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LB 389

Eliminate the levy authority of educational service units and provide state funding to educational service units

109th Legislature (2025-2026) Introduced by Dave Murman

Nebraska LB 389 ends ESU property tax levies after 2028 and shifts funding to state appropriations starting 2029, with 3.5% annual increases to replace local revenue.

Title printed. Carryover bill
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Bill Summary · LB 389

Summary: Nebraska LB 389 (2025) – Eliminate ESU Levy Authority and Provide State Funding

What the bill aims to do

  • Eliminate the property tax levy authority of Educational Service Units (ESUs) in Nebraska beginning in 2028.
  • Replace lost ESU levy authority with state funding beginning in 2029, with annual increases of 3.5% to offset the loss in local levy revenue.
  • Harmonize and update related statutes to reflect the shift from local levy funding to state funding for ESUs, and repeal the existing provisions being replaced.

Key provisions and changes

  • Targeted entities:
    • Educational Service Units (ESUs): The bill removes their ability to levy property taxes for their support starting with fiscal years beginning after July 1, 2028.
  • Funding mechanism:
    • From 2029 onward, state funds would be distributed to ESUs to offset the revenue previously raised by local property tax levies (the ESU levy).
    • The annual offset is to increase by 3.5% each year to maintain or enhance ESU funding relative to the prior levy-based funding.
  • Legislative action and structure:
    • The bill would amend Section 77-3442 and related sections (including 79-1225) to implement the levy elimination and establish the new state-funding framework.
    • Purpose includes harmonizing provisions and repealing the current language that authorizes ESU levies, replacing it with state appropriations guidance.
  • Procedural notes:
    • Introduced in the 109th Nebraska Legislature, First Session (2025) by Sen. Dave Murman (with a listed co-sponsor as indicated in the version content).
    • Committee: Revenue.
    • Notice of hearing scheduled for February 7, 2025.

Who would be affected

  • Educational Service Units (ESUs): Would lose the authority to levy property taxes for funding, transitioning to funding through state appropriations.
  • Local governments and school districts within ESU regions: Indirectly affected, as funding responsibility shifts from locally assessed levies to state funding, with the expectation of offsetting ESU budgets accordingly.
  • Nebraska taxpayers: The property tax base that previously funded ESUs would no longer support ESUs directly; instead, state funding would cover those costs, subject to annual increases.

Timeline and procedural aspects

  • Introduction: January 17, 2025.
  • Hearing: Notice of hearing for February 7, 2025 (Committee: Revenue).
  • Implementation timeline:
    • 2028: End of ESU property tax levy authority.
    • 2029: Start of state funding to ESUs to offset lost levy funds, with a 3.5% annual increase thereafter.

Notable context

  • The bill is focused on aligning ESU funding with a state-supported model rather than local property tax levies, which could impact how ESU services are financed (e.g., specialized services for school districts, regional programs).
  • While the content here emphasizes funding mechanics, the bill would also require accompanying administrative and budgetary changes to allocate and monitor the new state funds to ESUs.

If you’d like, I can add a simple comparison of current vs. proposed funding flows or provide a section-by-section paraphrase of the targeted statutory amendments.

Compiled from official sources — confirm details with the bill’s official record.

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