Opinion ID: 1992041
Heading Depth: 1
Heading Rank: 4

Heading: taxation of real property for state purposes

Text: Swanson's third argument as to how L.B. 839 violates the Constitution of the State of Nebraska is that it establishes a property tax for state purposes because it requires the use of a common levy for determining the amount of state aid to education to be paid to individual school districts. Neb. Const. art. VIII, § 1A, provides that [t]he state shall be prohibited from levying a property tax for state purposes. The purpose of this section was to require the state, after the adoption of sales and income taxes, to leave the realm of property taxation. State ex rel. Western Technical Com. Col. Area v. Tallon, 196 Neb. 603, 244 N.W.2d 183 (1976) ( Tallon II ). Inherent in the adoption of this section was the idea that the State would continue to carry out its traditional functions and finance them by means other than a property tax. The State cannot, however, avoid or circumvent this constitutional mandate by converting the traditional state functions into local functions supported by property taxes. Swanson contends that L.B. 839 represents that sort of circumvention of the constitutional mandate. State equalization aid to some districts, including the Valentine Class VI school system, decreases under L.B. 839. Given that school districts may increase their property tax requirements to compensate for that loss, Swanson argues that the Legislature has in effect established a property tax for a state purpose, to expand property tax bases so as to make possible the redistribution of equalization aid. Authority on this issue comes from the cases of State ex rel. Western Nebraska Technical Com. Col. Area v. Tallon, 192 Neb. 201, 219 N.W.2d 454 (1974) ( Tallon I ), and Tallon II. Tallon I arose under a section of the Nebraska Technical Community College Area Act that provided for the raising of funds in support of the technical community college system by way of a property tax levy. Neb.Rev.Stat. § 79-2626 (Supp.1973). Under that section, each college area was required to levy a local property tax and remit the proceeds to the State in order to receive state funding for the area's college. Tallon I. This court struck down that section as unconstitutional in light of the prohibition against a property tax for a state purpose. Two years later, Tallon II challenged the amended version of the Nebraska Technical Community College Area Act, Neb.Rev.Stat. §§ 79-2636 through 79-2662 (Supp.1975), which had been drafted to conform with this court's holding in Tallon I. This court found that the amended act no longer offended article VIII, § 1A. Under the original version of the act challenged in Tallon I, the State had assumed direct control of all major policy decisions that affected the operation of each of the seven community college areas. Tallon I. The State controlled each college's capital expenditures, each college's ability to contract for acquisitions, and the direction of which facilities and training and curricula were available in the various areas, and directly controlled the individual budgets of each area. These facts demonstrate the dominance of the State as opposed to the local areas in all major matters of control and operation of the statutory system. Id. at 211, 219 N.W.2d at 460. Additionally, the tuition for a prospective technical community college student depended only on whether that student was a state resident, rather than on whether the student was a resident of the area where he or she wished to attend college. That provision, in complement of the above-listed indicia of control, showed that the statute reflected a legislative purpose to control the operation of all seven community college areas for the benefit of the state as a whole. Herein lies the dispositive inquiry for this case: where state and local purposes are statutorily commingled, this court must determine whether the controlling and predominant purposes of the statute are state purposes or local purposes. Tallon I. Tallon I cautions against the possibility of legislative subterfuge, stating that within the prohibition of a property tax levy for state purposes, where the Legislature has authorized and required local governmental units to make a property tax levy for state purposes, it should not be treated as a local levy for local purposes merely because it is made by a local governmental unit. Id. at 212, 219 N.W.2d at 460. We find no such evidence of subterfuge in L.B. 839. Nothing in L.B. 839 grants to the State control over individual budgets, capital expenditures, availability of programs, whether and how to hire personnel, or administrative rules and regulations. All of these decisions remain within the province of the individual Class I and Class VI school districts. The statutory scheme in Tallon II is more analogous to L.B. 839 than is the statutory scheme in Tallon I. In response to Tallon I, the Legislature revamped the Nebraska Technical Community College Area Act to create a system that was essentially local in character. The new system did not condition receipt of state funding on the amount of property taxes generated; each college area was a separate and distinct corporate body; each college area was empowered to levy property taxes if it so desired; and each college area decided its own curriculum, personnel, and administrative rules and regulations. Tallon II. The state board served in an advisory capacity only and had negligible authority over local college areas. On these facts, the court held that the act was constitutional. These indicia of local control correspond to the Class I and VI school districts, which maintain their autonomy and independence in all respects except their grouping for property tax support. The mere fact that a state-authorized tax supports a governmental purpose does not render it a tax for state rather than local purposes. Rock Cty. v. Spire, 235 Neb. 434, 455 N.W.2d 763 (1990). Even given some commingling of state and local purposes, a statute that requires a political subdivision to levy a property tax does not contravene article VIII, § 1A, so long as the tax is levied for substantially local purposes. Rock Cty., supra . The State has assumed neither control nor the primary burden of financial support of Class I districts, nor has the State conditioned state funding on the performance of some act, or the levying of some tax, to benefit the State. Authority from the State to levy a tax does not necessarily translate into a state purpose behind that tax.