Special Session Update

By Korby M. Gilbertson, Radcliffe Gilbertson & Brady

Senators said goodbye to the 108th Legislature, 1st Special Session, at 2:22 PM on August 20 and there was applause in the Rotunda.  At 2:30 PM, Governor Pillen and an invited group of senators held a press conference to claim victory and promise that they would be back for more. 

This morning’s headlines said it all. From the Lincoln Journal Star:  “Pillen signs plan - Feeble tax package to be funded by front-loading program,” from the Nebraska Examiner:  “Legislature passes slimmed-down property tax relief package, ends Nebraska’s special session,” and from the Omaha World-Herald:  “Nebraska Gov. Jim Pillen signs property tax plan that offers 3% relief; lawmakers head home.”

There was a last ditch effort to convince lawmakers to stay for a few more days to do more, and even a motion to recess until November 18 and continue their work before and after Thanksgiving.  That motion failed with a vote of 15 ayes, 29 nays, and 5 excused and not voting.  I took special pleasure in the failure of that motion as I love Thanksgiving and the last few weeks of calm before the storm hits in January. 

The tax package (LB34) that passed did three things; property tax relief, state spending cuts, and political subdivision levy controls. First, it is intended to provide an additional $185 million in property tax relief which will represent an approximate 3.5% reduction. The major change for most taxpayers is the format in which the relief will be recognized. According to the Nebraska Department of Revenue, taxpayers will see the relief on their property tax statements they receive from the county treasurer this December instead of having to wait and claim it on their income tax return in 2025. Now, I have to add a caveat that there are some legitimate concerns with the timing laid out in the bill and the impact it could have on credits for 2023 property taxes. I’ll share more on that in a separate memo. 

In order to fund the front-loading of the property tax credits, the Legislature agreed to amend the budget they passed in April and make additional cuts and cash fund transfers to the tune of $184 million. 

Finally, the bill places hard caps on the revenue that counties, cities, towns, and villages can collect to the greater of a municipal price index (much like the CPI) or 0% more than was collected in the prior year. There are exceptions, including public safety (fire, police, public defenders, and county attorneys), emergencies, votes of the people, and actual growth. There are concerns that this methodology may have disparate impact on smaller municipalities. 

Governor Pillen and senators stated that this package represents the beginning of the efforts to reach his intended goal of providing 40%-50% of property tax relief. The Governor also said he doesn't believe that bringing them back for another special session this year on taxes would be smart. So, it looks like we can take a breather before the winter war/storm hits in January.