Gov. Sandoval changes course, will support extension of taxes

CARSON CITY -- Despite his repeated promise of no new taxes, Gov. Brian Sandoval will announce today his support for reauthorizing $626 million in taxes set to expire June 30.

The abrupt change follows Thursday's Nevada Supreme Court decision that probably would stop him from using county and school district funds to cover shortfalls, as the governor had proposed in his 2011-13 budget. State Budget Director Andrew Clinger estimated the ruling affects about $657 million.

"The problem is much worse than we thought," said Sandoval senior policy adviser Dale Erquiaga. "Future governors and lawmakers will have to deal with that."

Sandoval and his staff planned to work through the night to revise the budget, Erquiaga said late Thursday.

The state Supreme Court ruling, which said the state grabbing money from a local entity violated a provision of the constitution that says "all laws should be general and operate uniformly throughout the state," has implications for budgeting decisions well beyond the clean water money, according to Sandoval administration attorney Lucas Foletta.

"I don't see how there is any way we could take a narrow view of the court's decision," Foletta said.

In response Sandoval wiped from his budget the $62 million in clean water coalition money, $247 million in school construction bond reserve money that had been shifted to school operations, $225 million in a voter-approved diversion of room taxes and about $83 million in property tax diversions.

Erquiaga said the governor, a former federal judge, is taking a broad interpretation of the decision because he "will not gamble with the state's future" and "will not gamble with the budget" with budgeting decisions that could run afoul of the court.

Assembly Minority Leader Pete Goicoechea, R-Eureka, said it will be up to Sandoval what legislative Republicans do next.

But a GOP official predicted enough Republicans will switch from their own anti-tax pledges and pass the new budget that Sandoval will release today.

The governor is expected to announce his changes during a news conference. In a tweet, he said he had spoken with Assembly Speaker John Oceguera, D-Las Vegas, and state Senate Majority Leader Steven Horsford, D-Las Vegas, and would update them today about the budget.

What effect the governor's turn to taxes will have on spending on public schools, higher education and mental health and senior citizens programs was not immediately known.

Oceguera said there still will be "painful cuts." But according to his information, the number of layoffs in the Clark County School District, originally estimated at 1,800, would drop to 800.

Daniel Klaich, chancellor of the Nevada System of Higher Education, wouldn't speculate on the impact until he sees Sandoval's new plan. But Klaich said the governor's change could mean a "significant," positive improvement for colleges and universities.

Clark County School District Chief Financial Officer Jeff Weiler agreed.

"It does sound like some things are working in our favor," Weiler said. "We'll stay tuned."

DEMOCRATS HAPPY

Oceguera said he has been meeting with Sandoval in recent weeks to persuade the governor to change his position on the expiring taxes, but that "there was a little intervening source from above" that accomplished his mission.

"It will be great to work this out together. That's what Nevadans want. They want us standing on the steps together announcing an agreement," the speaker said.

Horsford said the governor and all four legislative caucuses would work together to hammer out a revised budget, despite having been at odds for 109 days of the 120-day legislative session.

"I think we are going to be much closer than we have been all session," he said.

Sandoval does not believe it is acceptable to cut state spending any more, administration officials said, and as a result of the court decision, he will support extending the full amount of the "sunsets," or more than $600 million in business, sales and other taxes that other­wise would have ended.

"As a former federal judge, I am cognizant of the legal issues," Sandoval said in a statement. "As governor, I am forced to deal with their ramifications and I am responding by reworking the state budget."

The court unanimously ruled that a bill allowing the state to take $62 million from the Southern Nevada Clean Water Coalition was unconstitutional.

Assembly Bill 6 was approved last year by Gov. Jim Gibbons and the Legislature. The coalition raised the money through user fees to construct a wastewater pipeline to Lake Mead. The project had been placed on hold because of the lack of growth in Clark County.

The court ruled that Gibbons and legislators violated the state constitution by voting to take the money from the Clean Water Coalition to fill a hole in statewide revenues. Taking the money was a "local and special tax" that applied to only one organization, and wasn't uniform across the state, according to the decision.

Legislators are trying to finalize a budget this week that they can pass before the scheduled June 6 adjournment.

MOVE COULD BE WIN-WIN

Sandoval's move to extend the expiring taxes could allow Republicans and Democrats to agree on a budget deal and go home on time.

Both sides can declare small victories or at least not major losses, according to Eric Herzik, a political science professor at the University of Nevada, Reno.

