For purposes of showing the reader how tax dollars are used, certain decisions were made about how state and local agencies and governments should be classified by function. Other researchers might disagree with the decisions made. The functions chosen for allocating tax dollars are based upon functions the U.S. Census Bureau uses for their survey of governments. Using these categories allows state to state comparisons of spending priorities. These comparisons are also linked to this section of the presentation.

Education includes the tax dollars spent by local school districts, educational service units (ESUs) and community college areas, and direct appropriations by the state to the state Department of Education, Commission on Educational Lands and Funds, as well as to the University of Nebraska system and state colleges.

Only tax dollars are included in the education total. University tuition, activities fees, concessions and dorm rentals are excluded from the analysis. State aid to local governments like schools and community colleges are counted as local spending, not state spending.

Health and human services includes Medicaid and other individual assistance programs, as well as local subsidies for nursing homes or hospitals. Again, only tax dollars are considered so patient revenues at publicly-owned hospitals and nursing homes are not counted in this analysis. Also included in this category are tax dollars used to support the areas on aging, developmental disabilities and substance abuse. The operating budget for the Nebraska Health and Human Services System is also included in this category.

Every effort was made to allocate administrative costs to functional areas, but it is much easier to do this with the state budget than with local budgets that contain less detail. As a result, local governments with more than one function, like cities and counties, have more tax use allocated to general government than is the case for state government or single purpose local governments. General government includes the expenses of the governing bodies, regulatory functions, tax collection, and any other agency that cannot be logically allocated to one of the other five functions.

For example, state tax dollars appropriated to the Nebraska Public Service Commission, the state Department of Water Resources, the Legislature, the state Department of Revenue, and the state Department of Environmental Quality were all allocated to the general government category. For the most part, these agencies perform a regulatory or legislative function. On the other hand, the budget for the court system was allocated to the "public safety" category even though the Supreme Court also has a regulatory function. Appropriations to operate the state Nebraska Department of Education were classified as "education" even though the department itself administers schools and not students.

Public safety includes the Nebraska State Patrol, local police and sheriff's offices, the State Fire Marshall, the state Department of Correctional Services, and all taxes collected by rural and suburban fire districts. Single-purpose local governments like fire districts were usually placed in functional categories. Townships were classified as "roads, transportation, and public works", ESUs as "education" and so forth. Others required more thoughtful placement. Taxes levied by sanitary and improvement districts were classified as "roads, transportation, and public works" in recognition of the fact that most of the tax dollars are spent building and maintaining the road system. On the other hand, property taxes and state aid received by Natural Resources Districts were divided, 50 percent for "culture and recreation" which is assumed to correlate with capital projects and 50 percent for "general government" to approximate the regulatory function.

As a category, "culture and recreation" includes agencies like the Nebraska Game and Parks Commission, the Nebraska Library Commission, and local parks, libraries and swimming pools.

City and county allocations were based on budgets of these governments analyzed to calculate the amount of spending for each of these functional areas. The percentages of total taxes budgeted for each of these functions were then applied to the total major state and local taxes to produce the allocations and overall percentages shown here. In other words, cities and counties were assumed to use their share of the "major" taxes considered throughout this presentation the same way that each used their "total" available revenues. The total available revenues include minor tax sources and other non-tax revenues that are used for general purposes.

Local governments which levied only small amounts of property taxes were allocated to the roads, transportation and public works category. These local governments include airport authorities and railroad transportation safety districts for which this allocation seems appropriate. It also includes drainage districts, public building commissions and cemetery districts for which another allocation might be more appropriate. The total dollars involved is about $19 million, so a different allocation would not change the spending by function shares significantly.