THE HISTORY OF THE NEBRASKA TAX EQUITY AND EDUCATIONAL OPPORTUNITIES SUPPORT ACT. Michael S. Dulaney A DISSERTATION. Presented to the Faculty of
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1 THE HISTORY OF THE NEBRASKA TAX EQUITY AND EDUCATIONAL OPPORTUNITIES SUPPORT ACT By Michael S. Dulaney A DISSERTATION Presented to the Faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Doctor of Philosophy Major: Administration, Curriculum, and Instruction Under the Supervision of Professor Larry Dlugosh Lincoln, Nebraska March 2007
2 For my mother, Vera Dulaney
3 CONTENTS ACKNOWLEDGMENTS... LIST OF TABLES AND CHARTS... PREFACE... vi vii xvi Chapter I. INTRODUCTION... 1 A. Statement of the Problem... 1 B. Purpose of the Study... 7 C. Research Question... 7 D. Sub Questions... 7 E. Significance of the Study... 8 F. Delimitations of the Study... 8 G. Limitations of the Study... 9 H. Definitions II. METHODS A. Historical Case Study B. Role of the Researcher C. Collection Procedures and Sources D. Interpretation of Data E. Verification Methods F. Ethical Considerations G. Presentation of Findings H. Dissemination of Report III. LITERATURE REVIEW IV. FINDINGS School Finance and Organization Before TEEOSA, A. Introduction B. The School Foundation and Equalization Act C. Class I Reorganization and Referendum D. Review i
4 The Commission, A. Introduction B. Creation of a Commission C. The Commission Report D. Teacher Supplemental Pay E. Review A New School Finance System, A. The Gould Case B. The TEEOSA C. Affiliation and Common Levy D General Election: Referendum E. Review Modifications to TEEOSA, A. Introduction B. The 1991 Legislative Session LB Technical, Substantive Changes LB Personal Property Taxes C. Nebraska Tax Research Council Report, D. The 1992 Legislative Session LB Accountability Commission LB 1063 and LR 219CA - Personal Property Taxes LB Formula Modifications LB Retirement Legislation LB 719A - Revisions to LB E. The 1993 Legislative Session LB Budget Act LB Technical Cleanup LB Common Levy Revisited F. The 1994 Legislative Session LB State Investments LB Adjusted Valuation LB Technical Cleanup, LB 76 - Election Law G. Review Spending and Revenue Lids, A. Introduction B. The 1995 Legislative Session LB Spending Lid LB Special Education Funding Lid LB TERC LB Federal Impact Aid LB Reorganization Incentives ii
5 C. The 1996 Legislative Session LB 1114 and LB Levy and Spending Lids LB TEEOSA Modifications Other Legislation Amending TEEOSA in D General Election: Initiatives E. Review Comprehensive Modifications to TEEOSA, A. Introduction B. LB C. Technical and Substantive Revisions to LB D. Other Legislation Amending TEEOSA in E. Review Lids and Guaranteed Funding, A. Introduction B. The 1998 Legislative Session LB Spending Lid LB Levy Lid Modifications LB 1134 and LB Reorganization Measures LB Gifted Education LB Quality Education Accountability Act LB Full Funding C. The 1998 Special Legislative Session D General Election: Initiative E. The 1999 Legislative Session LB Guaranteed Funding LB Technical Cleanup LB County Superintendents LB Property Tax and Assessment LB 87 - Joint Public Agencies F. Review The Budget Crisis, A. Introduction B. Hawkins v. Johanns C. The 2000 Legislative Session LB Levy Overrides LB Property Tax Relief D. The 2001 Legislative Session LB Reorganization Incentives LB Technical Cleanup LB Distance Education/Converted Contracts LB Property Taxation and TERC iii
