CRETE — It was Fourth of July weekend, and the small city 30 minutes southwest of Lincoln didn’t have enough police officers to go around. 

There was one officer on duty when the call came in. When the officer arrived, an irate man, naked and armed with an ax, greeted them from his car. 

Meanwhile, routine complaints — about fireworks, noise, general holiday disruptions — continued. Frustration built as callers learned no officers were immediately available. 

Saline County deputies stepped in to help with the ax-wielding man, who had barricaded himself inside the vehicle. Police Chief Gary Young had to call in off-duty officers to handle getting arrest and search warrants. 

“While this is going on, we get a suicide complaint of a guy cutting his wrists,” Young said. “I had nobody to send. So that is the impact down the road: We can’t help people.”

The department has 12 officers on its roster to serve nearly 7,800 residents. Injuries, vacation and sick leave mean capacity is sometimes even lower. 

“You start dwindling to maybe 10, nine, eight officers covering 24/7 all week, and they get tired and run down and hurt,” he said. “A lot of them are working overtime on their days off.”

To ease the strain on Crete’s cops, Young got the OK to hire a new officer. He found a strong candidate, a woman graduating from a nearby college, and offered her the job. Then the budget crisis hit. Young had to rescind the offer and keep a vacant position unfilled. Getting backup for his officers would have to wait. 

This spring, Crete learned it would lose around 16% of its revenue for the next fiscal year. The culprit: an 80% decrease in the city’s municipal equalization dollars, which are dispersed by the state according to a formula.

Crete isn’t the only community feeling the pain of reduced aid. And more cuts could be on the horizon, after lawmakers adjusted how much money is placed into the fund each year as part of a larger effort to close a state budget shortfall. 

Lawmakers created the equalization program in 1996 to aid cities and towns whose needs exceed their resources. It came as the state instituted a tighter cap on local tax rates, making it harder to generate adequate revenue. Now, a multi-step formula helps equalize revenue across municipalities by supplying state aid. 

The money is vital for smaller communities with weaker property valuations that aren’t able to raise the same amount of money as other communities without imposing heavy tax burdens on their residents. In the past several years, Crete’s aid has stayed between $740,000 and $865,000. For the coming fiscal year, Crete’s estimated aid amount is just over $140,000. 

The loss of more than $600,000 has been devastating. The police officer wasn’t the only casualty of Crete’s tightening budget. There was the city librarian, equipped with a master’s degree in library science, who was the last hired and first to go. The new parks and recreation hire, who was helping with a grant-funded forestry initiative. The community assistance office, which for years had served as a bridge between immigrant residents and the city they now call home. 

Crete’s funding crunch reveals a painful consequence of the state’s equalization law: A law created as part of a strategy to help keep property taxes in check penalized a city for lowering its levy.

In 2025, the Crete City Council lowered the city’s non-bond property tax levy from 28 cents per $100 of assessed value to 22 cents.

Meanwhile, the statewide average levy rose slightly to 28.57 cents.

A portion of the state’s equalization formula requires cities and towns to have a levy greater than or equal to the statewide average to receive complete aid. Because Crete was now well below the average, its equalization aid was slashed.

State Tax Commissioner Jim Kamm, who leads the department tasked with administering the equalization program, said the funding penalty increases the further a municipality is from meeting the statewide average, up to an 80% decrease in funds.

“I’m from a smaller community myself. I grew up in Columbus, spent a lot of time in rural Nebraska,” he said. “Even though I live in Omaha and I work in Lincoln, I appreciate what these small-town municipalities have to deal with here … But our job as the Department of Revenue is simply to administer the statutes as they’re written, and I can assure you, in this case, that’s what we did.”

City Administrator Tom Ourada said Crete knew it was going to be an issue, but they had no idea how much money they stood to lose because the statewide average changes every year.

“We figured since property values were being reevaluated throughout the state that the average would lower quite a bit, and it really didn’t,” Ourada said. “There were communities that, despite property values going up, raised their levy for whatever reason.”

Ourada pointed to Seward, a city 30 minutes away with about the same population as Crete — and $200 million more in property valuation. In theory, equalization helps bridge the gap between the two cities.

But this year, Seward’s aid eligibility is increasing by about $50,000, while Crete is recording a staggering drop.

“It’s really kind of an enigma,” Ourada said. “The have-not community lost money, and what I would term a ‘have’ community gained money.”

Lynn Rex, executive director of the League of Nebraska Municipalities, noted Crete isn’t alone in grappling with how to provide property tax relief while remaining eligible for aid. 

“It’s a challenge, because the message has been, ‘Lower your property taxes,’” Rex said. “I’ve never met a local elected official that has said, ‘Gosh, I can’t wait to get every penny of property tax and spend it.’ Everyone’s trying to figure out how to be more efficient.”

