The issue has divided rural senators, pitting those who saw the tax as a way to protect Nebraska agriculture against opponents who fought to kill it in hopes of lowering property taxes.

The measure would have allowed many of the state’s natural resources districts to continue charging 3 cents per $100 of assessed property value to pay for groundwater management projects, a key part of their efforts to comply with state mandates to use less water.

The tax is set to expire June 30, and lawmakers rejected a proposal that would have kept it in place through mid-2026. The tax would have totaled up to $45 on a home with a taxable value of $150,000.

“This is a tax I’ve always felt we should pay,” said Sen. Curt Friesen, a farmer from Henderson who sought to extend the sunset date.

Ten of Nebraska’s 23 natural resources districts have the power to levy the extra tax because the state has declared they’re using too much water or are at risk of doing so. Lawmakers approved the tax in 2004 to help the districts comply with new state requirements amid concerns that Nebraska farmers who irrigate were threatening the long-term water supply.

Sen. Mike Groene of North Platte, who helped sink the bill, said many districts still have the power to impose a separate, $10-per-acre occupation tax on irrigators who are using the water. The 3-cent property tax, by contrast, is imposed on all property owners in a district.

“Everyone has to pay that — the dry land farmer, the rancher, and the little old lady who lives in town,” Groene said. “They didn’t create this crisis, so why should they pay for it?”

Groene said two of the natural resources districts he represents lowered their property tax levies by relying more on the occupation tax. He said he understands the importance of irrigation, but “we’ve got to face reality” and enact policies that will encourage them to become more sustainable.

“The reason our property taxes are high is because we keep putting one straw on the taxpayers’ backs at a time,” Groene said.

The hardest-hit districts are in central and western Nebraska, which rely more than the east on irrigation to water crops.

The tax has helped districts manage their water supply, but now, “that tool is being taken away from us,” said John Berge, general manager for the Scottsbluff-based North Platte Natural Resources District.

Berge said his district is only using two-tenths of a cent — about $115,000 a year — out of its 3-cent taxing authority, but may need to use more in the future as state officials review the area’s water consumption. He said his district has used the revenue to help purchase new water-saving technology and create financial incentives for farmer to use less water.

Once they lose the taxing authority, Berge said district officials might have to reduce the amount of water farmers can use each year.

“Irrigation is not an option out here. It’s a necessity,” Berge said.

Nebraska’s natural resources districts can already charge a tax of up to 5.5 cents per $100 of value.

Most of the districts that have the extra 3-cent taxing authority have only been charging a fraction of what they’re allowed out of concern for property taxpayers, said Dean Edson, executive director of the Nebraska Association of Resources Districts.

“These people (on the district boards) are really judicious with tax dollars,” Edson said.

Friesen, the Henderson senator, said forcing irrigators to pay the occupation tax doesn’t account for the benefits they provide to the state economy and the hedge they offer in dry years.

“Drive around the state to any area that’s irrigated, and look at the property values,” he said. “There are more grain bins, more buildings. When you look at the benefits of irrigated land to the area, I think it’s unfair to put the tax only on them when they helped create that economic development.”

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