Senator Klaus asks committee to hold LB354 and launch study of Municipal Equalization Fund

Senator Stan Klaus told the Revenue Committee that his intent with LB 354 was to limit municipal equalization funds to larger communities but that draft language landed on a broader set of class 1 cities than he intended. He asked the committee to hold the bill so he can pursue an interim study.

Why it matters: The Municipal Equalization Fund provides targeted state aid to cities whose local levies cannot be reduced below statutory lids; changes could shift millions in aid and would affect municipal budgets.

Klaus said his original policy goal was to restrict eligibility to “first‑class cities with a population over 15,000,” but drafting produced a different scope; after discussions with municipal leagues and city officials he asked the committee to retain the bill and develop an interim study instead. He told senators the aim is to determine whether the fund’s formula still matches current municipal finance realities.

City officials urged caution. David Scott, city manager of Sidney, said his city depends on about $374,000 annually from equalization funds and that losing it would be “devastating.” Tobias Templemeyer, city administrator and general manager for Beatrice, told the committee the city would have lost nearly $800,000 under the bill as introduced; he warned that the general fund covers core services and that replacing that revenue would require difficult choices, including large property‑tax increases or cuts to services.

Klaus said the fund was created in the 1990s as a limited remedy tied to levy caps and that a review is appropriate after decades of changes in municipal finance. He said he expects to propose an interim study to examine the fund’s purpose, funding stream and beneficiaries.

The committee did not take further action; senators agreed that a study might give time to craft a targeted bill if warranted.