Legislative storm isn’t over

Friday, July 25, 2003 | 5:05 a.m.

Jon Ralston, a columnist for the Sun, has covered every Nevada Legislature since 1987. He hosts the news discussion program "Face to Face With Jon Ralston" on Las Vegas ONE and also publishes the Ralston Report.

"I can't change their minds. To me they're irrelevant. A person who says that doesn't want to help out. We will never get a vote from them. If they don't want to see this, they become irrelevant."

-- Gov. Kenny Guinn, Jan. 9, 2003, telling Sun reporter Cy Ryan how he felt about those lawmakers who believe Nevada has a spending problem.

"To me, this is not a choice worthy of our citizens. It is not a choice for leaders, but a choice of political cowardice."

-- Guinn, Jan. 20, 2003, declaring in his State of the State speech how he felt about those who did not want to fund his billion-dollar budget.

When they set sail six months ago on their great voyage in search of taxes, Capt. Guinn and his crew of 63, they could not have known they would encounter a perfect political storm.

The ominous clouds were there when they left port in January. But no one could have known the weather would turn so nasty, resulting in an animosity-filled, personality-driven twister that often tossed aside public policy and threw overboard institutional respect.

Amid the wreckage of the 2003 Legislature and its two sequels, the question isn't so much if the state can weather the effects of this disaster but how severe are the consequences of what the tax hurricane has wrought. Finding the genesis of this storm is not nearly so trying an act of political meteorology as forecasting when the next inclement conditions will touch down.

This is a story of a ship of state that, by most accounts, ran aground because of failed leadership, fingerpointing, self-interest and personality politics run amok. It is a tale of a mutinous but suddenly relevant Assembly Republican Caucus, the majority of whom were saved from exposure only because of the eleventh-hour tax rime of the ancient Marvel. And it is a saga without a final chapter, as anger has yet to subside, the depth and direction of public outrage difficult to gauge and the buoyancy of court cases and a fleet of initiatives impossible to predict.

In the telling of this fateful trip, you will see how gaming managed to lose as it won, how a governor known for consensus-building shattered any possible consensus and how the Legislature, driven by fear and loathing and a desire for relevance, may have rendered itself irrelevant.

The rumbles begin

For nearly two decades the gaming industry has searched for a broad-based business tax solution so that money-ravenous lawmakers would have another revenue source to tap. Gov. Bob Miller, anointed by the industry, started the process in 1991 when he placed into the previous record-setting tax increase ($300 million) a per-employee tax written by gaming lobbyist Harvey Whittemore. But after that, nothing. Miller chafed at any further broadening of the tax base, including in his final, lame-duck session of 1997.

That left it to Guinn, the well-liked Las Vegas community leader, who was embraced by the gamers and anointed more than two years before the 1998 balloting. But Guinn did not do anything but talk about the problem during his first two legislative sessions, including this from his 2001 State of the State address:

"During this past year, I have made no secret of my belief that Nevada must explore new revenue streams and establish a broader economic base, so that we can provide a good education to our children, adequate health care to our families and seniors, and safety for all our citizens."

Lawmakers showed they were ready to proceed with the tax restructuring, needed because gaming and sales taxes were not keeping up with growth, and they passed a resolution in 2001 that formed a tax task force that was mandated to do, among other things: "develop one or more definitive proposals to carry out the state's need to provide additional revenue for state programs, to stabilize the tax base and to reduce the long-term structural deficit of the state budget."

Assembly Concurrent Resolution 1 passed unanimously. The course was charted. Or so it seemed.

The first thunder claps of the brewing storm were the muffled meetings of that task force, chaired by former Clark County budget boss Guy Hobbs. No one paid much attention to what was happening, but the business folks began to sense a fait accompli early on. The chamber types were dismissed and disdained, especially by task force member and Mandalay Resort Group executive Mike Sloan, who had spent years advocating that nongaming businesses should pay more taxes.

Ironically, the task force, seen by its critics as a tool of the Strip, produced a document that was praised as well- argued and compelling, but it also was a report relegated to disuse in cyberspace, with few lawmakers ever clicking on it to see the exhaustive, 1,100-page report.

Critics can rail about Sloan's intense insistence on gross receipts or the presence on the task force of Las Vegas Sun Editor Brian Greenspun, whose family has gaming and development interests. But the real story of the task force is not that the deck was stacked in favor of a gross receipts tax; it is how forcefully the case is made not just for the GRT in that document but that something should be done to fix a broken tax system.

(People, especially politicians, political operatives and commentators, will throw bricks at the gamers because of their vast and undeniable political influence. But what began nearly two decades ago as an exercise in bottom-line protection for the industry became a cause that Hobbs and many others embraced as in the public interest -- and that has been lost in the debate.)

