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Economy

State of siege

It’s not hyperbole to say this year’s legislative session will be unlike any other in the state’s history. Here are a few voices that will try to rise above the din on February 2.

The floor of the Legislature in Carson City is likely to resemble the Roman Colosseum come February 2, when elected officials begin a 120-day process to determine where the hell they’re going to find $1.8 billion to balance the state’s budget.

Gov. Jim Gibbons’ two-year budget plan of $6.2 billion spent the last week in legislative committee, and amid much fire and brimstone, one thing has become clear—regardless of which direction the Legislature takes, be it drastic cuts, higher taxes or some combination, Nevada’s future will be radically changed when this is all over.

Gibbons has already cut planned state spending by $1.5 billion over the last year, and many question how much further the state can go without crippling much-needed services. Now Gibbons wants to cut state employee salaries 6 percent, along with massive cuts to education, health and human services and taking yet more property-tax money away from already financially starved counties.

The economic picture continues to worsen as more and more homeowners walk away from property they can no longer afford, and according to the Economic Forum, a group of five business leaders, Nevada will have $5.65 billion in tax revenue to spend over the next two-year cycle, much less than the $6.8 billion the state expected to receive when the Legislature adjourned in 2007.

And regardless of the current Democratic majority—28-14 in the Assembly and 12-9 in the Senate—given the stakes, the 75th regular session of the Nevada Legislature is sure to be one of the most hard-fought in the state’s history, with every economic sector fighting for its voice to be heard.

Andy Matthews, vice president of communications with the nonprofit Nevada Policy Research Institute, believes Gibbons’ budget, which proposes, among other things, a $473 million cut from higher education, “does not contain the kind of draconian cuts that many would have us believe it does,” adding that Nevada’s real problems stem from a cycle of overspending during boom times and taxing during bust times.

Higher taxes are simply not the answer, Matthews says, adding education needs a major overhaul regardless of the budget. “We’ve more than tripled our per-pupil spending since 1960, and we’re not getting results. Forty-three percent of our fourth-graders were functionally illiterate on the national report card.”

Budget-cutting measures supported by NPRI, which adheres to free-market principles and advocates eliminating government waste, include increasing the number of charter schools and taking a close look at the Public Employees Retirement System. “It’s very expensive, because in PERS you have a defined benefit system rather than a defined contribution system [as in a 401(k)],” Matthews says. “That means you are guaranteed a certain outcome, and in a time like this, we’ve got unfunded liability in PERS of $11 billion.”

More

From the Archives
The states we're in (1/22/09)
Beyond the Weekly
Gibbons defends cuts, says critics have no alternatives (Las Vegas Sun, 1/27/09)
Chamber will support tax hike with other reforms (Las Vegas Sun, 1/26/09)

Bob Fulkerson, state director of the nonprofit Progressive Leadership Alliance of Nevada, says that, in the spirit of his group’s attempt to create more humane solutions to the problems the state faces, PLAN supports tax increases across the board.

“Whether it’s roads, highways, housing, health care, schools, we have to do something about our tax system,” Fulkerson says. Key PLAN proposals include a business-profits tax to target larger businesses and eliminating some of the deductions the mining industry currently receives. But while PLAN does indeed support the creation of a state tax—something Fulkerson and everyone else seems to agree will never happen in Nevada—it does not support a sales-tax increase.

“That hurts poor and working-class people, because they’re already paying a lot more proportionally to the state budget,” he says. “We have one of the most regressive tax systems in the country.”

In addition, PLAN wants to modify the business tax passed by the Legislature in 2003, which, according to Fulkerson, “threw small businesses under the bus, because it really hit less-profitable businesses and smaller businesses a lot harder than larger businesses.” The broad-based business tax is estimated to bring in $194 million annually, while the modified business tax could benefit the state by $279 million.

Julianna Ormsby, a lobbyist for the Nevada Women’s Lobby since 2007, says her group is still formulating its response to Gibbons’ budget, but that it agrees with PLAN’s recent report on raising taxes, “Fool’s Gold: The Silver State’s Tax Structure: Inadequate and Inequitable.”

