Focus on property taxes as Gov. Pete Ricketts delivers State of State and begins statewide tour

Gov. Pete Ricketts greets former state Sen. Tom Hansen of North Platte Wednesday afternoon during Ricketts’ stopover at the North Platte Regional Airport after his annual State of the State address. Gerry Oligmueller, the state’s budget director, listens in.

Gov. Pete Ricketts reiterated that property tax relief leads his preferred uses for currently flush state coffers while visiting North Platte Wednesday after his annual State of the State address.

With more than 50 people listening in the North Platte Regional Airport conference room, Ricketts said, “Property tax relief continues to be the No. 1 issue people talk about no matter where I go in the state.”

His budget proposals include more than $500 million over the next three fiscal years on top of the $275 million Property Tax Credit Fund that funded a 5% break in North Platte property owners’ tax rates this fiscal year.

“That was a step in the right direction last year,” Ricketts told his North Platte audience. But with state tax revenues once more exceeding projections, “we have the opportunity to do more.”

The governor also stressed the need to finance statewide flood repairs, approve tax breaks for military retirees and offer “career scholarships” for young Nebraskans.

Ricketts first stopped at the Grand Island airport Wednesday after his morning State of the State speech before the Legislature. He planned to fly on to Scottsbluff to cap the first day of a three-day tour.

Ricketts said he and Omaha Sen. Lou Ann Linehan, chairwoman of the Legislature’s Revenue Committee, had agreed on “a high-level framework” for a tax relief plan her committee introduced late Monday.

Legislative Bill 974, sponsored by six committee members, is the latest version of a state-school-aid-based tax relief plan by Linehan and North Platte Sen. Mike Groene, the Education Committee chairman.

It would reestablish per-student “foundation aid” — a step long sought by sparsely populated but land-rich rural districts — alongside the longtime “equalization aid” that mostly goes to the state’s largest districts.

To keep the additional school aid focused on tax relief, LB 974 also would tighten school budget lids and ratchet down taxable valuations on home and business property as well as agricultural land.

“We’ve got to have expense control as well” by local governments for property owners to receive the relief they expect, Ricketts said.

Linehan and Groene’s previous tax-relief bill last year had many similar features but would have been funded in part by raising the state sales-tax rate and removing sales tax exemptions on a limited number of goods and services.

That bill reached the legislative floor in May but went no farther, running up against objections from Nebraska’s largest school districts and Ricketts’ refusal to consider raising one state tax to lower another.

Ricketts said robust economic growth within the state during 2019 — despite the devastation from the March “bomb cyclone” and subsequent waterlogged weather — is providing the fiscal anchor for his budget plan.

State revenues were a combined $354 million higher than forecast for all of 2019, and the state Revenue Forecasting Board in October added $266 million to its projections of state income through mid-2021, he said.

That performance pulled the state out of the latest trough in its long-running cycle of fiscal prosperity and hard times linked to Nebraska’s farm and ranch economy.

When a reporter asked how long Ricketts’ extra tax relief would last, the governor replied that his proposed budgets “have always fully funded the state aid formula” since he took office in 2015.

In addition to what LB 974 would do if passed, Ricketts said, his budget would boost the state school aid budget in its current form by $12.5 million to meet its obligations.

Ricketts said restoring “foundation aid,” abolished when Nebraska’s current school aid formula was born in 1990, would ensure this round of property tax relief becomes an “ongoing money” obligation.

But regardless of fiscal forecasts, “we have to live within our means,” said the governor, set to leave office under term limits in January 2023.

He praised the Legislature for giving 46-0 first-round approval Monday to LB 153, Gordon Sen. Tom Brewer’s bill to exempt half of military retiree pensions from state income taxes.

Nebraska is the only state in the region with more veterans leaving than coming in because it’s the only one that taxes military pensions, Ricketts said.

He asked senators Wednesday for $50 million to fund the state’s 12.5% share of rebuilding Nebraska’s flood-damaged infrastructure, plus $9.2 million more for small but heavily damaged counties that can’t afford their 12.5% share. The federal government will provide 75%.

Ricketts called for spending $16 million over four years to found a Nebraska Career Scholarship Program for postsecondary students in high-demand areas like information technology, mathematics, engineering, manufacturing and health care.

He also urged support for renewing and reforming Nebraska’s 33-year-old program of state business incentives through LB 720, introduced last year but stalled by rural calls to also boost property tax relief.

Most states, including state-income-tax-free Texas, offer such incentives to compete for the chance to lure new employers and help others expand, Ricketts said.

“If we don’t have an incentive system, consultants who advise companies on where to expand won’t even consider Nebraska,” he said.

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