6 E. The 2002 Legislative Session LB Temporary Aid Adjustment Factor LB Student Fees LB Allowable Reserves and Class Is LB Omnibus Property Tax Cleanup F. The 2003 Legislative Session LB Levy Increase LB 67 - Technical Cleanup G. School Organization Interim Study H. The 2004 Legislative Session LB 1093 Extension of the Levy Increase/Aid Adjustment Factor LB Resurrection of Reorganization Incentives LB Adjusted Valuation and Clerical Errors I. Review School Organization, A. Introduction B. Class I Assimilation C. Early Childhood Education D. Retirement Legislation E. Adjusted State Aid F. Property Tax Provisions G. Review V. OBSERVATIONS VI. APPENDICES Appendix A - Chapter 79, Article 38: Tax Equity and Educational Opportunities Support Act, as Passed by the Ninety-First Legislature, Second Session, Appendix B - Chapter 79, Article 10: Tax Equity and Educational Opportunities Support Act, as Modified through the 2005 Legislative Session Appendix C - Tax Equity and Educational Opportunities Support Act: Enacting Legislation and Amendments from 1990 to Appendix D - Nebraska Legislative Sessions 1985 to Appendix E - Legislative (Regular) Session Calendars iv
7 Appendix F - Nebraska Legislative Process Appendix G - Nebraska Legislative Committee Structure 1985 to present Appendix H - Legislative Rosters: Appendix I - The History of the Nebraska Legislature Appendix J - Nebraska School Statistics: 1967 to VII. LIST OF REFERENCES v
8 ACKNOWLEDGMENTS I wish to extend my heartfelt gratitude to Dr. Jody Isernhagen for encouraging me to take my academic aspirations to the highest level, and for offering words of support these past years. I wish to offer my appreciation and thanks to Dr. Larry Dlugosh for the caring and attentive guidance through my doctoral program. What an honor and privilege it is to be among the fortunate students to refer to Dr. Dlugosh as, My advisor. My research effort would not have been possible without the invaluable assistance and training provided by Dr. Marilyn Grady. She embraced my chosen topic and channeled my attention and focus to the appropriate methodology. I wish to express my gratitude to the other members of my dissertation committee, including Dr. Martha Bruckner and Dr. James Walter. Thank you for agreeing to be a part of this very important part of my life. I also wish to extend my special thanks to Dr. Jerry Sellentin for agreeing to be an honorary member of my committee and for all the support he has offered over the years. There are several individuals who have provided me immeasurable assistance in my examination of the Nebraska public school finance system. Mr. Russ Inbody and Mrs. Connie Knoche of the Department of Education, Mr. Tim Kemper of Lincoln Public Schools, and Dr. Dennis Pool of Omaha Public Schools have each offered a tremendous amount of help to me. Thank you to each for their support and for their dedication to public education. I would like to commend the hard work of the three immediate past chairs of the Nebraska Legislature s Education Committee, Senators Tom Vickers, Ron Withem, and Ardyce Bohlke, and the current chair, Senator Ron Raikes. Each has, in his or her own way, advocated for policy changes to improve the quality of public education in Nebraska. I would like to offer a special measure of gratitude to former state senator Bob Wickersham and also Senator Ron Raikes for serving as informal, external reviewers of my work. To my friends and family, thank you for your patience during the time I immersed myself into this project and for your willingness to accept me back into your lives after the completion of my work. vi