“People are hurting, and we know we’re all having to pull back, but we have to be realistic. We’re not fundamentally opposed to the entire budget, but it’s not going to work for education.”

Kyle Davis, policy director for the Nevada Conservation League, which lobbies the Legislature to ensure sound environmental policy, says developing renewable energy has to be a priority, but that it won’t matter if the state proceeds ahead with the massive cuts to education, social services and public safety, which combined make up more than 90 percent of Gibbons’ proposed cuts.

“Businesses are going to be looking for educated workforces and adequate state services for employees, and if we set it up to where we don’t have a structure in place, companies just aren’t going to want to come here,” Davis says.

Susan Lynn, coordinator with the Great Basin Water Network, which strives to ensure that all decisions regarding water in Nevada are made without political pressure, says it appears that water will be getting short shrift in this year’s session.

“The governor had wanted to do a water-basin research project in Nevada last year, and appropriated $1 million to it, which really is a drop in the bucket,” Lynn says. “Now that is [expected to be] deleted from the budget, as are 10 positions with the Department of Water Resources. That is a huge loss to all of us.”

Randolph Townsend, a Republican state senator since 1983, defends Gibbons’ budget.

“The governor did exactly what he said he would do, not raise any taxes. He did not want to lay anybody off. There are those who don’t like these proposed cuts, but we don’t hear from anyone who disagrees what their plans are,” Townsend says.

While Townsend says the decisions to be made will be difficult, he more or less agrees that education needs to be looked at closely for any areas that can be cut. “We need to look at everything in higher education, like where are our resources? Are there too many in social sciences? How many hours are they teaching?”

He also wants to examine higher education for components that are marketable, “such as the focus on renewable energy and the amount of money that goes into those components [such as] engineering and environmental science, and those who are going to seek jobs in that new economy. Nurses, mental-health specialists, engineers—those are marketable skills this state needs.”

Ryan Erwin, president of Ryan Erwin and Associates, a political-affairs consulting company, says reforming the current government is a preferable alternative to raising taxes, using Medicaid as an example.

“If Medicaid would utilize the available technology to automate the coordination-of-benefits process, they’d save millions of dollars a year. Thirteen percent of Medicaid recipients have some other type of coverage, but Medicaid ends up usually paying 100 percent of the bill. If you added up that 13 percent, you’re looking at a couple hundred million a year in savings.

“These are things that Democrats and Republicans should be coming together on. It’s just common sense.”

As for education, Erwin says a big benefit would be getting more existing tax money into the classrooms and away from bureaucracy. “If we find a way to get just an extra 5-8 percent of education spending for textbooks, supplies, whatever students need, and lose a few bureaucrats, that’s probably a good thing.”

Robert Uithoven, a board member of the Nevada Economic Development Advisory Board since 2006, says the only way to ensure Nevada’s business climate grows is to not raise taxes, and that Gibbons’ budget mirrors NEDAB’s goal of advancing and marketing Nevada as a great place to do business.

“What people don’t want to see is a knee-jerk reaction like in 2003 with the tax increase,” says Uithoven, Gibbons’ former campaign manager. “Taxes are a deterrent to economic growth in this state, and it is economic growth that will most quickly improve the public sector.” Uithoven uses his own government-affairs consulting business as an example, saying he had to cut his workforce by 50 percent in the last year. “You certainly aren’t going to be getting more money from a modified business tax if people aren’t able to hire. And some of these companies will be pushed into bankruptcy by tax hikes.”

Still, Uithoven sees tax increases being proposed across the board—for sales, property, gaming, business and gas. What his group will be paying attention to is the justification for each increase, and whether any or all the proposals have expiration dates.

Only one thing is certain going into February 2: The recession continues to worsen. More and more Nevadans continue to lose their homes, their jobs and their quality of life. One can only hope that party politics will be set aside to focus on finding solutions—and quickly.

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Ken Miller is Las Vegas Weekly's associate editor, having previously served as assistant features editor at the Las Vegas Sun ...

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