Las Vegas Sun

March 29, 2024

Tax plan finally passes

CARSON CITY -- After 157 days of stalled tax and education debate, the state Legislature adjourned early this morning with a plan to fund schools and a plan to raise taxes by an estimated $836 million over the next two years.

Gov. Kenny Guinn is expected to sign the measure -- the largest tax increase in state history -- into law this afternoon, with some tax increases taking effect immediately.

The Legislature's last day went through several dramatic moments before a late-night vote gave lawmakers a constitutionally mandated two-thirds approval for a new tax plan.

Just before 11 p.m., the Senate passed the bill by a vote of 17-2, with one absence and one not voting, giving the bill a two-thirds majority.

The bill then moved to the Assembly, where for weeks 15 Assembly Republicans prevented a two-thirds majority.

Ranking Assembly Republican John Marvel, R-Battle Mountain, broke the stalemate and cast the fifth vote by a Republican to join the 23 Democrats in support of the constitutionally mandated supermajority, 28-14.

The Nevada Supreme Court ruled July 10 that the constitutional requirement for a two-thirds vote was trumped by a constitutional provision requiring the funding of public schools.

But with numerous lawsuits challenging that decision, lawmakers did not want to risk passing a bill by a simple majority, despite the court's authorization to do so.

"We're in a constitutional crisis and the possibility that we could pass this bill without a two-thirds majority is bad," Marvel said. "We must uphold the constitution."

The tax plan raises existing taxes on cigarettes, liquor, gaming and some slots and creates new levies on live entertainment, banks and business payroll. It also creates a new real property transfer tax for the state.

Senate Bill 8 -- the new plan created Monday that withstood hours of uncertainty -- also authorizes $1.65 billion to be spent on K-12 education, freeing the way for school districts to hire teachers and continue efforts to open schools for the new year.

"I'm relieved," Assembly Majority Leader Barbara Buckley, D-Las Vegas, said. "With the prospects of schools not opening, legislators were able to compromise."

Lawmakers ended the 20th Special Session -- the second special session of the year -- at 1:35 this morning after racking up $450,000 in overtime costs for 37 days of special sessions that followed the June 3 adjournment of the 120-day regular session.

Legislative staffers said that lawmakers were paid for 145 days.

Even after Senate Bill 8 passed the Assembly about 11:30 p.m. Monday, Assembly Minority Leader Lynn Hettrick, R-Gardnerville, tried to stop its transmission back to the Senate on the grounds that the measure contained items nobody wanted.

Assembly Speaker Richard Perkins, D-Henderson, gaveled Hettrick's objection down. Hettrick is the leader of the 15 Republicans who have sued the Legislature in federal court, and are continuing to pursue legal actions to appeal last Friday's decision by the U.S. District Court to dismiss their case.

After the vote, a disappointed Hettrick said he will continue pursuing lawsuits related to the July 10 Supreme Court vote, even though he said Monday's two-thirds votes take some of the wind out of the sails of his legal efforts.

"It does make it more difficult," Hettrick said. Hettrick derided the tax plan.

"I've never seen it happen in government that throwing money at a problem solves it," he said.

Perkins said the plan protects individual taxpayers by not raising sales or property taxes.

The tentative deal reached early Monday appeared destined to fall apart so many times that many in the building made references to the movie "Groundhog Day," in which Bill Murray is trapped in a small town replaying day after day.

"This has been the most amazing session in terms of difficulty, in terms of gamesmanship, in terms of publicity stunts and that sort of thing," Perkins said. "We just had to get to an end."

Monday began with promises from the leaders of both houses that a tax compromise was imminent. But even at 11:30 p.m. with the Assembly poised to vote, the bill's passage was in doubt.

The day was supposed to begin at noon with the Senate approving a modified tax plan. But Senate and Assembly leaders were still $6 million apart on the total amount of new taxes to be generated to fund schools.

And even after Democrats won the negotiation by getting the budget number up to requiring $811 million in new taxes, it was Senate Democrats who ironically threatened the compromise.

As a business lobbyist asked for more time, Perkins went ahead with his previously stated alternate plan -- convene at 4 p.m. and simply recede on Senate Bill 6.