9 TABLES Table 1. Foundation Aid Distribution under the School Foundation and Equalization Act Testifiers at Public Hearing for LB 662 (1985) Record Vote: Passage of LB 662 (1985) Record Vote: Vickers AM1182 to LB 505 (1985) to Eliminate 1% Sales Tax Increase Contained in LB 662 (1985) Canvass Report: Referendum 400 (1986) Roster: Nebraska School Financing Review Commission Membership ( ) Percent of Revenue for Public Elementary and Secondary Schools by Government, Comparison Example: District Taxable Valuation Base, Belief Statements Issued by the Nebraska School Financing Review Commission Rosters of the Education and Revenue Committees (1990) List of Testifiers: Public Hearing for LB 1059 (1990) Vote to Advance LB 1059 (1990) from Committee Disposition of General File Amendments to LB 1059 (1990) on March 6, Record Vote: Advance LB 1059 (1990) to E&R Initial Record Vote: Advance LB 1059 (1990) to E&R Final Summary and Disposition of Amendments and Motions to LB 1059 (1990) on Select File Record Vote: Passage of LB 1059 (1990) with E-Clause Attached Record Vote: Passage of LB 1059 (1990) without E-Clause vii
10 Table 19. Governor Orr s Objections to LB 1059 (1990) Record Vote: Motion to Override the Veto of LB 1059 (1990) Section-By-Section Description of the Tax Equity and Educational Opportunities Support Act Record Vote: Final Reading Vote on LB 259 (1990) Provisions of LB 259 (1990) Petition Measures Election Results: Referendum 406 (1990) Results of Other Ballot Issues: 1990 General Election Summary of Modifications to TEEOSA as per LB 511 (1991) Summary of Modifications to TEEOSA as per LB 829 (1991) Summary of Modifications to TEEOSA as per LB 1063 (1992) Summary of Modifications to TEEOSA as per LB 719 (1992) Summary of Modifications to TEEOSA as per LB 1001 (1992) Summary of Modifications to TEEOSA as per LB 719A (1992) Summary of Modifications to TEEOSA as per LB 310 (1993) Summary of Modifications to TEEOSA as per LB 348 (1993) Record Vote: Withem Motion to Return LB 839 to Select File for Specific Amendment (AM2496) Record Vote: 2 nd Vote to Pass LB 839 (1993) with E-Clause Attached Summary of Modifications to TEEOSA as per LB 839 (1993) Summary of Modifications to TEEOSA as per LB 1066 (1994) Record Vote: Vote to Advance LB 1290 (1994) to E&R Initial viii
11 Table 40. Summary of Modifications to TEEOSA as per LB 1290 (1994) Summary of Modifications to TEEOSA as per LB 76 (1994) Summary of Modifications to TEEOSA as per LB 1310 (1994) LB 613 (1995): Summary of Actions Taken by the Revenue Committee in Relation to Introduced Bill Record Vote: Final Reading, LB 613 (1995) Summary of Modifications to TEEOSA as per LB 613 (1995) Summary of Modifications to TEEOSA as per LB 490 (1995) Summary of Modifications to TEEOSA as per LB 542 (1995) Summary of Modifications to TEEOSA as per LB 840 (1995) Comparison Chart of LR 93CA (1995), LB 1114 (1996) as Introduced, and LB 1114 (1996) as Passed Executive Session Report, LB 1114 (1996) Record Vote: Final Reading, LB 299 (1996) Record Vote: Final Reading, LB 1114 (1996) Summary of LB 1114 (1996) as Passed and Signed into Law Summary of LB 299 (1996) as Passed and Signed into Law Summary of Modifications to TEEOSA as per LB 299 (1996) Record Vote: Wickersham FA441 to Committee AM3077 (Second Division, FA438) Record Vote: LB 1050 (1996), Final Reading Summary of Modifications to TEEOSA as per LB 1050 (1996) Summary of Modifications to TEEOSA as per LB 700 (1996) Tax Equity and Educational Opportunities Support Act as Re-codified by LB 900 (1996); with New Sections Added by LB 1050 (1996) ix
