By Russ Pankonin
The Imperial Republican Co-Publisher
Last Friday’s ruling by the Nebraska Supreme Court declaring the property tax levy in LB 701 unconstitutional casts a large shadow over Nebraska, not just on water policy but overall tax policy as well.
One of the big objections to achieving compact compliance with Kansas in the Republican Basin centered on the belief that compliance was a state responsibility, not just a responsibility to the Basin.
The settlement, people said, was agreed to and signed by the state, not by any of the natural resources districts (NRDs) or irrigators in the basin. Hence, they believed the responsibility to fund compliance efforts fell upon the whole state, not just residents and irrigators in the Basin.
Honestly, I can’t disagree with their argument. However, through the passage of LB 701, local NRDs got some say in their own fate in dealing with compliance issues. I feel local control is more important than relying on the state to deal solely with the problem.
The debate continued until a McCook-based group called Friends of the River (FOTR) filed suit against the property tax levy in LB 701.
To their credit, FOTR have prevailed with the Nebraska Supreme Court ruling that compact compliance was indeed a state responsibility and that the local property tax levy to help pay for those activities was unconstitutional.
FOTR scored another victory in District Court before the case was appealed to the Supreme Court.
In the District Court ruling, the judge said LB 701 was unconstitutional because the only NRDs able to use the financing options in LB 701 were those in the Republican Basin, creating a closed class. That set up the basis for appeal.
What the state and NRDs’ attorneys didn’t expect was that the high court wouldn’t even address the closed class issue. Instead, the justices found the property tax unconstitutional on the basis that the state constitution prohibits the state from collecting local property taxes to pay for a state purpose or responsibility.
Frankly, this ruling has some state officials fearing just how far-reaching this decision could be. Just look at school funding as one instance.
The state constitution mandates that the state provide for K-12 education in Nebraska. Does this ruling mean that the local property taxes collected to pay for school district operations around the state are also unconstitutional because they’re paying for a state obligation?
As you can see, the implications of this ruling could be far more reaching than just addressing taxes to pay from compact compliance with Kansas.
Another frightening aspect of the decision is that the Legislature could potentially decide this region’s fate when it comes to managing irrigation and water use in this basin. Do we want that? Absolutely not!!!
LB 701 still allows NRDs to collect an occupation tax on all irrigated land for compliance activities. Sen. Mark Christensen is proposing a change to LB 701 to resolve the closed-class issue by opening up the occupation tax to all NRDs in river basins that have been declared fully- or over-appropriated.
However, FOTR have already filed suit challenging that the occupation tax in LB 701 is just another local tax being collected for state purposes or obligations.
Regardless of the District Court’s eventual ruling on that suit, it’s highly likely that this case will also end up being decided by the state’s Supreme Court.
Only then, which will be somewhere between another 12-24 months, will we know whether local NRDs will have any control of their fate in complying with the 2002 compact settlement.