Grand Island, whose tax rate is also lower than the state average, is losing more than $800,000. With more than 50,000 residents, Grand Island has a stronger sales tax base to rely on than Crete, and equalization aid makes up a smaller percentage of its overall revenue. Even then, the cut was an unwelcome surprise.

Patrick Brown, the city administrator, said Grand Island is taking a more conservative approach to budget planning when it comes to new employees and equipment for the coming year.

“It gets hard when some of the revenue sources that you’re depending on are cut in half,” Brown said. “And then to turn around and try to replace those revenues, you need to do it with property tax, but then they’re putting hard caps on property tax, so it gets harder and harder.”

In Crete, staff reductions netted about $350,000 in savings. But in order to make up the remainder — and regain equalization funds — the city will have to raise its levy, which Ourada described as an “unforeseen and unintended consequence” of the equalization formula.

Any changes to the equalization formula would need to come from the Legislature. But the city was hesitant to bring the issue to lawmakers because, Ourada said, to a certain extent the levy is within a city’s control.

“It may be termed as playing the game,” he said. “You raise your levy, even though you may not really need to, so that you ensure that you get (municipal equalization funds). We did not do that, and I’m not accusing others of doing it.”

In the last legislative session, lawmakers took a hard line on the aid program, at one point considering a bill that would have made first class cities — including Crete — ineligible for the funds. 

They also reduced the amount of money flowing into the fund by diverting a portion of administrative fees — which previously had gone solely to the equalization fund — to the Department of Revenue Enforcement Fund. The move, part of a larger strategy to help close the state’s budget deficit, is estimated to decrease equalization funds by $14.38 million for the 2026-27 fiscal year. 

In June, the Department of Revenue notified the League of Nebraska Municipalities that the equalization fund balance may be less than the total amount communities were eligible for during the 2026-27 fiscal year. If the balance is less than the eligible aid — estimated at $35,650,879 — payments to municipalities could be reduced further. 

“You’ve got several variables here,” Rex said. “The variable of, what is the amount of money that’s going to be in the fund to begin with? So when it’s prorated, what are you going to get? And then secondly, and probably most importantly, … if you have lowered your property tax rate significantly, and then you lose all of (the aid because of prorating), how do you make that up? And was there a way to predict that? And there really isn’t.”

Also last session, Sen. Stan Clouse, a Republican from Kearney, introduced a resolution proposing an interim study of equalization and whether it was appropriate to exclude cities from receiving aid once they reached a certain population threshold. A hearing has not yet been scheduled, but Rex noted the league’s legislative committees are discussing the equalization fund and whether any changes need to be made. 

“At the end of the day, what happens is that if they don’t get these funds, then these municipalities that are relying on it are in a position of then having to increase the property tax,” Rex said.

In Crete, raising the city’s levy by 6.8 cents would erase the deficit, but Crete has little appetite for placing such a heavy burden on its residents, Ourada said. He has suggested a 5-cent increase to the City Council, which would restore some of the equalization funds for next year.

“This imposes hardship on people, so we’re very sensitive to that,” Ourada said. “But in the end we are going to have to raise our levy more than what we typically would.”

The impact of the cuts can be felt throughout Crete. The library, which previously offered later hours on Tuesdays and Thursdays, has cut back open hours to stanch the bleeding.

Working adults who took advantage of those later hours can’t access services they had come to rely on. Jessica Wilkinson, Crete’s library director, noted many of those residents used the library’s printers and aren’t sure where else to go. Late book returns have become more common.

The library offers a variety of technology, including a makerspace with 3-D printers. But the librarian who helped teach visitors how to use the technology was a casualty of the budget cuts.

So was Crete’s Community Assistance Office, created a decade ago to help residents access things like health, education, housing and immigration service providers. As Crete continued to diversify, driven by newcomers filling meatpacking and manufacturing jobs, the office became an important resource. 

Today, nearly half of Crete’s residents identify as Hispanic or Latino, according to Census data. Last year, the city was designated as a “welcoming” community, in part because of the work of the community assistance office. Ourada said it was both a very difficult and very easy decision to shutter the office. 

“The hard thing is that we lose that, and we lose touch with a good portion of our community that we don’t know what their needs are,” he said. “On the other hand, a lot of that (work) can be picked up by (private) partners, so that helped immensely. When you cut police officers, you don’t have somebody that can pick that up.” 

The cuts are painful, Ourada said, as is the prospect of raising taxes. But as much as he wishes it hadn’t happened, he also knows Crete can’t prolong its suffering through half-measures. 

“Everybody realizes that this is an all-hands-on-deck situation,” Ourada said. “We all have to get through this, and I just want it to be for the one year.”

This story was originally published by Flatwater Free Press, an independent, nonprofit newsroom focused on investigations and feature stories in Nebraska that matter. Read the article at: https://flatwaterfreepress.org/crete-lowered-its-property-tax-levy-to-help-struggling-residents-then-state-aid-disappeared/