State aid to Nebraska’s public schools could decrease if a proposal to give state tax credits for donations to fund private school scholarships becomes law.
Proponents of LB 753 have suggested that private school scholarship tax credits won’t take public funds away from Nebraska’s school districts. A new estimate of the bill’s impact from the Legislative Fiscal Office indicates that a reduction in state aid to schools distributed through the TEEOSA formula “is possible.”
LB 753 is expected to be debated on Thursday.
What the bill would do
LB 753 would make available $25 million for annual tax credits beginning in 2024, with yearly increases of up to 25% possible beginning in 2027.
If estimates of 5,000 public school students utilizing the scholarships to transfer to private schools hold true, the Fiscal Office projects that state aid to public schools through the Tax Equity and Educational Opportunities or Support Act, or TEEOSA, could be reduced by $11.8 million.
The estimate is based on those 5,000 students transferring from the state’s 11 largest school districts. All of those districts are located in areas where private school options exist.
Participants in an OpenSky webinar earlier this year noted that efforts in other states to direct state dollars to private schools often start small but balloon in costs and consequences.
Under LB 753, tax credits for private school scholarships could grow to $100 million a year, decreasing revenues available to fund state services and support school districts in educating Nebraska students. And as the amount of available tax credits grows, it’s likely that more students could transfer from public schools and thus decrease the funding to public schools through the state-aid formula.
LB 753 would provide tax credits for scholarships to private schools and could potentially reduce state aid directed to public schools. Without adequate funding, districts may have to increase property taxes, reduce staff or increase class sizes.