County treasurers must correct mistaken payments made to schools, Nebraska Supreme Court rules

OMAHA — County treasurers must correctly calculate and distribute the payments made by public utilities in lieu of paying property taxes. They also must correct any mistakes they make, the Nebraska Supreme Court ruled on Friday.

Omaha Mayor John Ewing Jr., who was the treasurer at the time in Douglas County, overpaid the Omaha Public Schools, the City of Omaha and Douglas County from payment in lieu of taxes (PILOT) funds in 2021. His name is on the case that sorted out the duties of local treasurers.

But Chief Justice Jeffrey Funke’s opinion makes plain that its aim is to clarify some confusion a lower court ruling left over whether county treasurers had the duty and ability to fix such funding mistakes they make as part of their ministerial duties.

At stake is sorting out potentially millions of dollars in annual payments county treasurers distribute to school districts from the utilities that provide electricity statewide. 

“The ministerial duty is one imposed on the treasurer to distribute the PILOT funds based on the exact formula adopted by the people and required by the Legislature,” Funke wrote. “In requiring that the treasurer distribute the PILOT funds in a specific manner, it must be … that the treasurer’s duty is only accomplished when he or she has facilitated that exact and particular distribution.”

The high court also clarified that Omaha’s Westside Community Schools was well within its rights to file a second legal bid to recoup the funds it was not paid from 2019 through 2021 after a lower court vacated the initial case on a technicality. 

A state audit that spurred much of the legal action found that in 2021 Westside was underpaid by $3.7 million and that schools in Elkhorn and Ralston were underpaid by more than $4 million. Omaha Public Schools, the audit found, received about $5.6 million too much. The City of Omaha received $4.4 million too much. And Douglas County received $2.7 million too much.

The court case avoided assigning specific amounts owed. 

Lawyers for the Omaha school district had argued that the law was murky on whether the treasurer could collect funds overpaid to districts, based on the previous formula calculations, an argument the state Supreme Court rejected.

“Westside has met its burden of proving that it is entitled to the PILOT funds it did not receive,” the ruling states.

Ewing has previously defended his office’s mistake, describing it as an inherited interpretation of state law that the Douglas County Treasurer’s Office had used for six decades. Ewing’s opponents in the mayor’s race made an issue of the payments during his successful bid to unseat incumbent Mayor Jean Stothert. 

Westside Superintendent Mike Lucas shared word of the court’s decision in a Friday email to Westside families. In it, he said, “While we are still reviewing the full implications of this positive decision, we are grateful for the support from our Board of Education members and the Westside community.”

Ewing, in a statement Friday, said, “This is the correct remedy — that the Douglas County Treasurer’s Office be allowed to correct the situation by paying school districts with future revenues from the OPS payment in lieu of taxes program.”

The Douglas County Board is set to meet with legal counsel next week to review the Supreme Court decision.

OPS, in a statement, said it was “aware of and reviewing the ruling, but we respectfully decline further comment at this time.”

Editor’s note: This story has been updated with comments from Westside Community Schools, Omaha Public Schools and Omaha Mayor John Ewing Jr.