Democrats who sought more funding for education and social services will have lost their bid to impose new taxes on businesses and services, yet they can say they forced the governor to extend taxes to avoid devastating cuts that were largely included in his original budget.

Sandoval and the Republicans who backed his pledge not to raise taxes or lift the sunsets could argue that the high court forced their hand in the end, but they had managed to stave off the Democratic effort to tax Nevadans even more, he said.

"The easy gloating approach is to say the governor blinked and broke his promise," Herzik said. "But I think the governor had built a budget on thin ice, and he saw that budget fall through the ice with the Supreme Court decision. Yeah, it's a win-win and a lose-lose. The governor now has to go back on his promise, but the Democrats aren't getting a massive infusion of money either. It's a win for both sides, though, because they could say we did what was best for the state."

The Nevada Policy Research Institute, a Las Vegas-based conservative think tank, condemned Sandoval for extending the expiring taxes.

"It is quite disappointing to see that after more than 100 days of Governor Sandoval consistently advocating for the interests of Nevada taxpayers, he reportedly is ready to precipitously abandon his promise not to raise taxes," said Steven Miller, the institute's vice president for policy.

Miller said Sandoval already has found $440 million in additional funds since he proposed his budget in January.

"It would be bizarre if the governor were no longer comfortable with the very amount of spending he was advocating as recently as a month ago," Miller said.

'GIMMICKS' THREATENED

In his budget plan, Sandoval proposed to take money from a few counties, not all 17, to cover spending shortfalls. That apparently would violate the high court's Thursday decision, forcing the governor to change his no-tax position, a source in the administration said.

For example, the governor proposed grabbing Clark County and Washoe County property tax revenue to cover part of the cost of higher education in those counties.

Democratic legislators during hearings questioned why other counties were not included in this taking, especially Elko County which is home to Great Basin College, or Eureka County, the wealthiest county in Nevada. They eventually rejected taking the money from any county.

Sandoval also proposed taking $425 million in surplus school construction bond revenues from Clark, Washoe and a handful of other counties. Those funds would be shifted to the school districts to pay for the ongoing operating costs of their schools.

Eventually the administration lowered the taking to about $250 million, but Democrats rejected the move to take any of that money.

Once again Sandoval's plan would take funds only from a small number of school districts, not all 17 school districts.

Instead of using what Democrats labeled "gimmicks" to balance the budget, Democrats in recent days have conducted hearing after hearing to drum up support for reauthorizing business, sales and other taxes that are scheduled to expire at the end of June.

Review-Journal reporter Laura Myers contributed to this report. Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861. Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.

Trending topics:

• Carson City
• Clean Water Coalition
• Nevada Legislature
• Nevada Supreme Court
• unconstitutional
• Gov. Brian Sandoval
• tax extension

Comments

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1. E.Stein May 28, 2011 | 9:13 p.m. Report Abuse

   Instead of partisan fighting, could we examine areas where we could do a little cutting? UNLV wouldn't be less of a "world class" institution if it cut our a few classes like these.
   1. History and Theory of Golf Course Development - a real cash cow and global changing class. 2. Afro-American Heroes in Film - you certainly can't google the answers to this question in this day and age. 3. Magic, Witchcraft and Religion. ?? Really??No comment 4. Sex, Dance, and Entertainment. This actually is a relevant money maker in Las Vegas, but probably could be learned OJT 5. Sex in the Cinema. I guess if #4 doesn't further your career you can give adult films a shot. Maybe someone will learn how to properly portray/engage in the "money shot"? How much are we paying the "professor" to show porno's to college students? Nevada sure would go down the tubes if we made cuts to "Higher Education" especially classes like this. Why aren't our elected officials doing some real work, like making our education system explain why they need classes such as this, and cannot trim some money from their budgets.

2. TankerUSMA1975 May 27, 2011 | 9:30 p.m. Report Abuse

   @michael commenting. I don't believe that the state police make up billions of dollars in the state budget. Firefighters are paid by the counties, not by the state. The estimate that I belive you are refering to is the entire cost, that paid by both the state and counties, and is not all state funding. Be careful of your sources. If firefighters are volunteers, they are only paid when training or fighting a fire, and thus can't cause the expenses you are stating to the state budget. What is your source for a firefighter making 444k? Please provide a link to the 1.7 billion figure, I and others would like to look at the data.