The skies darkened further last November with the balloting as the Legislature fundamentally changed. Lightning struck for the Republicans as the party picked up four seats -- 11 GOP rookies in all were elected to the Assembly, giving the minority a five-vote margin of error to block any tax increase under the two-thirds rule. And two very conservative Republicans -- Barbara Cegavkse and Sandra Tiffany -- moved from the lower house to the state Senate, where their political views on taxes were similar to those of Sen. Ann O'Connell.

It is here that Capt. Guinn and his lieutenants -- Senate Majority Leader Bill Raggio and Assembly Speaker Richard Perkins -- missed their opportunity. They knew getting two-thirds, especially in the Assembly, would be difficult, but they didn't reach out to Assembly Minority Leader Lynn Hettrick and his caucus. Instead of dropping anchor to find a way to navigate through the session, they charged full speed ahead.

A governor believing he had a mandate, a majority leader who believed he could corral his caucus and a speaker who thought picking off five of 19 Republicans wouldn't be too difficult. Little did they, or anyone else, know the shoals that lay ahead.

Guinn unleashes volley

When the lawmakers gathered on Jan. 20 for Guinn's State of the State speech, they already were on edge. Guinn found it hard to conceal his disdain for the legislative branch, a sentiment shared by many governors. Guinn's "relevance" comment in the run-up to the biennial address had only aggravated nervous lawmakers even more, especially a group of skittish freshmen.

But here was his opportunity to be The Great Compromiser, the man known for bringing disparate groups together, the avuncular Guinn. But that's not what happened. Yes, he was resolute, focused on the task ahead and tough in his rhetoric. But, perhaps, too tough.

The governor lectured lawmakers on the structural deficit and the need for a billon dollars in new taxes. He implied it was his way or they would be run over. No talk of his willingness to consider spending cuts; only that he wanted a gross receipts and he would brook no dissent. You could almost tell from the body language in the chamber that the wrong note had been struck, that disharmony loomed.

But despite that beginning, there was still a chance to make a deal. Hettrick, who is well-liked among his colleagues, would approach the governor a few weeks later with this plan to cut the billion-dollar budget almost in half by stripping away many of the governor's so-called enhancements.

Here was an opportunity for the pro-tax caucus: Guinn could show that he needed $704 million just to keep pace with additional costs in higher and lower ed and social spending. Let Hettrick's cuts become public, catalyze the philosophical debate and let the chips fall.

Instead, Guinn patronized the minority leader as he would most of that caucus, especially the relentless Bob Beers, who would set up a website and taunt the administration with obvious delight.

And Hettrick, usually amiable and flexible, became entrenched and itching to show his caucus' relevancy. You could almost hear the thunder getting louder on the third floor of the Legislative Building in the GOP caucus room.

At the other end of the building, Raggio began to look less like the masterful manipulator and iron-fisted leader and more like James Cagney in "Mr. Roberts," seemingly unaware of or in denial about the growing discontent around him. With Carson City's Mark Amodei pushing his own tax plan and being seen by some as the de facto majority leader -- and Cegavkse, Tiffany and O'Connell staying on message -- the two-thirds needed in the upper house was looking shaky. The Senate ship was rudderless, and while Raggio tired to reassure Guinn and everyone else, he clearly could not control his own troops.

As the lawmakers cycled through various tax plans -- gross receipts mutated into the UBT (Unified Business Tax), a net profits tax was floated, a franchise fee, a hybrid payroll tax/franchise fee -- it became clear as the regular session wound down that the 120-day-limit was in jeopardy. And yet, as the putative sine die arrived, only hours before the deadline, the governor and gaming were only one vote short in the Assembly. The pro-business tax coalition had the four Republicans they had all session -- Josh Griffin, Joe Hardy, Dawn Gibbons and Jason Geddes -- and they surely could twist one more arm. And the Senate seemed locked in as the session wound down.

Assembly Democrats believed they had been clever by linking the education budget to the tax plan. Those Republicans, they knew, would never vote against education, so they would be forced to rubber-stamp the tax package. Or at least one of them would. Weeks later, after a constitutional crisis had been created by the failure to pass a budget, lawyer John Eastman would tell a panel of federal judges that this move by the Democrats was a "cynical manipulation" of the process. Actually, it was hardball politics -- and it didn't work.

Instead the Mean Fifteen or, depending on your point of view, the Fearless Fifteen, emboldened by their power and / or principles and/or media attention, held together. And in the Senate, Maurice Washington, believed to be on board and the man Raggio had essentially saved from political oblivion and legal trouble, bolted at the eleventh hour.

The ship had run aground as the perfect storm had caused the regular session to crash and a special session became inevitable.

