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Occupation tax issue unlikely to be heard in this year’s session PDF Print E-mail

By Russ Pankonin
The Imperial Republican

    Much to the dismay of Sen. Mark Christensen, it looks unlikely that his efforts to make a change to the occupation tax in LB 701 will be heard in this year’s legislative session.
    But it’s not because Christensen, the 44th District senator from Imperial, hasn’t been pressing the issue with his colleagues as well as the governor.
    Christensen wants to make the occupation tax available for use by other natural resources districts (NRDs) in Nebraska where river basins have been declared fully- or over-appropriated by the state.
    Presently, the Republican Basin NRDs are the only ones able to use the occupation tax under the wording in LB 701. The same was true of an additional property tax levy.
    LB 701 contained two funding mechanisms for Republican Basin NRDs—an additional levy authority of up to 10 cents and a per-irrigated-acre fee up to $10 per acre.
    The funding options gave NRDs ways to pay for projects to stay in compliance with the Republican River Compact Settlement with Kansas.
    The property tax portion of LB 701 was challenged in Lancaster County District Court by a McCook-based group known as “Friends of the River” (FOTR).
    In late 2008, the district judge ruled the property tax was only applicable to the Republican Basin, making it a closed class and therefore unconstitutional.
    On appeal to the Nebraska Supreme Court, the property tax was ruled to be a local tax to pay for a state purpose, therefore, making it unconstitutional on that basis.
    However, the Supreme Court did not rule on whether the property tax applied only to a closed class.
    FOTR has also filed suit in district court, seeking to have the occupation tax ruled unconstitutional. That decision has yet to be handed down.
    Christensen’s goal of broadening the language to allow other NRDs to use the occupation tax was aimed at opening the class. Doing so would insure the occupation tax does not apply to a closed class, keeping it constitutional.
    However, Christensen has been unable to get his colleagues on board.
    With less than 10 days left in the session, it appears there simply is not enough time to get the issue before senators.
Legislation already planned
     After realizing this year’s effort stands little chance of making it to the floor, Christensen is already promising to introduce a bill to insure open class in next year’s session.
    With the property tax unconstitutional, the occupation tax is the only tool NRDs have to pay for compliance projects, the senator noted.
    In addition, Republican Basin NRDs owe the state nearly $9 million loaned to them in 2008 to repay surface water districts for water purchased in 2007.
    These two funding mechanisms were to be used to repay that debt.
    Without a change to the occupation tax class, Christensen fears there will be no avenue to repay this money.
    As a result, he’s also planning to introduce legislation to forgive the nearly $9 million if the occupation tax class isn’t broadened.
    Upper Republican NRD Manager Jasper Fanning said the occupation tax is a key tool to pay for compliance projects, especially since property taxes can’t be used.
    “Absolutely, we need this tool,” he said this week. This is a perfect case to show that policy and politics don’t mix well, he added.
    In the short term, the fate of the basin hangs in the balance of the courts, Fanning said.
    With the Legislature not addressing the issue, they are putting the basin at risk, he added.
    If no funding options become available for compliance projects, such as buying surface water to offset use, lower allocations could  occur.
    Christensen said state officials have hinted allocations in the range of four to six inches would be necessary to keep the basin in compliance in a water-short year.
    That would be devastating to the farmers and economy of southwest Nebraska, Christensen warned.
    Christensen took this message to Governor Dave Heineman during a meeting last week.
    Gov. Heineman said this week that until the district court rules on the occupation tax, it’s premature to make any changes to open the class.
    The governor would not speculate what action he would support if the occupation tax is struck down.
    The governor has made it clear he doesn’t want any new taxes. “Nebraskans don’t want or need increased taxes,” he said.
    The most pressing issue was to find a way to return the unconstitutional property taxes levied in the basin.
    This appears to be solved through a tax credit by the NRDs to taxpayers next year to account for levies collected under LB 701. 
    The governor noted the occupation tax is somewhat different because it’s a tax that can be self-imposed. However, until a ruling is made, he doesn’t foresee any immediate changes.
Bill stuck in committee
    Christensen has been trying to get his bill, LB 651, out of the Natural Resources Committee. From there, he wanted to amend the bill to change the class of the occupation tax and tack it on to other legislation.
    Sen. Chris Langemeier of Schuyler chairs the Natural Resources Committee.
    For the most part, he said senators are unfamiliar with the occupation tax. They supported it when they thought it applied only to the Republican Basin.
    However, Langemeier said this opens an opportunity for senators to study the issue over the summer and get input from constituents.
    It’s not news to people in the Republican Basin who understand the need for an occupation tax.
    But it is for other parts of Nebraska, Langemeier noted.
    Christensen said it’s a frustrating situation for him.
    He said all too often the Legislature legislates under crisis mode instead of being proactive and looking to the future.
    After June, Christensen will get six months to educate his colleagues on the need for an occupation tax as an important tool in compliance issues.
    Fanning also noted it will be a valuable tool in the Platte River Basin going forward. There, they must work to comply with a cooperative agreement between Wyoming and Colorado on water flows into the state.
    In addition, Central Nebraska Public Power and Irrigation District are suing the NRDs up above Lake McConaughy.
    They claim unchecked groundwater irrigation development above the lake has decreased North Platte inflows into McConaughy.
    Central Nebraska owns Lake McConaughy and Kingsley Dam.


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