3. deacon427 May 27, 2011 | 8:45 p.m. Report Abuse

   Yes people, the firefighters and police in the county are over paid, at least in clark county. Yes, some of them abused the sick leave policies and deserve to be FIRED! But did you know that the state only gets 2.35% of the sales and use tax rate you pay? Further, did you know that the base rate of 2% has been in effect since 1955??? The only reasons it has gone up is because of the counties who get the lion share. Also, did you know that state workers are the lowest paid governmental employees in the state? Did you also know Nevada state government is the leanest state government in the country? Did you also know that county workers get longevity pay, yeah longevity pay, that is based on their salary and years of service, and that for many of them it is in the thousands if not tens of thousands a year? Did you know that state workers get longevity, or at least we did until the froze it, that at its maxmium level tops out at $1500 a year??? I would rather they keep the longevity pay because it is basically an insult anyhow. Michael I do not know what your source of information is but please get it straight about state employees, because it is a fact that we make 25 to 35 % less than our counterparts at the county, so don't tell me that I make too much. Over the last 2 to 4 years we have been hit with cuts to our salaries, increases in benefit costs, and loss of longevity and COLAs. Not so for the county workers. So if you want to take pot shots at the county workers than go for it, but leave state workers alone. By the way, sunset the temp taxes, I definitely agree. the truth is we need a tax on services, elimination of deductions for the mining tax, and a bump in the gaming tax of about 2%, then all problems would go away for the budget. We need to restructure the tax system and there is no time like the present, because in fact it should have been done years ago.

4. michael commenting May 27, 2011 | 8:10 p.m. Report Abuse

   TankerUSMA1975 YES YES YES omg the OTHER police agency is called NEVADA STATE patrol It was just an example;
   the billions come from none other than Jeremy Aquero of the Applied Analytics (i think) now his last estiment I believe a few weeks back was 1.7 billion in such over payments than national average.
   Let's take fire; did u know 70% of ALL FIREFIGHTERS are in fact VOLUNTEERS. and the others do not cost over $180,000.00 per person per year. did u know the highest pd public employee in Nevada 09 ?
   A FIREFIGHTER AT $444,000.00
   just something to think on

5. michael commenting May 27, 2011 | 8:03 p.m. Report Abuse

   Raoul.N.Stone , wow; what goofy upside down UNION PROPAGANDA did you get that drivel. So u think (for example) that cops and fire in Oregon or Idaho or Colorado AVERAGE COST PER YR OF $180,000.00 A YEAR?
   u r a shill for public employee unions which even by the head of AFL CIO and F.D.R. SHOULD NOT EXIST. but what the heck, u must be smarter.

6. TankerUSMA1975 May 27, 2011 | 7:57 p.m. Report Abuse

   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.

7. TankerUSMA1975 May 27, 2011 | 7:56 p.m. Report Abuse

   @michael commenting. Police and fire are paid by city and county governments, not state so there go your budget figures out the window. Where do you get your figures for the cost of illegal aliens? The Supreme Court of US has ruled that school districts have to educate all without checking immigration status.

8. Raoul.N.Stone May 27, 2011 | 5:35 p.m. Report Abuse

   michael, i will type slowly so you can understand. Nevada has fewer state and local government workers per capita than any other state in the United States. As a result of this incredibly lean staffing, we pay about 12% LESS on state and local government worker salaries and benefits than the national average.

9. G.Wiz May 27, 2011 | 4:47 p.m. Report Abuse

   Libertarians don't like taxes and regulation for the same reason 'Jack the Ripper' disliked laws against homicide. Specially those big fat Libertarians like Koch who funded the teabagger parties. They get richer off you Republican idiots and you still keep buying into their spew.

10. michael commenting May 27, 2011 | 2:50 p.m. Report Abuse

    TankerUSMA1975 if u don't understand english, I will type slower;
    1. as a state; Nevada's cost of public employee who are grossly overpaid cost 2 billion dollars per budget (2 years) over the same jobs on a national average (we have exactly national average cost of living) NOW FOR THOSE LIKE U TOO SLOW TO GET IT, I WILL EXPLAIN FURTHER; OUR COPS AND FIRE COST 3 TIMES WHAT GENUINE HERO COPS AND FIRE COST IN NYC where the cost of living is 70% higher.
    2. as a state; Nevada's cost of illegal alliens is 2 billion dollars per budget cycle (2 years)
    total available= 4 thousan million dollars per budget

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