Lincoln Board of Education proposes biggest levy decrease in more than 20 years

But Lincoln residents will still likely see their property taxes go up. That’s because property values across the district are projected to rise by a whopping 22%, meaning that even though LPS is significantly cutting its levy, it will still take in a projected $27 million more in property tax revenue this year with state aid set to drop by $25 million next budget cycle.

LPS outlined the revenue numbers and levy drop in a proposed $513.7 million budget for the 2023-24 school year, which was unveiled at a Lincoln Board of Education work session Tuesday.

Under the draft spending blueprint, LPS’s levy to fund general operations and bond debt repayments would drop from $1.21 per $100 of valuation to $1.08, a 13-cent drop that is the largest year-to-year decrease since the late 1990s.

“You have to look back to 1998 to see something similar,” said Board President Lanny Boswell, who called the drop in the levy “substantial.”

The drastic decrease is made possible by soaring property values and changes to the school state aid formula championed by Gov. Jim Pillen and ultimately approved by the Legislature this past session.

Under the legislative changes, districts will now receive $1,500 in state aid for every student and enough funding to cover 80% of a district’s special-education costs. The per-pupil aid, however, is subtracted from the state aid that equalized districts — like LPS — already receive as part of the state’s so-called equalization formula.

All in all, LPS is projected to receive about $15 million more in state funding than last year and $27 million more in property tax revenue, paving the way for a lower levy that equates to $39 million less than if it had kept its levy rate the same, while still affording LPS surplus revenue for future budgetary needs.

Though total state funding is up thanks to a projected $24.6 million infusion of special-education dollars, aid to LPS from the state’s equalization formula is still down about $10 million from last year and about $38 million from the 2018-19 school year.

“I would say that there have been changes (to state school funding) that have been more incremental, and this is much more significant,” said Liz Standish, associate superintendent of business affairs. “I believe that was compounded by the large valuations, so dealing with both factors in the same year has been very challenging.”

While the 13-cent levy decrease is a significant drop — over the past 20 years, it’s dropped by only about 10 cents total — many property taxpayers are still likely to see higher bills because of soaring property valuations. About 60% of a Lincoln resident’s property tax bill goes to LPS.

Under the current levy of $1.21 per $100 of valuation, the owner of an average $228,660 home would pay $2,768 to LPS. If their property remained unchanged in value, they would see a $297 decrease per year under the proposed $1.08 levy. But if the home’s value climbed by 25% — closer to the 22% average projection LPS used to craft its budget — that homeowner would pay $320 more in taxes despite the levy decrease.

That means LPS will still bring in about $18.5 million more than it needs for its projected 2023-24 spending needs.

The district plans to put that money in its cash reserve — which it uses to manage year-to-year revenue swings — because the higher property valuations will likely mean $25 million less in state aid next year, Standish said.

“We definitely continue to experience volatility,” she said.

School districts are also now restricted by a property tax request cap under the recently passed LB243, which limits the base growth of school revenues by 3% plus a certain percentage based on student enrollment factors, including the number of English language learners and students enrolled in the federal free- and reduced-lunch program.

LPS’ proposed base growth cap for the 2023-24 school year is calculated by the state at 3.61%. Larger school districts — like LPS — are granted an additional 4% if at least 70% of school board members approve it. LPS’s proposed growth is within that 3.61% base cap, however, meaning the board would not have to take action, Standish said.

The growth cap is based on a complicated formula that accounts for more than just the annual increase in property tax revenue.

Given that formula, LPS’ expenditure budget is still able to grow 4.8% — growth that is largely due to a $15 million increase in payroll that follows an already-negotiated 3.65% salary and benefits increase for staff next school year.

Board member Annie Mumgaard raised concerns about dropping the levy “precipitously” and keeping it there, saying potential swings in the property tax request in the future would affect middle- to low-income households at a greater percentage.

“If we’re going to drop it 13 cents, can we keep it dropped 13 cents? Can we keep it at that for two years, four years, five years?” she said.

Barb Baier, another board member, said the new state laws regarding school funding are variables that LPS can’t control, adding that it’s uncertain how the changes will truly affect the district.

“For me, I think we have to experience it to be able to understand it, and to pretend we have a crystal ball and know what all those impacts are is an impossibility,” Baier said.

Other new expenses include $1.9 million to open Standing Bear High School, the district’s new high school in southeast Lincoln, this fall.

There are also budget line items that allocate funding for priority areas guided by the district’s All Means All equity action plan and first-year Superintendent Paul Gausman’s transition report that highlighted district needs, including student behavior supports and early childhood education.

That includes $361,000 earmarked for an early childhood program at Standing Bear with two classrooms, identical to Lincoln Northwest. There is also nearly $200,000 to cover the costs of reorganization to the district’s top leadership team, which will see the creation of a new associate superintendent’s office overseeing educational services, including early childhood and special education and federal programs.

The upcoming budget cycle will be the final one that accounts for federal coronavirus funding that has paid for a variety of things, including interventionists, mental health supports and expanded summer school. With those funds expected to sunset, LPS is stowing away $2.5 million in funding for “investments and strategic initiatives” the district may want to continue when the federal dollars run out.

Another interesting budget highlight: LPS is setting aside $100,000 to make menstrual products free in all middle and high schools, a request that students have repeatedly made to the board.

LPS will hold five community input opportunities for the public to weigh in on the budget:

* Wednesday, 5 p.m., Lincoln Northeast cafeteria.

* Thursday, noon, virtual forum at LPS.org.

* Thursday, 5 p.m., Lincoln East cafeteria.

* July 11, 5 p.m., Lincoln Southwest commons.

* July 12, 5 p.m., Lincoln North Star commons.

After those forums and meetings with other stakeholders, the Lincoln Board of Education will hold a second work session in July. According to the district’s timeline, the budget is set for approval in September.

Officials are also anticipating that the district will for the first time have to take part in a relatively new public hearing process required by state law for school districts that exceed 2% or more in their year-to-year property tax request increase.

LPS was not required to participate in that hearing last year — the first year it was held — due to an exception in that law that allows political subdivisions to account for the percentage growth in a district’s real property when making the property tax request calculation.