Gov. Pillen outlines some funding levers in his quest to lower Nebraska property taxes

BEATRICE — Nebraska Gov. Jim Pillen said Friday he hopes to trim state spending by at least $500 million in the next couple of years and capture more federal dollars for property tax relief.

Pillen made those commitments at the third of his property tax town halls, echoing a previous plan for tax relief that failed to garner enough senators’ support this spring. The town halls are designed to drum up enough support so at least 33 lawmakers will support the governor during an expected special session for property tax relief.

“Some have said, ‘Well, you know we’ve been talking about property tax for 60 years and it’s the same old song,’” Pillen told the roughly three dozen people at the  public library in Beatrice. “No, this song’s different.”

The Governor’s Office on Friday announced the second leg of Pillen’s property tax town halls for next Thursday and Friday:

• May 30 at noon — SCC Learning Center, 537 Main St., Plattsmouth.
• May 31 at 11:30 a.m. — Seward Memorial Library, 233 S. Fifth St., Seward.
• May 31 at 2 p.m. — Holthus Convention Center, Room I, 3130 Holen Ave., York.

Reduction goal: $2 billion

When Pillen came into office, he said, he walked into a situation that “scared the bejesus” out of him, where the state’s revenue coffers were plentiful but agencies wanted to increase spending. 

This set him on a path to reduce 40% in property taxes, or about $2 billion.

Lawmakers nearly took another major step in April, but State Sen. Lou Ann Linehan of Elkhorn, Revenue Committee chair, pulled her Legislative Bill 388 after it appeared to have fewer than 33 senators in support. That’s the minimum number of votes required to end debate on heated measures.

“I’ve already told the Revenue Committee that we’re going to be working this summer,” she told the Nebraska Examiner after that vote.

The governor remained committed to calling for hard caps on local spending, at about 2% or 3%, and to front-load property tax credits, allowing taxpayers to capitalize immediately rather than applying later for credits based on how much income tax they pay.

State spending and sales taxes

To fund his ideas, Pillen wants to trim about $500 million in state funding in the next couple of years that he said would enhance but not reduce state services. The state contracted with a Utah-based firm seeking to find similar efficiencies.

“We’re just doing business practices of improving processes, streamlining, looking at things as a systems approach and making a difference,” Pillen told reporters.

Pillen is also looking at about 120 sales tax exemptions that “pick winners and losers” and reviewing which should be eliminated, such as exemptions on pop and candy that were part of the latest tax package.

State Sen. Tom Brandt of Plymouth, who lives 10 miles east of Beatrice, gave his support for looking at sales tax exemptions, adding Nebraska leads nationwide in those carve-outs.

“The sky is not going to fall if we take this stuff,” Brandt said of the exemption on pop and candy.

Filling in for State Sen. Myron Dorn of Adams, who represents Beatrice but had a prior obligation, Brandt attended the town hall and said he trusts that the “49 personalities in the Legislature” will find a common sense solution for a governor who is “on the right track.”

“I’m fully in support of whatever we come up with, and I appreciate that the governor is asking you for input,” Brandt said.

In part, Pillen wants to reduce state government spending to what it was around 2012, during a deflationary period, and “correct those sins” when lawmakers increased obligations.

Another funding suggestion is a philosophical change away from what Pillen said is “goober politics” where some lawmakers believe they must curry political favors for reelection.

“There’s some senators who think their job is to take money to their community — that’s not Nebraska,” Pillen said. “That’s a different vision, different view.”

Federal funding, increased tax obligations

The governor is also seeking to increase how many federal dollars the state draws down, building off some successes in the past two years, including State Sens. Mike Jacobson of North Platte for hospital assessments; Anna Wishart of Lincoln for Certified Community Behavioral Health Clinics; and Dorn for nursing home assessments.

“Green light, pedal to the metal,” Pillen recalled telling his cabinet members on securing such funding this week. “No strings attached, but we have to get more than our fair share.”

“Sin taxes” might be increased, such as those on tobacco, vaping products or alcohol, as well as on agriculture inputs, Pillen said.

The governor also suggested a future plan could be the state taking on more, or all, of local obligations to fund K-12 education, similar to what happened with community colleges in 2023.

One man in the audience, who said he lives close to the Kansas border, said he’s worried Pillen’s 40% reduction to property taxes still wouldn’t be enough.

“Yeah, that helps, but it’s still not in the range of being competitive with our next-door neighbors,” the man said.

Pillen responded that he overall wants to decrease state taxes, noting that for surrounding states with no income or property taxes, they might have higher sales taxes as a tradeoff.

Unfunded and underfunded mandates

“Operation Clean the Closets Out” is also on the table, which Pillen described as outlining what unfunded mandates exist for county and city governments and undoing those. Pillen said approximately 22% of county government costs come from unfunded mandates.

“We have to get the unfunded mandates out, and same for cities,” Pillen said. “We have to say no. We have to clean up government.”

State Sen. Carol Blood of Bellevue, who ran against Pillen for governor two years ago, has tried for years to tackle unfunded and underfunded mandates, proposing a constitutional amendment that would let Nebraskans vote on ending future obligations unless they come with funding.

Blood said Friday that Pillen hasn’t reached out to her on the mandates. She said a list of them already exists because of previous legislative studies. 

At a 2023 hearing, she pointed to many such mandates, including supervision and transportation of juvenile offenders, election ballot printing and autopsy or grand jury costs after a prisoner’s death.

“We know it’s a good idea, but nobody, nobody would listen to us,” Blood said.

She said the Legislature had a chance to act sooner but put good ideas “in the dumpster,” which is part of the reason she’s not willing to go into a special session.

“They say they want our ideas, but they don’t really,” Blood said. “I’m not going to have them shove something down my throat that I know is just going to make it harder for the middle class and people that are struggling financially.”

Summer special session goal

Special sessions cost thousands of dollars each day, which Blood said might be one reason to wait on proposals that might not be guaranteed to pass. Pillen dodged a question on special session costs, stating that “really good savings” could come from senators introducing fewer bills.

Asked why he thinks the town halls would change the spring outcome, Pillen told reporters he understands he faces a game of “33-17,” needing at least 33 votes but failing if 17 or more senators are opposed.

However, he said, he believes in the people of Nebraska and believes they must be part of a solution, which comes at the same time as an election year for some key senators who Pillen might need to support his tax proposals.

“If the citizens of Nebraska aren’t engaged with the members of the Unicameral, they can be rest assured special interest groups are, and they don’t have the citizens of Nebraska’s backs,” Pillen said.

Pillen said he expects to call a special session before school starts in August, scheduling around a summer trade mission to Indonesia.

“We will get it fixed, but we need your help,” Pillen said.