Editorial: Questions linger on economy

Wednesday, Sept. 26, 2001 | 9:44 a.m.

Gov. Kenny Guinn, who has imposed a freeze on the hiring of new state employees, may know within 10 days whether he also will have to make cuts in government programs because of fewer revenues coming into the state treasury. There are concerns that if Guinn forecasts that the state's economy will continue to stumble in the wake of the Sept. 11 terrorist attacks, he may make cuts to essential services in order to keep the state government's budget balanced.

The terrorist attacks have damaged the nation's economy, which was teetering toward recession already, with shaken markets, job layoffs and a loss of consumer confidence the news of the last two weeks. Tourism-based economies, including ours in Nevada, have suffered, with many visitors forgoing travel for now. But even in a tourism-based economy, there is no reason why a state as prosperous as Nevada should be in such a precarious position.

The underlying problem is twofold. First, the state relies heavily on an unstable and regressive sales tax, which can produce far less revenue during rough economic times. Second, even though the state's economy enjoyed unprecedented prosperity during the 1990s, taxes remained too low, which meant that government agencies weren't adequately funded to provide basic services. Now that there may be even less money if cuts occur, the strain will be enormous on state agencies to carry out their essential responsibilities. If Guinn decides he has to make cuts, it is critical that he not slash services to programs that aid those who are genuinely helpless. Guinn shouldn't repeat a mistake that Gov. Bob Miller made 10 years ago when he cut mental health services during a budget crisis, cuts that the state's mental health system is only now recovering from.

Casinos and other businesses successfully fended off tax increases during the past decade, contending that new taxes could slow down Nevada's booming economy. Now that the economy is slowing down, and thousands are losing their jobs, businesses will argue that taxes can't be raised, that it will hurt the recovery. But the reality is that Nevada no longer can wait to stabilize its tax structure and adequately fund its state government. Elections are next year and the candidates for governor and the Legislature should have an honest debate about how best to repair the state's wobbly tax base. The state's residents no longer can afford to live with a state tax structure built upon a house of cards.