12 Table 61. Summary of Modifications to TEEOSA as per LB 934 (1996) Nebraska Constitutional Amendments November 5, 1996 General Election Canvas Report: Initiatives 411 And 412 (1996) Major Components of LB 806 (1997) as Introduced Public Hearing Testifiers, LB 806 (1997), February 10, Division of Committee Amendments, LB 806 (1997) Proposed Changes to the Reorganization Process under Second Division to the Committee Amendments, LB 806 (1997) Proposed Changes to the State Aid Formula under Fourth Division, Committee Amendments to LB 806 (1997) Proposals for a Poverty Factor, LB 806 (1997) Proposals for Cost Grouping Criteria under LB 806 (1997) Tier Structure as Contained under LB 1059 (1990) Record Vote: Advance LB 806 (1997) to E&R Initial Fifth Division: ESU Organization and Services under LB 806 (1997) Summary of Bohlke-McKenzie AM2237 to LB 806 (1997) Relating to Class Is and Freeholding Record Vote: Stuhr AM1771 to LB 806 (1997) to Eliminate Poverty Factor Vote Record: Advance LB 806 (1997) to E&R Final Record Vote: LB 806 (1997) Final Reading A Review: LB 806 (1997) as Passed and Signed into Law Summary of Modifications to TEEOSA as per LB 806 (1997) Original Provisions of LB 710 (1997) x
13 Table 81. Summary of Modifications to TEEOSA as per LB 710 (1997) Overview of Other Bills Amending TEEOSA in Summary of Modifications to TEEOSA as per LB 345 (1997) Summary of Modifications to TEEOSA as per LB 347 (1997) Summary of Modifications to TEEOSA as per LB 713 (1997) Summary of Modifications to TEEOSA as per LB 865 (1997) Summary of Modifications to TEEOSA as per LB 269 (1997) Summary of Modifications to TEEOSA as per LB 270 (1997) Summary of Modifications to TEEOSA as per LB 271 (1997) Summary of Modifications to TEEOSA as per LB 342 (1997) Summary of Modifications to TEEOSA as per LB 397 (1997) Summary of Modifications to TEEOSA as per LB 401 (1997) Summary of Modifications to TEEOSA as per LB 595 (1997) Record Vote: LB 989 (1998), Advancement to E&R Initial Record Vote: Vote to Pass LB 989 (1998) Expenditure Lid Exclusions Allowed under LB 989 (1998) for Class II-VI School Districts Summary of Modifications to TEEOSA as per LB 989 (1998) Changes under LB 306 (1998) Relevant to the New Motor Vehicle Tax and Fee System Levy Override Elections Summary of Modifications to TEEOSA as per LB 306 (1998) Summary of LB 1134 (1998) as Passed and Signed Summary of Modifications to TEEOSA as per LB 1134 (1998) xi
14 Table 103. Review of LB 1219 (1998) Summary of Modifications to TEEOSA as per LB 1219 (1998) Record Vote: Chambers FA629 to LB 1229 (1998) to Mandate Gifted Programs Review of LB 1229 (1998) Summary of Modifications to TEEOSA as per LB 1229 (1998) Summary of LB 1228 (1998) as Advanced Committee Review of LB 1228 (1998) as Passed and Signed into Law Summary of Modifications to TEEOSA as per LB 1 (1998 Special Session) Nebraska Constitutional Amendments, 1998 General Election Canvas Report: Initiative 413 (1998) Provisions LB 149 (1999) as Advanced from Committee Record Vote: Kristensen AM0715, as Amended by Wickersham AM0728 to LB 149 (1999) Record Vote: Advancement of LB 149 (1999) to E&R Final Record Vote: Passage of LB 149 (1999) Record Vote: Vote to Override Veto, LB 149 (1999) Summary of Modifications to TEEOSA as per LB 149 (1999) Summary of Modifications to TEEOSA as per LB 813 (1999) Provisions of LB 272 (1999) to Eliminate the Office of County Superintendent Summary of Modifications to TEEOSA as per LB 272 (1999) Summary of Modifications to TEEOSA as per LB 194 (1999) Summary of Modifications to TEEOSA as per LB 87 (1999) xii
15 Table 124. Summary of Modifications to TEEOSA as per LB 1213 (2000) Summary of Modifications to TEEOSA as per LB 968 (2000) Summary of Modifications to TEEOSA as per LB 313 (2001) Summary of Modifications to TEEOSA as per LB 797 (2001) Summary of Modifications to TEEOSA as per LB 833 (2001) Summary of Modifications to TEEOSA as per LB 170 (2001) Vote to Override Veto of LB 898 (2002) Summary of Modifications to TEEOSA as per LB 898 (2002) Student Fees Specifically Authorized or Prohibited Prior to Record Vote: Adoption of Kristensen AM2952 to Com AM2931 to LB 1172 (2002) Percentage