LINCOLN — Nebraska would devote more than $1.45 billion to direct property tax relief over two years under the Appropriations Committee’s latest budget plan.
The committee approved changes to the plan this week that would increase the state’s long-standing property tax credit program by $63 million for the two years ending June 30, 2023. That’s enough for the credits to grow by 2% annually from their 2019 peak.
At the same time, Nebraska’s new program that gives income tax credits to property owners to offset part of their school property taxes will more than double in size, compared with the current year.
The budget also provides homestead exemptions for a growing number of low-income elderly and disabled homeowners.
All told, the new two-year budget plan increases property tax relief by $574 million compared with the two years ending June 30 — a 65% increase.
“That’s quite a bit of money,” said State Sen. John Stinner of Gering, the committee chairman. “What it represents is a commitment by the governor and the Legislature. This was one of our top priorities.”
Committee members are slated to sign off on the $9.7 billion, two-year state budget proposal next week. The plan leaves $210 million for other legislative priorities.
Stinner pointed out that money for property tax relief comes in from sales, income and miscellaneous taxes, which are then used to help property owners. He also noted that Nebraska has earmarked additional money to ease property taxes in the future.
For example, Nebraska voters last year committed the bulk of taxes from the yet-to-be-constructed racetrack casinos to property tax relief.
Also, a law passed last year requires the income tax credit program to jump to $375 million a year in fiscal year 2024-25, then grow at the pace of inflation.
The new income tax credit program started at $125 million for the fiscal year ending June 30. Based on growth in state tax revenue and the size of the state’s cash reserve, the program is expected to top $313 million for each of the next two fiscal years, or $626 million over the two years.
Meanwhile, the 14-year-old property tax credit program will grow. That program reduces the amount that property owners have to pay in property taxes.
Two years ago, lawmakers allocated $275 million a year to the program, which provided credits worth $104.19 for every $100,000 worth of residential and commercial property and $124.99 for every $100,000 worth of agricultural land in 2019.
But the value of the credits shrank last year, as property valuations increased and there was no change in the money put toward the program.
The latest action by the Appropriations Committee would put $25 million more into the program for the current year and $38 million more for 2022, with the goal of increasing the credits by 2% annually. The percentage matches the proposed increase in rates to be paid to health and human services providers in the budget plan.
The Legislative Fiscal Office estimated that the additional money would boost credits on residential and commercial property to $108.95 and $110.95 for the two years. Credits on ag land would increase to an estimated $130.73 and $135.86.
Counting the $626 million for the income tax credits and $214 million over two years for homestead exemptions, the total property tax relief amounts to $1.45 billion.
In other actions this week, the Appropriations Committee voted to beef up the state’s rainy day fund by transferring $50 million in each of the two budget years into the fund. The infusion of money would put the reserve at an estimated $763 million by June 30, 2023, or about 14.2% of state revenue.
The committee also agreed to shore up the state’s health care cash fund by picking up $10.1 million a year of behavioral health care with state general funds. The health care fund has paid for that portion of behavioral health care until now.
The health care fund was created largely with money from the state’s settlement with tobacco companies. Earnings from the fund have supported a number of health and research initiatives.