The school aid fund that is the linchpin of the state’s property tax reduction efforts is dwindling faster than projected, dropping by half as soon as the 2025-2026 fiscal year instead of the initial prediction of 2030.

That is the concerning finding of a new report compiled by the Legislature’s Fiscal Office on the Education Future Fund, which the Legislature established this year as the key element in Gov. Jim Pillen’s plan to reduce property taxes devoted to public schools and provide overall tax relief.

The fund, designed to guarantee $1,500 of state support for every student in all Nebraska school districts and boost state support for special education, was established with a $1 billion appropriation and a commitment of $250 million a year going forward.

In response, the districts have lowered their levies, guaranteeing property tax relief, as schools have historically received about 60% of the property taxes collected by local and government entities across the state.

During the Legislature’s Appropriations Committee’s consideration of the plan in March, the state budget director acknowledged that the fund would dwindle over time.

While the report does not forecast the fund’s health beyond 2025-26, the projected annual increase in appropriations from the fund held against the $250 million annual deposit indicates that the fund could be depleted within a decade.

That finding is troubling for school districts and taxpayers.

Specifically, the districts, which have sliced their levies and would find it difficult if not impossible to increase them under the new limitations, need to be assured that the appropriations from the fund will be available each year, even with the rising cost for special education, the primary reason for the fund’s more rapid than anticipated depletion.

Property tax payers need to be assured that the levies will not increase, or the popular and necessary property tax relief plan will have failed in just a few years.

The solution to the fund depletion problem is, on one hand, simple: The state needs to identify a sustainable revenue source for the fund and ensure that it receives enough money to maintain a healthy, operational balance.

The trick, however, will be finding that revenue source in a time when income tax cuts have reduced state revenue and state agencies have reduced their budgets to nearly the lowest possible levels.

Appropriations Committee Chair Sen. Rob Clements of Elmwood told the Journal Star that he believes there are several sources for additional revenue for the Education Future Fund.

The Legislature needs to begin to locate those sources and identify the impact of moving that money to the fund on the rest of the state budget soon. And it is imperative that the Legislature and governor closely monitor the fund’s depletion rate so action that can be broadly supported by both urban and rural senators and taxpayers can be taken to maintain the fund and the property tax relief.

This editorial first appeared in the Lincoln Journal Star on November 30, 2023. It was distributed by The Associated Press