Neb. Rev. Stat., section 77-27,136 provides that the Legislature is to appropriate $17,900,000 to incorporated municipalities to be distributed based on population. The statutory amount has not been fully appropriated for many years and in fact, even before the recent across-the -board cuts, the appropriation has been $17.5 or $17.6 million. The appropriation was reduced in the October 2001 Special Session and was reduced 25% during the regular 2002 session. For 2002-03 the amount appropriated was $13.1 million.

All proceeds from the motor fuel tax and all state sales taxes collected on motor vehicles are deposited in the Highway Trust Fund. Twenty three and one-third percent of the revenue to the Highway Trust Fund is distributed to incorporated municipalities through a formula. The municipal distribution formula is based on three weighted factors:

1) Population - 50%.

2) Vehicle registrations - 30%.

3) Lane miles - 20%.

Those portions of the tax flowing to municipalities are required to be spent building, repairing, or maintaining city streets. For 2000-01, the amount distributed to cities under this formula was about $82 million.

Three million of the state General Fund portion of the cigarette tax is to be deposited into the Municipal Infrastructure Redevelopment Fund for distribution to cities and villages for infrastructure needs. The money is distributed to municipalities on a per capita basis.

Laws 1996, LB 1177 created an equalized aid program for municipalities. The bill provided that beginning in 1998, any qualifying municipality receives aid equal to the average per capita property tax levy for all municipalities times the population of the municipality, minus the average property tax levy times the valuation of the particular municipality. If the result is negative, the municipality receives no aid. Essentially, this formula allows every city to raise the average amount of per capita revenue by levying the average property tax rate, with the state supplying any shortfall.

The Municipal Equalization Fund is funded with the city share of Insurance Premium Tax. That share is 30% of the half distributed to local governments or 15% of the total collected. The Municipal Equalization Fund also receives the 3% administrative fee the state retains for collecting municipal sales tax. These two sources contribute about $12 million annually to the fund. The equalization formula in recent years has only required about $9.5 million to fully fund. The excess collected is distributed to all municipalities on a per capita basis. If the proceeds in the Fund were ever insufficient to fully fund the requirements of the equalization formula, the available funds would be distributed pro-rata to the qualifying municipalities.