Neb. Rev. Stat., section 77-27,136 provides that the Legislature is to appropriate $13,500,000 to counties to be distributed based on property taxes levied with an offset for the amount of taxable farm machinery in the county. The initial distribution uses the appropriated amount in 1992 ($17 million) and allocates it to counties based on property taxes levied. In other words, the counties that levied the most property taxes, measured in dollars, receive the most of the initial allocation.

Three and one half million dollars are then subtracted from the allocation based on the amount of taxable farm machinery in the county. In other words, those with the most farm machinery receive the biggest reduction from the initial allocation. The statutory amount has not been fully appropriated in many years both before and after the statutory reduction in 1992. In 1999, the appropriation was reduced to $7.4 million to increase state funding for Community Colleges and Natural Resources Districts that lost the proceeds of the motor vehicle tax. For 2002-03, the amount appropriated was again reduced by 25%, to $5.5 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 counties through a formula. The county distribution formula is based on seven weighted factors:

1) Rural population - 20%.

2) Total population - 10%.

3) Lineal feet of bridges 20 feet or more in length - 10%.

4) Rural motor vehicle registrations - 20%.

5) Total motor vehicle registrations - 10%.

6) Miles of county and township roads - 20%.

7) Value of farm products sold - 10%.

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

LB 695 of 1998 created a modest new county aid program, for which $5.8 million was budgeted. This aid is capacity equalizing calculated by examining valuation per road mile. Aid is equal to the difference between the average property taxes per road mile which can be raised by all counties, and the amount raised in the specific county, when a tax rate of 1.7 cents per $100 in valuation is multiplied by the statewide and individual county valuation. Counties with low valuation capacity using this formula receive aid that can be used for any general fund spending purpose. For 2002-03, the amount has been reduced to $4.5 million. When the funding is insufficient to meet all the needs of the equalization formula, the eligible counties receive a pro-rated share of the full need amount.

LB 695 also provided that state reimburse counties $35 per day for housing state prisoners. About $4 million was appropriated for this program for 2002-03.