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Cities Warn Cutting Municipal Equalization Funds Would Force Service Cuts or Tax Hikes
Summary
City officials from Ralston, Beatrice, South Sioux City and Wayne told the Appropriations Committee that a proposed elimination or reduction of municipal equalization funds (MEF) would create budget shortfalls — examples cited: Ralston ~$180,000, Beatrice ~$786,000, South Sioux City ~$913,512, Wayne ~$695,000 — necessitating cuts to police, fire, libraries or property‑tax increases where levy capacity existed.
Multiple first‑class city officials told the Appropriations Committee that the recommended elimination or reduction of municipal equalization funds (MEF) would produce material budget shortfalls and necessitate service reductions or property tax increases.
Jack Chaloha, city administrator for Ralston, said Ralston qualifies for MEF and expects about $180,000 in 2026; losing that revenue would require service cuts or additional property tax (but the city is already at the 50¢ maximum general‑fund levy and cannot raise that amount quickly). “If this $180,000 is eliminated, it will leave a huge hole in our budget,” Chaloha said, noting the loss equates to roughly two full‑time police officers for his city.
Tobias Templemeyer, Beatrice city administrator, said elimination of MEF would remove about $786,000 from Beatrice’s general fund and force reductions in police, fire, library and pool hours. Lance Headquist of South Sioux City said his city received $913,512 in MEF funds last year and that losing it would amount to a roughly 19.5% increase in property taxes if the city attempted to maintain services. Wes Blakey of Wayne said the city expects about $695,000 this year — more than 10% of its general‑fund revenues — and that elimination would imperil staffing for police and dispatch.
Why it matters: MEF was established to partially offset limits on levy growth and address unequal tax bases among first‑class cities. Multiple witnesses argued that removing the funds would run counter to statutory intent and state goals of keeping property taxes down, and that the state should avoid using MEF as a general‑fund balancing line.
Next steps: Committee members asked for history and distribution mechanics; NACO testified in a neutral capacity and recommended alternatives (including a 1% commission option on nameplate distributions) and technical clarifications to statutory distribution if changes proceed.
