Nebraska Enacts School Readiness Tax Credit Act

We are excited to share the news that LB 889 was overwhelmingly supported and approved by the Nebraska Legislature on Final Reading by a vote of 45-2, and then signed by Governor Ricketts to officially make the Nebraska School Readiness Tax Credit Act law. Thank you to each and every one of you who supported the bill throughout the legislative process and reached out to your State Senator.
 
This new law creates two new tax credits. One credit is for Nebraska’s early childhood professional workforce and one is for the quality early childhood programs that participate in Nebraska’s Step Up to Quality Program. The tax credits are purposefully targeted to support investment in quality early care and education. The passage of LB 889 is a critical step forward to increasing access to quality early care and education across Nebraska.
 
 
LB 889 was modeled after an extremely successful package of tax credits in Louisiana that play the vital role of supporting the child care industry, which is comprised mainly of privately run, community-based small businesses that educate young children, create jobs and pump money into local economies. The school readiness tax credits in Louisiana have proven to not only strengthen economic development, but also significantly increase the quality of early childhood programs and the professional development of the early childhood workforce.
 
Targeted investments in quality early care and education programs, like those in LB 889, have both immediate and long-term benefits to the individual child and society at large. Children from families of low-income who have access to high quality early childhood programs are less likely to be retained in grade, less likely to be referred to special education, less likely to go to jail, more likely to graduate high school, and more likely to attend college – all leading to higher earnings.
 
 
Again, thank you for your tremendous support of LB 889 and our work to ensure that every child has every opportunity to realize their full potential.
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LB 889 has Advanced by Unanimous Vote!

LB 889, the School Readiness Tax Credit Act (SRTC), introduced and personally prioritized by Senator Heath Mello and cosponsored by Senators Campbell, Cook, Kolowski, Kolterman, McCollister, Stinner and Sullivan, is modeled after a nationally recognized and successful package of tax credits in Louisiana to provide economic incentives directly linked to improvement in the quality of early childhood care and education programs and the early childhood workforce.

We are pleased to announce that LB 889 has advanced out of the Revenue Committee by a unanimous  8-0 vote with a committee amendment. The committee amendment (AM 2490) makes several changes to the original bill, but still provides a positive impact on improving the wages of the early childhood professional workforce and the quality of early childhood education in Nebraska.

For more specific information on the bill and the proposed amendment read below or click here for a downloadable pdf. 

Nebraska’s Child Care Industry as an Economic Driver
  • In Nebraska, child care industry revenue combined with spillover effects have a nearly $460 million impact on the economy.1
  • Throughout Nebraska, there are 7,794 child care programs with revenue of $286.7 million.2

  • The child care industry employs 14,409 individuals supporting an additional 3,200 jobs in other industry sectors.3
Quality Child Care Matters!
  • Families and employers depend on quality child care for more stability for today’s employees and to lay the foundation for tomorrow’s workforce.
  • Research is clear that low-income children who have access to high-quality child care are less likely to be retained in grade, less likely to be referred to special education, less likely to go to jail, more likely to graduate high school, and more likely to attend college – all leading to higher earnings.

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The impact of LB 889 with AM 2490 will provide a positive and enduring impact on quality early childhood education. AM 2490 would make the changes outlined below.

*Removes both the Business Expenses Tax Credit and the Individual (Parent) Tax Credit.

Changes to the Staff Tax Credit: 
  • Reduces credit amounts.
  • Inserts a “floor” or starting point for eligibility based on a minimum certification.
  • Excludes from the definition of eligible staff, certificated teaching and administrative staff employed by programs established pursuant to section 79-1104 to exclude school district staff with the salaries and benefits that child care employees do not enjoy.
Changes to the Program Tax Credit: 
  • Reduces credit amounts. 
  • Eliminates eligibility for Step 2 programs. 
  • Adds “or operates” to the definition of child care and education providers to include nonprofit child care and education providers.
Additions
  1. Inserts a 5 year sunset on the tax credits. 
  2. Places a $5 million annual cap on the funds available to be used for the credits. 
  3. Makes the provider credit non-refundable.
School Readiness Tax Credit for the Early Childhood Workforce

This tax credit would be available to early childhood professionals who have attained at least a Child Development Associate (CDA) credential or one year certificate/diploma in early childhood education or child development, and are employed in early childhood programs participating in Step Up to Quality. The credit encourages teachers and directors to improve their knowledge, skills and abilities, thereby enhancing the quality for the programs and enabling those programs to increase their Step Up to Quality ratings.

