Senator Dave Murman introduced LB389 to the Revenue Committee, a bill that would eliminate education service unit (ESU) property-tax levy authority and replace that revenue with state funding that grows by 3.5% annually.

Supporters told the committee the bill would reduce Nebraskans’ reliance on property taxes and model state takeover of ESU funding on the community college levy replacement. Nicole Fox of the Platte Institute summarized that approach, saying, “LB389 directly attacks the problem of high property tax rates.” She told senators the estimated statewide fiscal impact would be roughly $65 million per year by FY2031 and argued the plan would provide direct property-tax relief if the state replaces levied revenue.

ESU leaders, superintendents and educators testified in unified opposition, citing stability and local control concerns. LariAnne Polk, chief executive officer of the Educational Service Unit Coordinating Council, told the committee that ESUs rely on a mix of contracts, grants, state core-service dollars and levies, and that “this established history of the state funds not meeting the statutory obligations is the cornerstone of our opposition.” Polk and other witnesses pointed to a multi-decade history in which promised state increases were not fully allocated and said ESUs cannot dependably plan if levies disappear.

Administrators described concrete programs that could be affected. Jen McNally, director of Mental Health and Wellness for ESU 5, said her “Wellness for All” program has served more than 1,000 students and facilitated more than 70,000 interactions; parents and students gave multiple personal accounts of the program’s impact. Brenda McNiff, administrator of ESU 5, told senators ESUs leverage federal grants and contracts—about two-thirds of ESU budgets—and that state core-service dollars and the levy together supply the remaining third. ESU representatives told the committee ESU levy authority is currently capped at 1.5 cents; testimony also cited the levy as roughly 1.7% of K–12 property taxes statewide.

District financial officers warned about service erosion and cost-shifting. Shane Rhian, chief financial officer for Omaha Public Schools and ESU 19, testified that if the state replaces levies but later reduces or delays funding, ESUs would lose revenue and either cut services or pass costs to member districts. He offered one estimate: had LB389 been in effect for the last decade, ESU 19 would have lost roughly $3 million over that period and would have more than $1 million less revenue this year under the proposed funding model.

Several ESU speakers asked whether LB389 could include a backstop similar to the community-college model—language that restores levy authority if the state fails to make payments. Some ESU representatives said such a stopgap could reduce opposition; others emphasized they would want to negotiate precise language and make sure statutory shortfalls from prior years were addressed. Senator Murman told the committee he is open to working with ESUs and the Department of Education on details.

No committee vote was recorded at the hearing. The bill received extensive public testimony: proponents argued the policy would provide direct property-tax relief and stabilize ESU funding through a predictable annual increase; opponents said it would remove a reliable local funding source, risk critical services (including mental-health programs, special-education supports, distance-learning and cybersecurity), and reduce local control.

Senators asked detailed budget and statutory questions during the hearing. ESU witnesses repeatedly urged the committee to preserve a role for local levies or include a robust, enforceable state backstop and transition language if levies are eliminated.

Outcome: LB389 was introduced and publicly heard before the Revenue Committee; no committee action or vote was recorded in the transcript.