Comments (34) | Add a comment
Court ruling crafts new political realities for Sandoval
-
John Locher/Las Vegas Review-Journal File Photo
Gov. Brian Sandoval, center, applauds after an April 20 speech by U.S. Rep. Shelley Berkley, D-Nev., to a joint session of the Nevada Legislature in Carson City. A state Supreme Court ruling has the Republican re-thinking his no-tax-hike pledge. » Buy this photo
Tools
LAS VEGAS REVIEW-JOURNAL
Updated: May 28, 2011 | 7:56 a.m.
A new day has dawned in Nevada.
No matter the contours of the budget deal GOP Gov. Brian Sandoval works out with Democratic leaders of the Legislature, the state can no longer freely grab pots of local government money to balance its budget, thanks to a Nevada Supreme Court decision.
And state leaders may be forced to consider broadening Nevada's tax base beyond gaming, mining and sales tax on goods instead of patching holes in a leaky spending plan every two years, observers across the political spectrum said Friday.
"This changes the way government does business," said Billy Vassiliadis, a longtime lobbyist for the Nevada Resort Association. "They've tried to manage through crisis by reaching into certain funds, which I've always thought was a little short-sighted. Ultimately, a good thing can come out of this."
Former GOP Sen. Bill Raggio, author of the 2009 tax package, said he had long questioned the wisdom of the state siphoning local funds, yet lawmakers were previously told the sweeps were legal.
"I guess I'm one of those who said, 'I told you so,' " Raggio said, adding that he had also warned that the 2009 taxes might need to be extended if the economy didn't recover enough. "Some of that has been forgotten with all the political posturing going on. I think the governor will have to be prudent."
GOVERNOR UNDER PRESSURE TO DEAL
Sandoval, who campaigned on a pledge not to raise taxes, might pay a political price with the conservative right if he lifts some of the June 30 sunsets on a 2009 tax package to fill a budget gap of up to $657 million that suddenly yawned as the result of the high court ruling Thursday.
Yet the popular new governor might be more widely seen as a statesman who worked with Democrats to avoid a deeper crisis by crafting a budget that puts the state's welfare and support for education and social services ahead of his election promise. Backing from most of the business community, which pushed to extend the 2009 taxes for education, provides him cover, as well.
"Obviously, the governor thinks he can withstand any political challenges from the right," said Robert Uithoven, a GOP consultant who worked with former Republican Gov. Jim Gibbons, who also opposed new taxes yet lost support when he refused to work with opposing lawmakers.
Sandoval is under intense pressure to quickly revise his budget and negotiate a deal with lawmakers, who have just nine days left to work until the 120-day session is constitutionally scheduled to end. The governor will have to rally GOP caucuses in the Senate and Assembly to back him if he extends some taxes after months of supporting his no-tax-hike pledge. And Sandoval must get Democrats to sign on to his bare bones $6.1 billion budget that's short of their $7 billion proposal.
COMPROMISE IS IN THE AIR
Most Republicans are expected to go along with Sandoval, especially if he also can negotiate some money-saving reforms. And Democrats appear ready to compromise after dropping efforts this week to pass two new taxes -- a transaction fee on services and a margin tax on businesses -- that would have raised another $570 million over two years. It was part of an overall $1.2 billion tax package, which included lifting the June 30 sunsets, that was introduced late in the session with zero GOP support.
Assembly Ways and Means Chairwoman Debbie Smith, D-Sparks, was in tears at a hearing on Wednesday as Democrats cut budgets after giving up on raising more revenue with new taxes.
On Thursday, Smith was ecstatic after hearing the surprising high court decision that is forcing Sandoval to finally consider lifting some sunsets on the 2009 tax package.
"Wow. What a difference 12 hrs makes," Smith tweeted. "Compromise at last?"
LOCAL REVENUE CACHES RULED OFF-LIMITS
The Nevada Supreme Court ruled the state couldn't use $62 million it grabbed from a dedicated Clark County clean water fund. The funding shift had been approved by lawmakers in both parties during a special session in February 2010 to help fill a budget shortfall caused by shrinking state revenues.
As a result of the ruling, Sandoval must remove the $62 million from his budget. And the former judge and his legal advisers said it also means the state probably cannot use another $247 million in school construction bond reserve money for school operations, $225 million in a voter-approved diversion of room taxes and about $83 million in property tax diversions.
"The Supreme Court decision ... has far-reaching implications for how Nevada governors and legislatures will do business from this date forward," Sandoval said in a statement Thursday.
And that would be a positive change, said fiscal experts who have long said Nevada's narrow tax base has resulted in a boom-bust economy that's too unstable and must be reformed.
"Immediately, this is Sandoval's problem, but every governor going forward is going to face the same problem. Now is the time to broaden the tax base," said Robert Lange, director of Brookings Mountain West, a think tank. "If there's ever a moment where the field has changed so radically that there's opportunity for structural reform, this is it."
STATE MUST BROADEN TAX BASE
Even the Nevada Policy Research Institute, a conservative think tank, has argued in favor of broadening the state tax base by imposing a levy on services -- but in exchange for lowing the overall sales tax rate and in a revenue-neutral way so Nevadan's aren't paying more for government.
Steven Miller, vice president of NPRI, said it would be "bizarre" if Sandoval breaks his pledge not to raise taxes, despite the high court ruling because there is still too much wasteful spending now.