  • To be a teacher in a Nebraska child care center the minimum requirements are to be 18, pass a criminal background check, have a high school diploma or GED and have a plan for 45 hours of training in administration, early childhood education, or child/youth development in a period not to exceed six months. 
  • Many early childhood education teachers earn little more than minimum wage with no benefits.
  • Nebraska is in need of 7,900 additional qualified early childhood workers to ensure all children at-risk age 0 to 5 have access to high-quality services. 
  • The SRTC for the early childhood workforce provides incentives to improve the knowledge, skills and abilities of the early childhood workforce.
School Readiness Tax Credit for Early Childhood Programs

This non-refundable tax credit is available to programs with at least a Step Three quality rating and is based on the number of low-income children served through the state child care subsidy program. The value of the credit increases with the star-level and is designed to help address the higher expenses associated with providing higher quality services to low-income children.

  • Most early childhood programs for children under age four in Nebraska are privately run small businesses.
  • The child care sector is a significant contributor to Nebraska’s economic development in addition to providing early education and care to young children.
  • Although the average private annual cost for an infant in center-based care is $7,900, the average annual child care subsidy payment per child is $2,880 , a $5,000 difference.
  • The SRTC for early childhood programs helps these small businesses to 1) be sustainable financially 2) offer high quality care to ensure school readiness and 3) serve the most at-risk children.

 


 

1. Child Care in State Economies, Committee for Economic Development, August 2015. Retrieved January 23, 2016 from https://www.ced.org/pdf/Report%20-%20Child%20Care%20in%20State%20Economies.pdf
2. Ibid
3. Ibid.
4. Nebraska Department of Health and Human Services, Children’s Services Licensing, Title 391 NAC 3, 3-006.05B Non-Certificated Teachers, Operative 5/20/2013.
5. First Five Nebraska, Retrieved January 25, 2016 from http://www.firstfivenebraska.org/blog/article/innovation#.VqaYtlJLUuM
6. Voices for Children in Nebraska, Kids Count Report in Nebraska, page 35, 2015.
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What are "Nebraska School Readiness Tax Credits?"

School Readiness Tax Credits are a package of tax credits designed to increase access to high quality early childhood programs by supporting families, early childhood programs, the early childhood workforce and businesses that support high quality early childhood programs. Most importantly, the tax credits support Nebraska’s youngest children with targeted emphasis on the 64,127 or 42% of all young children from birth to age five considered at risk of failing in school.i

The School Readiness Tax Credits are directly aligned with Nebraska’s Step Up to Quality program administered by the Nebraska Department of Education in partnership with the Nebraska Department of Health and Human Services. The primary goal of Step Up to Quality is to improve early care and education quality and increase positive outcomes for young children.

The School Readiness Tax Credits that would become effective on or after January 1, 2017 are as follows:

  1. Parent Credit: For child care expenses for children in eligible programs rated Step Two or higher in Step Up to Quality.
  2. Early Childhood Program Credit: Refundable credit for eligible early childhood programs rated Step Two or higher. Amount is based on number of children who are either receiving child care subsidy or are in foster care.
  3. Early Childhood Workforce Credit: Refundable credit for early childhood workforce employed at eligible programs participating in Step Up to Quality.
  4. Business-Supported Credit: Refundable credits for businesses that support eligible programs rated Step Two or higher in Step Up to Quality.

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