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NESCPA Legislative Update - Special Session Plan Update

July 01, 2024

Below is an update from our lobbyist, Korby Gilbertson, regarding the upcoming Special Session. 

It has been a busy week, and the rumor mill is in full tilt. I refer to the information as rumor because we have no official information from the Governor. However, I wanted to bring all of you up to speed on what we are hearing. I hope you can take two things from this update: 1) NOTHING IS SET IN STONE, 2) IT IS TIME TO BE VIGILANT.

On Wednesday, Governor Pillen sent a letter to senators outlining his reasons for calling a Special Session. I have attached the letter for your information.  Speaker Arch also emailed all senators and gave them a preliminary plan for the yet to be called Special Session.

As Governor Pillen announced last week, he plans to issue a proclamation for a special session to begin Thursday, July 25, to address lowering Nebraska's property taxes.  Special Sessions are different, and don’t always run on the typical Monday-Friday schedule, nor do they follow the same set of rules of procedure.  Everything is compressed which means less time for bill introduction, review and preparation for hearings.

Speaker Arch told senators that he intends to schedule the first three days of the special session on Thursday, Friday, and Saturday (July 25-27). The Governor’s proclamation will determine the start time on Thursday, and senators would convene at 10:00 a.m. on Friday and Saturday. Pursuant to the Rules, bill introduction would only take place those three days.  On Monday, July 29th, public hearings would begin at 9:30 a.m. The public hearings are expected to be Monday and Tuesday (July 29-30).

I have been asked if there is a limitation on the number of bills or if only the Governor can introduce bills.  There is no stated limit on the number of bills that can be introduced but they must be in line with the specifics of the Governor’s proclamation calling the Special Session.  Further, bills introduced at the request of the Governor are introduced first.

Speaker Arch also announced that the Legislature will address some pending appointments which is allowable under the Rules.  Finally, Arch stated that committees are not schedule any interim study hearings, and that they will not be addressing any legislative resolutions, including ceremonial and congratulatory resolutions, during the special session.

Now, on to the rumored “plan.”  Governor Pillen made an announcement at one of his town hall meetings that he would like to have the state take over the vast majority of K-12 education costs.  Because school funding uses approximately 60% of property tax revenue, if the state assumes more of the cost, property taxes would significantly decrease.  This would now be the way to guarantee at least a 40% cut in property taxes.  As always, the devil is in the details, and we don’t have many.  However, it is expected to be done over a three-year period and the Governor has told people that he would like to follow the formula he used when the state took over community college funding two years ago.  If that is the case, schools would still be able to levy for certain things including capital construction. I won’t delve into the local control issues, the fear of further consolidation, or the disparity in costs per student across the state.  I am sure this will not be a slam dunk.

Paying for this plan would reportedly be done via a patchwork of sales and excise taxes.  It is important to note that everything is still on the table but the following is a list of what is currently on the short list: (I do not have specifics on proposed rates unless stated)

  • Eliminate the Tier 1 Property tax credit fund (roughly $315 million this year, slated to grow over two years to around $405 million, of which ag gets approximately 60%) 
  • Spending down the Education Future Fund (arguably not needed since State will take over funding)
  • Stop cash reserve transfers (assuming that this is in reference to funds transferred for the 1107/ income tax credit for property tax paid)
    • It is assumed that the 1107 credit would be front loaded and then phased out over the three year period.
  • Sweeping $40 million of cash fund interest from state agencies
  • Reducing the required cash reserve minimum from 3% to 1% 
  • Eliminate some unfunded mandates to cut costs
  • Make some cash fund fees regulatory instead of statutory (I’m not sure about this one, could be argued that agencies have a better idea of what should be charged so they don’t run up big surpluses.  Might be easier to sweep if regulatory and that would not bode well with those that pay those fees.)
  • 20% tax on vape products
  • $2 additional tax on cigarettes 
  • 30% tax on consumable hemp
  • 20% tax on games of skill (up from 5% established this year)
  • Tax "pop & candy" as a “sin” tax (we assume so they can be taxed at a rate higher than 5.5%) 
  • 14.5 cent increase in the liquor tax which is now $3.75/gallon tax.
  • Keno tax
  • Tax capital gains at 5.5% 
  • Tax software as a service  (wondering if this indicates that they will want to tax services at a different sales tax rate)
  • Increase NE lodging tax from 1% to Iowa’s rate of 5%
  • Institute advertising tax (not clear on actual language or if it will address constitutional issues)
  • Tax on insurance premiums (no specifics regarding type of insurance)
  • A Catch-all that leaves everything in limbo: Eliminating $607 million in current exemptions.  Thing that were specifically mentioned, but don’t cover the $607 million, include:
    • Real estate services
    • Legal services (not clear if intent is business or all)
    • Agricultural repair parts at 2%
    • Artificial insemination (I assume only for livestock) at 5.5%
    • Manufacturing Equipment at 2%
    • Water for livestock at 2%

While I can’t say this is clear as mud, I have ventured a comparison with Pawnee Lake (sorry for those not from Nebraska). With 27 days to go before the anticipated start of the Special Session, I anticipate that I’ll be back with updates as we get new information. Until then, please let me know if you have any questions or concerns. 

Korby M. Gilbertson
Radcliffe Gilbertson & Brady
625 South 14th Street, Suite 100
Lincoln, NE 68508
(402) 476-7272