For years, educators have sounded alarm bells that per-pupil funding for Nevada schools trails far behind the national average of about $17,000 per student.
Without upping the state’s funding by at least a third, advocacy groups warned that schools — which rank near the bottom nationwide — could risk even more overcrowding and teacher shortages.
AJR1, sponsored by Assm. Natha Anderson (D-Sparks), would have done just that by tweaking the state’s property tax structure. It’s one of only two funding mechanisms — sales tax is the other — that a Legislature-commissioned panel of finance experts said is broad enough to get education funding close to the national average.
AJR1 would have made a property ineligible for tax abatements the first year after it is sold, and would revise the state’s tax code so that a property’s taxable value would reset when sold.
The measure could have generated millions in additional funding for schools. An analysis of a near-identical 2017 measure found that it could have generated as much as a half-billion dollars annually for operating funds in about a decade. A 2024 report by the state’s school funding commission had similar findings.
But lawmakers were hesitant to pass the measure, even though they solicited the reports that suggested closing a $2.7 billion gap between current funding levels and national average funding target. It passed out of the Assembly on a 26-16 vote, but was never voted on in the Senate and died at deadline; a spokesperson for the Senate Democratic Caucus said that the measure did not have enough support to receive a floor vote.
Its death is not totally unprecedented, echoing that of the 2017 measure (SJR14), which needed to pass two consecutive sessions. It died after it was not reconsidered in 2019.
The legislation faced heavy pushback from the real estate industry and constituents who said it could inflate housing costs, which have risen more than 30 percent in Washoe and Clark counties since the pandemic. Even proponents said that tweaking the state’s property tax structure is a politically unsavvy move — it could rankle homeowners, who are more likely to vote than their counterparts who rent — and could very well threaten lawmakers’ shot at re-election if the measure passed.
And critics say proponents didn’t do some of the take-no-prisoners maneuvering and cross-party dealmaking that pushed previous education funding hikes over the finish line.
However, as a resolution, instead of a traditional bill, AJR1 only needed clearance from the Democrat-controlled Legislature and not Gov. Joe Lombardo — who has said he opposes new taxes. If it was approved a second time next session, it would have gone to voters in 2028 for final approval. That, too, could present issues for Democrats if it riled up anti-tax sentiment during an election cycle when they want to hold a key Senate seat and send the state’s electoral votes to a Democrat.
“The bill failed because it sounds like a tax increase,” said Mike Kazmierski, executive director of the educational nonprofit Strengthen our Communities. “No elected official wants to be associated with that third rail of politics.”
How is education funded in Nevada?
Property tax is among the primary revenue sources for K-12 education funding nationwide. But the Commission on School Funding says its yield in Nevada has been constrained by abatements set during a hot housing market in 2005 — which limit annual increases in property tax bills for residential properties to 3 percent and 8 percent for commercial properties — and depreciation formulas, which reduce the taxable cost of real estate property over a period of time.
Unlike other revenue sources, including mining and hotel room taxes, which can fluctuate depending on factors such as state of the economy, the commission said property tax is more stable and reliable.
For the past four years, the commission has recommended revamping property tax, along with sales tax, to resolve years of chronic education underfunding.
Options are limited because Nevada lacks an income tax, which is used by other states to raise funding for schools.
In 2023, lawmakers approved a historic increase in K-12 education funding, about $2.6 billion, enabled by an increase in projected tax revenues because of post-pandemic inflation. This brought funds going into the state’s Pupil-Centered Funding Plan up to $11.2 billion last biennium.
Despite this increase, Nevada’s per-pupil funding, about $13,000 a year, remained about $4,000 behind the national average, according to the commission’s 2024 report.
Lawmakers appropriated $11.5 billion for the next two years for the Pupil-Centered Funding Plan, which will bring Nevada’s average per-pupil funding near $14,000.
Effect on real estate?
The bill faced strong opposition from the real estate industry, which argued AJR1 could have raised constitutional issues, going against an “equal and uniform” taxation provision codified in state law.
This is in part because of the state’s depreciation formula, which reduces the taxable value of real estate at a rate of 1.5 percent annually over a 50-year period. This means that a home with a lower market value can have a significantly higher taxable value than a more upscale property, simply because of its age.
Dylan Shaver, a representative for the progressive group New Day Nevada that supported AJR1, offered two Northern Nevada properties as an example. One of them, a historic mansion, was listed for $2.4 million but was valued at $75,000 for property tax purposes. That’s in comparison to a newly built home listed for $550,000 with an assessed value of about $84,500.
This means that homebuyers of less-expensive properties can end up paying significantly more in taxes.
“That depreciation ends up creating pretty significant holes and gaps at the local level that can not be resolved,” Shaver testified.
Nevada is the only state to apply a depreciation formula to real estate, bill proponents point out. By resetting depreciation at the point of sale, advocates such as Shaver argue that the state’s tax system would not only become more fair, but could bring in more revenue.
With the combined tweaks to depreciation formulas and abatements, the state could have brought in an additional $536 million annually in tax revenue by the 11th year, based on an analysis of the near-identical SJR14.
But AJR1, by resetting depreciation at the point of sale, would make taxes “non-uniform,” so that owners of two homes of the same age and condition could be paying different tax costs, opening up the measure to potential legal challenges.
The real estate industry also pointed out that getting rid of abatements could significantly raise housing costs for buyers at a time when housing prices in Nevada have risen far faster than incomes.
“If the property tax is also increased due to a depreciation reset, it would add hundreds or even thousands of dollars to their annual expenses, pricing many families out of homeownership,” Azim Jessa, a representative for Nevada Realtors, said during a May hearing.
Although they remained opposed to the measure, the Nevada Realtors said in a statement that they understood the “need for adequate funding for schools” and that they “are willing to participate in policy discussions that result in reasonable solutions and are equitable and fair for homeowners and homebuyers alike.”