SB6 was an $873 million plan that already passed the Senate. If the Assembly removed its objections, the bill would have gone to the governor.

The Assembly had called roll, stood for a prayer and recited the pledge before Raggio arrived, informing Perkins he would accept the $811 million and had the votes in his caucus to fund that amount.

Perkins called for a recess, asking members not to stray from their seats, to await the Senate vote.

But Raggio had no sooner returned to the north end of the building than his Democratic counterpart -- Sen. Dina Titus, D-Las Vegas -- called for a quick caucus of her members behind a fire escape door off the Senate floor.

When she emerged, Titus' long face suggested she would not be able to bring enough Democratic votes to join the eight or nine Republicans poised to vote yes. Without a guarantee that the bill would pass with the 14 votes required for a two-thirds majority, Raggio never called the session to order.

Lobbyist Pete Ernaut was summoned to round up the yes votes in the next 30 minutes so that Raggio could beat Perkins' threatened move to recede with a vote on a new tax plan.

After 90 minutes of apparent inability to get the votes into place, one lobbyist who had fanned out to help Ernaut remarked: "The Democrats said they're just tired of voting on tax bills. That's it. They're sick of it."

Assembly Democrats began milling the halls, many bemoaning the cancellation of their 8:15 p.m. flights to Las Vegas and others, like Tom Collins, D-North Las Vegas, threatening: "It's today or never. I'm not coming back tomorrow."

Moments later Guinn's Chief Of Staff Marybel Batjer arrived with a proclamation from Guinn allowing lawmakers to consider other bills.

The Assembly reconvened and began considering some of the minor bills, only to call another recess, as negotiations continued on tax deals.

Senate Democrats began demanding what they wanted in a new tax bill.

Ultimately the change was minor -- increasing the 50 percent increase on liquor to 75 percent.

The change also generated more than the $811 million previously discussed -- and sold to Marvel.

When the bill arrived at the Assembly fresh off its Senate passage, Hettrick and Bob Beers, R-Las Vegas, took Marvel aside and showed him the spreadsheet suggesting he had been hoodwinked.

"They lied to you," Hettrick said. Gaming and business lobbyists rushed in as Hettrick demanded to know why the plan raised $836 million on paper but only authorized spending $811 million.

Moments later Marvel was escorted into Perkins' office where he met with the speaker and Buckley. The unlikely trio emerged moments later and marched to the floor for an immediate vote.

"It is with great reluctance that I will probably support SB8," Marvel said, settling the uncertainty for a moment.

He was joined by Republicans Jason Geddes and Dawn Gibbons of Reno, Josh Griffin of Henderson and Joe Hardy of Boulder City.

The electronic tote board lit up with red votes showing 14 votes in opposition and green showing 27 votes in support.

In the end Assemblywoman Chris Giunchigliani, D-Las Vegas, who had all day declared her disgust with the process with threatened no votes, cast the final yes vote to put SB8 over the top.

After the vote Democrats said the tax would not technically raise $836 million. For starters, they said, $17 million will be needed to balance the 2003 fiscal year that ended June 30 as a result of lower-than-expected gaming tax revenue.

The remaining $819 million is closer to the $811 million budget, they say, because they are not certain the live entertainment tax will generate its estimated $117 million over the next two years.

After the vote, when Assembly Democrats were championing Marvel as a "hero," Assemblyman Tom Grady, R-Yerington, said that while he thought the vote was courageous.

"I don't think anyone is a hero and there are definitely no winners," Grady said.

Raggio said he considered the final tax package a good one for Nevada.

"There were such serious financial problems that hadn't been addressed and that we'd been ignoring for a decade and we knew it had to be done," Raggio said. "It may have taken a couple of special sessions, but we avoided a business income tax and I feel personally satisfied that this plan will support the state for the next two years."

Sen. Ray Rawson, R-Las Vegas, and the assistant majority leader, said he was also pleased the Legislature kept to the two-thirds constitutional majority amid difficult times.

"These were hard issues and a lot of personal acrimony and undercutting occurred," Rawson said. "A lot of that won't be healed for a long time."

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