally, to get more information from the other side.

 

I understand that the issue is based on the formula (that nobody can seem to tell me exactly how it is calculated).

 

So, what you are saying is that when valuations go up, we should be receiving more funding from the local property taxes so the state should be funding us less. If it is as simple as that, I see some major flaws in that system.

 

Farm land is obviously the largest amount of assets that property taxes get their money from. For many years, farm land was valued at around 2,500 - 3,000 per acre and was fairly stable. Then, in the last 7-8 years, farm land has sky rocketed to 8,000 - 10,000. I have even seen some land go for as much as 12,000 per acre. At this time, commodities were at record levels. Corn was selling for around $7.00 per bushel. Farmers had great cash flows that could pay a lot in taxes. Well, this morning, our local elevator is buying corn at $3.35. Meanwhile, very few inputs have decreased even though when corn was going through the roof, they were rising right along with it. I believe the 3:35 is at or below what would be considered break even now.

 

So, farmers are not in the same cash flow situation they were 3-4 years ago to be able to pay a lot more in taxes. (I'm assuming this is the source of the idea of Farmers vs schools)

 

As everyone should understand, just because you have say $5,000,000 on the balance sheet in land, doesn't mean you have the cash flow to pay whatever is asked.

 

I have been told we are close to maximizing our legal limit on property taxes. So, we have a little room to raise it but not really that much. The valuation on land has come down some since commodities have dropped.

 

If you know the formula, I have a question. Obviously, it estimates how much in property taxes we should be able to get from local property. Is the valuation used in the formula, a value from the past 2-3 years? Or, does it look forward at what that value is going to be during the school year in question? I'm assuming the way the farm economy is going, the property taxes for the school year 2016-2017 is going to be lower than what it would have been in 2013-2014 or even 2014-2015.

 

Thanks for the discussion.

[Mavric]

I understand that the issue is based on the formula (that nobody can seem to tell me exactly how it is calculated).

 

So, what you are saying is that when valuations go up, we should be receiving more funding from the local property taxes so the state should be funding us less. If it is as simple as that, I see some major flaws in that system.

The formula isn't so much complicated as it is involved. That is, the calculations are fairly straight-forward, it's just that there are a lot of variables and you have to search all over the place to find each one. A lot of the information can be found here. It's not quite as simple as "valuations go up, state aid goes down" but that is definitely a large part of it. The simplest way to explain it is the state aid you receive is equal to what the state calculates you "need" to run the district minus what resources you have, which is mostly what you can ask for via property taxes. Thus, the more property taxes you can ask for, the more they subtract from what you "need" and thus the less state aid you get. I think the basic premise makes sense - not that there aren't other ways to do it, but I can see the logic in doing it that way. And I'm in a school district that gets zero state aid.

 

 

Farm land is obviously the largest amount of assets that property taxes get their money from. For many years, farm land was valued at around 2,500 - 3,000 per acre and was fairly stable. Then, in the last 7-8 years, farm land has sky rocketed to 8,000 - 10,000. I have even seen some land go for as much as 12,000 per acre. At this time, commodities were at record levels. Corn was selling for around $7.00 per bushel. Farmers had great cash flows that could pay a lot in taxes. Well, this morning, our local elevator is buying corn at $3.35. Meanwhile, very few inputs have decreased even though when corn was going through the roof, they were rising right along with it. I believe the 3:35 is at or below what would be considered break even now.

 

So, farmers are not in the same cash flow situation they were 3-4 years ago to be able to pay a lot more in taxes. (I'm assuming this is the source of the idea of Farmers vs schools)

Definitely agree with this. And that is a lot of the problem. The huge increase in ag land valuations has dramatically shifted the balance of property taxes. The valuation of our district has quadrupled in the last 12 years, and we are over 90% ag land. In fact, this past year our district dropped our tax asking by $250k overall but it was still a tax increase on ag land because that much more of the balance had shifted to ag land.

 

 

If you know the formula, I have a question. Obviously, it estimates how much in property taxes we should be able to get from local property. Is the valuation used in the formula, a value from the past 2-3 years? Or, does it look forward at what that value is going to be during the school year in question? I'm assuming the way the farm economy is going, the property taxes for the school year 2016-2017 is going to be lower than what it would have been in 2013-2014 or even 2014-2015.

I haven't kept up on the formula as much the last few years because we aren't getting any state aid. But it appears to me that the state aid calculated for the 15-16 school year is based on the 2015 valuations - or at least the values used to calculate the taxes paid in 2015 as it's always confusing to me if 2015 taxes are paid in 2015 or 2016. But at any rate it is as up to date as they can have it as far as valuations go.

[BigRedBuster]

Interesting. I'll study your link more later.

 

One thing that was told to me yesterday that leaves me scratching my head. There is a larger town right next to us that has done major construction to their schools and they seem to have all the money in the world to do whatever they want. I asked how the heck can they do that when everyone's budgets are being cut? I was told that a number of years ago cities with large packing plants which caused their schools to have much more diversity sued the state over funding. Once the law suit was filed, those cities were able to get certain things changed that gives them much more funding than they used to get. I know I saw some figures last year and this community received a HUGE amount per student compared to what our school and others around it received.

 

I'm not sure I was told the whole story behind that but, that's what I was told.

[Mavric]

I'm pretty sure that any major building projects would have to be bonds voted on but the district patrons. There isn't a limit to that as long as the public votes for the bond. You can't use General Fund money (all the money that comes from the state and most of the money from property taxes) to do building projects. Now they could have gotten changes to the formula that help them out. But I don't think that would have made a large difference. And that money can still only be used for general operations and maintenance, not construction.

 

Here is the valuation and levy info for all school districts for this year (sorted by county then district). You can see what each district is levying for each fund. The max for the General fund is $1.05 unless the patrons have voted to override that limit. General Fund money can only be used for operations and maintenance. The max for the Building Fund is $0.14 (not sure if that can be overridden) and that is used for construction. The Qualified Fund can be used for construction projects that have to do with health issues and has a max of $0.052. The school board can levy that without a vote of the patrons. But I would guess the interesting one for your question would be to see what that school district has in their Bond fund. I would think they have a decent amount in there if they've done some major construction recently.

[huKSer]

Its good to know that Kansas isn't the only screwed up state for school funding.