Proposal to expand Nebraska college savings accounts to cover private K-12 tuition advances

LINCOLN — Nebraska’s educational savings accounts designed to help pay for public or private college expenses could expand to cover private K-12 tuition, in line with federal law, beginning in 2029.

The proposed change from State Sen. Tony Sorrentino of the Elkhorn area was amended 32-11 Tuesday evening into Legislative Bill 647 after multiple hours of debate. At least 42 states already allow such savings accounts to cover tuition at K-12 private schools, which was first allowed in 2018 after passage of the federal Tax Cuts and Jobs Act, for up to $10,000 per beneficiary per year.

A 529 savings plan — in Nebraska, NEST 529 — offers tax breaks to encourage families or students to donate and allow the savings to grow tax-free. 

Multiple attempts to expand the accounts in Nebraska have stalled in recent years.

‘Great way to save’

State Sen. Brad von Gillern of the Elkhorn area, who led LB 647 as chair of the Legislature’s Revenue Committee, said he didn’t have the “foreknowledge” to use NEST 529 accounts for his children. But he “very gladly” started them for his grandchildren and suggested others do so.

“It’s a great way to save for college education, and with the implementation of this bill … those funds could also be used for primary education,” von Gillern said.

Von Gillern said that of the other states without expanded accounts — California, Oregon, Colorado, Minnesota, Illinois, Michigan and New York — it is “probably not a club that you would imagine Nebraska being in.”

“It sort of reminds me in grade school when they showed you pictures of five cats and a dog and said, ‘Which one doesn’t belong there?’” Sorrentino told von Gillern during the debate.

‘Subsidizing’ private school dollars

State Sen. George Dungan of Lincoln led opposition to Sorrentino’s measure, which he noted did not directly send public dollars to private schools. However, he and State Sen. Dunix Guereca of Omaha said it was in the same vein as the defeat of a private school voucher system last fall at the ballot box.

“We are indirectly subsidizing the tax deductions for money that goes to tuition for private K-12 education,” Dungan said of Sorrentino’s proposal, originally LB 131.

Guereca, who, along with Dungan, has been on the frontlines advocating against recent school choice proposals, said the November vote was about the “concept” of using public dollars for private schools. He said the tax breaks allowed under Sorrentino’s expanded measure could instead be used for a “plethora of other ideas,” particularly with the state’s projected budget shortfall.

“I’m afraid that if we do pass this measure then it’s a slippery slope to see more and more school privatization,” Guereca said.

Dungan raised concern that Sorrentino’s measure would not allow savings to cover K-12 public school expenses, such as for extracurriculars. Sorrentino said he was “fine” with including public schools but that doing so is not federally allowed.

Budget woes

The measure’s start date was pushed back to 2029 in part to push it beyond the state’s budget woes, not just for the next two fiscal years, at nearly $400 million in the hole with even the cuts proposed in the Appropriations Committee budget, but also following two years to mid-2028. The state would be about $700 million short of the mark future lawmakers would need to hit, based on current projections.

Sorrentino’s measure could lead to new tax breaks of about $3-4 million each year, but he cautioned that the estimate is based on assumptions of 12,000 to 15,000 people opening new accounts and meeting the maximum $10,000 contributions to those accounts.

Of 49 state senators, he said each could come up with a different estimate. He said it could be as much as $5 million or as little as $500,000. He said he thought the number was likely closer to $3 million.

State Sen. Bob Andersen of north-central Sarpy County said Sorrentino’s measures could alleviate public school overcrowding, possibly leading to overall cost savings to the state.

State Sen. Danielle Conrad of Lincoln differed from her progressive colleagues and voted for the bill, as did State Sen. Dan Quick of Grand Island, a more moderate Democrat. State Sen. Tom Brandt of Plymouth, a Republican who has rebuffed past school choice proposals, voted against adding Sorrentino’s measure to LB 647. The other votes largely followed party lines.

Conrad said Sorrentino’s measure was “intellectually and practically and policy-based distinguishable from some of the prior measures that we have looked at.”

Said Conrad: “This measure doesn’t seem to really raise the exact kind of concerns about a dilution or diminution of public funds into private schools.”