of Allowable Reserves under TEEOSA Summary of Modifications to TEEOSA as per LB 460 (2002) Summary of Modifications to TEEOSA as per LB 994 (2002) Budget Scenario 1: Maintain February 2003 State Aid Certification Budget Scenario 2: Governor Johanns Budget Plan Budget Scenario 3: Appropriations Committee Preliminary Budget Proposal Introduced Version of LB 540 (2003) Compared to Alternate Amendment (AM712) - Applicable to FY and FY Savings to State as per Committee Amendments to LB 540 (2003) Record Vote: Bourne AM1757 to LB 540 (2003) Budget Package: Votes to Pass and Override Gubernatorial Vetoes xiii
16 Table 144. Summary of Modifications to TEEOSA as per LB 540 (2003) Summary of Modifications to TEEOSA as per LB 67 (2003) Observations: Nebraska Historical And Current Data Prepared and submitted by the LR 180 Staff (2003) LR 180 (2003) Study Recommendations Projected Savings to the State: Reductions in State Aid as per LB 1093 (2004) as Introduced Projected Savings to the State Reductions in State Aid as per LB 1093 (2004) as Advanced to General File and the $1.10 Levy Proposed by the Appropriations Committee Public Schools Maximum Levy ( ) Record Vote: Wehrbein AM3027 to Committee Amendments, LB 1093 (2004) Record Vote: Chambers FA1580 to Committee Amendments, LB 1093 (2004) Summary of LB 1093 (2004) as Passed into Law Summary of Modifications to TEEOSA as per LB 1093 (2004) Summary of Modifications to TEEOSA as per LB 1091 (2004) Summary of Modifications to TEEOSA as per LB 973 (2004) Summary of LB 126 (2006), Class I Assimilation Bill, as Introduced Class I District Statistics Chronology of Debate, LB 126 (2005) Parameters for Closure of Attendance Sites under LB 126 (2005) as Advanced to General File Selected Student and Spending Data from Lexington Public Schools and its Affiliated Class I Districts Selected Student Data from the Schuyler School System xiv
17 Table 163. Vote to Advance LB 126 to E&R Initial Provisions of AM1672 to LB 126 (2005) Coupled with Surviving Provisions from Original Bill Record Vote: Senator Raikes Compromise Amendment, AM1672 to LB 126 (2005) Record Vote: Vote to Advance LB 126 to E&R Final Record Vote: Passage of LB 126 (2005) Record Vote: Motion to override veto of LB 126 (2005) Summary of Modifications to TEEOSA as per LB 126 (2005) Calculating Adjustment Formula Students prior to LB 577 (2005) Calculating Adjustment Formula Students after LB 577 (2005) Estimated State Aid Increase under LB 577 (2005) Summary of Modifications to TEEOSA as per LB 577 (2005) Employer Contribution Rate Changes/Amount of Spending Lid Exclusion under LB 503 (2005) Summary of Modifications to TEEOSA as per LB 503 (2005) Summary of Modifications to TEEOSA as per LB 198 (2005) Summary of Modifications to TEEOSA as per LB 263 (2005) Registered Principals: Public Education Groups Chart A. Lop-off Calculation under the Tax Equity and Educational Opportunities Support Act xv
18 PREFACE The basic purpose of this comprehensive history of the Nebraska Tax Equity and Educational Opportunities Support Act is to provide a record of the Legislature s actions relevant to school finance policy since This study should be used as a reference for policymakers and school officials alike in order to understand the policy evolution of the existing school finance system. xvi
A History of Nebraska School Finance: The Policy Evolution of the Nebraska Tax Equity and Educational Opportunities Support Act (TEEOSA)
A History of Nebraska School Finance: The Policy Evolution of the Nebraska Tax Equity and Educational Opportunities Support Act (TEEOSA) By Michael S. Dulaney Associate Executive Director Nebraska Council
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