"Extending the sun-setting taxes will further hamper Nevada's economic recovery and discourage job creation," Miller said in a scathing statement attacking Sandoval.
Jan Gilbert of the Progressive Leadership Alliance of Nevada, however, makes the case that the Nevada economy has started to improve even with the 2009 taxes in place. She praised Sandoval for moving to extend some of the taxes, although she said his budget still comes up far short.
"This highlights the problem with our revenue structure, which has made us rely on budget gimmicks for a decade," Gilbert said. "We've never taken the bull by the horns and said we have a revenue problem. Now, there's no denying it."
Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919.
Comments
Terms & Conditions
The following comments are provided by readers and are the sole responsiblity of the authors. The Review-Journal does not review comments before publication nor guarantee their accuracy. By publishing a comment here you agree to abide by the comment policy. If you see a comment that violates the policy, please use the Report Abuse button.
Some comments may not display immediately due to an automatic filter. These comments will be reviewed within 24 hours. Please do not submit a comment more than once.
Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.
RSS
Twitter
Facebook
We have already seen in recent days businesses testifying in support of extending the sunsets on certain taxes. The Las Vegas Chamber of Commerce has come out in support of a broad based business tax that is linked to education reform. However, there is still an area that needs to be addressed. The Constitutional protection for the mining industry and the state laws that allow huge deductions need to undergo changes. I am not advocating the Alaska solution of a 25% royalty on oil companies, although based on recent earnings reports, that doesn't seem to have had a negative effect on their profits. The issue was highlighted in a recent power point presentation at the Barrick Mining annual meeting. One of the mines highlighted in the power point was the Cortez Hills Mine in Northern Nevada. According to the power point, in 2010, the mine produced 114,000,000 ounces of gold (over 35 TONS) at a production cost of $312 per ounce. During the first quarter of 2011, the mine produced 366,000 ounces (over 11 TONS) of gold at a production cost of $220 per ounce. If you project a sale price of $1000 over cost of production,that results in a profit of over $1,500,000,000. Based on what the mining industry paid in taxes in 2009, the tax payment to the state of Nevada will probably be less than 50,000,000. The power point goes on to point out that the projected production from Cortez Hills for 2011 will be between 1.30 to 1.45 MILLION ounces (40-45 TONS)at a production cost of $235-245 per ounce. This is natural resource that should provide significant benefits to the citizens of Nevada. Unless the Legislature acts quickly, another two years will pass without any significant action to change the tax structure of the state.
Just saying that NV has the 9th highest paid state workers is interesting but incomplete. I am not defending them but as a taxpaxer who expects responsible use of my money, how do their responsibilities, job qualifications, number of subordinates, breadth of responsibility, etc., compare? Perhaps some actual in-depth investigative journalism and/or publicly released studies by the legislature or graduate departments at UNR/UNLV on various departments might be useful in reforming, reorganizing, streamlining or downsizing departments, if needed. Let's not go down that path with highly paid consultants (that we can't afford) who would likely write reports starting with a predetermined answer and work backwards. At the end of the day, perhaps an urban clearance of Carson City on the scale of Carthage is the answer but let's get some objective data first and not make decisions with just blind mob rule or uninformed prejudice.
gbigs, I agree, the affordable housing might tip the scales for LV as a retirement spot for some but not everyone. Las Vegas is centrally located to many places to visit; Ca, Az, Lake Tahoe, Washington State, etc. We'll see.
@Jasper- In the U.S., Nevada ranks 35th in population, 32nd in state GDP and 9th in government employee spend. Nevada has a spending problem. We disagree.
EH. CA has seniors because they aged and stayed there. and CA weather is astounding. the best in the US. even with the higher cost of living, and unfriendly tax status. AZ is a more friendly place for seniors. they also have Sun City, a mecca for them. NV offers no such layout. N NV. is harsh for weather, Vegas a little better, that is where most of them live. many seniors may opt to go to Vegas now that prop values have dropped, and houses are cheaper, remains to be seen. Florida is seniors meca...the state has it all, friendly tax, weather, golf, preplanned communities.
@gbigs- The U.S. Census shows those who are 65 or older make up 11.6% of the population in Nevada, 11.2% in California and 13.1% in Arizona. Average high temperatures are higher in both Arizona and Nevada. Temps are rough here July thru September, otherwise, its great weather the rest of the remaining 9 months. We agree to disagree.
To gbigs: I tried to respond to your earlier post, but for some reason it was not accepted.
To EH122: We have had for years some of the lowest taxes in the country and yet people aren't exactly tripping over one another to move here. This fact becomes even more obvious when you realize that California, the highest taxed state in the country, is a neighboring state. One would think that people and businesses would be flocking to this state. The fact of the matter is people don't want to move here for other reasons. One of those reasons is a lousy education system that produces too many people with little or no skills. Now, the powers to be want to blame the teachers for this problem, but any reasonable person would recognize the fact that you get what you pay for.
EH. seniors cant deal with the extreme weather in NV. too hot and too cold. you wont get a boom industry for seniors in NV. also, the med system in Vegas now has a rep for being killer...so many scandals. NV needs to develop Yucca. with Casinos and prostitution now leaving, or almost gone, the state is in DIRE condition.
Don't forget low taxes, no state income tax, low cost of living and low housing costs combined with the entertainment value can be very attractive to seniors who could fill some of these empty homes.