2 isn't better than 1

By the time Session '03 immediately rolled over into Special Session 19, nearly all deliberation, such as it had been, and nearly all collegiality, such as it had been, were lost. (Most of the public doesn't realize that while these sessions were dragging on and costing a combined uncool million, at varying times half of the lawmakers snuck out of the capital to go home, to get some sun, to attend to business. They were AWOL.)

Ways and Means Chairman Morse Arberry jammed out a tax plan that had inexplicably changed by $30 million since being passed by the tax committee, declaring the money panel should pass it and "worry about the consequences later." The Senate Taxation Committee voted a tax bill out with no idea how much money it would raise. And Senate legislation that made it to the floor had embedded in it a special time-shares-can-be-casinos provision snuck in by Amodei for his anti-gaming acolyte and time-share advocate, Mike Schneider. (Indeed, questions arose about legislating for personal and professional gain as lawmakers -- state Sen. Bernice Mathews was the most obvious -- wondered aloud how various tax provisions would affect them or their businesses.)

Veteran observers shook their heads as they watched the proceedings degenerate. Lawmakers were whispering about their relevance, about how they were going to show gaming, about how they were would reap electoral rewards next year. This all occurred as they discussed the most important state financial issue in the last quarter-century.

As one special session faded into another with no end in sight, the Assembly Republicans became more and more emboldened during this crisis. Many of the freshmen arbitrarily chose numbers that they would vote for -- Walter Andonov said $250 million needed to be cut, Chad Christensen didn't have a number but thought that a railroad museum for Virginia City should be slashed.

Meanwhile, the resolute governor, who had stood before the assembled lawmakers in January, receded from view. He talked to some lawmakers privately, he expressed disappointment once or twice.

But he didn't pound away, using his bully pulpit to bring about a conclusion. By the end, as one insider put it, the governor had taken on an "I'll sign anything" persona, thus being driven by the lawmakers and helplessly watching from the back seat.

By the time the second session was under way, it was clear the battle was between the Senate's desire for a payroll tax plan -- pushed by Amodei, who had usurped Raggio's authority -- and a franchise fee based on gross receipts demanded by the Assembly. A side issue was how banks would be taxed, but with a third of the Senate either on bank boards or having their spouses on boards, the hit was unlikely to be that great.

The storm went from bad to worse to 100-year-flood status after the court maneuvering began with the governor breaking his silence by suing the lawmakers, thus precipitating that controversial state Supreme Court decision that erased the two-thirds requirement to raise taxes and touching off a populist frenzy. With federal intervention the next step, lawmakers were finally prodded into action only because they were under the threat of being drowned out by the courts.

By the time it wound down, the Senate outcome did not seem in doubt -- two-thirds previously had voted for an $870 million budget, so something less, so long as it was based on a payroll tax, would not be difficult. But what about the Assembly 15?

Battle Mountain veteran John Marvel, a reliable lawmaker for decades, talked to old friends in the lobbying corps and decided he had had enough. As the negotiations wound down and the voting matrix was being prepared for the Assembly, Marvel agreed to vote for something in the neighborhood of $800 million. But, the Democrats and tax advocates knew, that might not be enough if one or two Democrats bolted (some literally from the building).

In the end, Perkins held the 23 Democrats as he had all session and Marvel, after standing up to say how bitter a pill this was for him, provided the difference. And then came the most astonishing and telling scene of an astonishing and telling session: Most of the other 14 Republicans filed past his desk to shake his hand or embrace him. Why weren't they outraged because he had deserted the cause?

Because they knew he had saved them. Most of that caucus, despite the perception, was willing to vote for the largest tax increase in history -- but at $500 million, or $600 million, or $700 million. Thanks to Marvel, though, all they have to tell their constituents is that they voted against the largest tax boost in state annals.

Uncertain future

This was not just a story seemingly without heroes; it was a story that had its share of ironies and one that the public may find had few redeeming qualities:

It's hard to tell how much of the anger -- among insiders, lawmakers and the public -- will subside as the end-of-the-session hangover wears off. Voters surely are painting the entire process with a broad brush and want to vent their wrath at all of them. But once the fingerpointing and recriminations subside, will the average person really feel the pinch of this tax increase?

What lies at the end of the long trip is clear: Session '05 will begin with a gaping budget hole -- at least $200 million -- and some of the same issues the Legislature refused to confront will be there again.

Many questions lurk:

The electoral impact, whatever it turns out to be, is unlikely to be confined to legislative races. Rep. Jim Gibbons, already mulling a U.S. Senate bid, may have found his own perfect storm to wash away Harry Reid. Gibbons, the father of the requirement that tax increases must pass with at least a two-thirds majority, has his own initiative to run on in '04. And depending on what else is on the ballot and the mood of the electorate, other contests could be affected, too.

But as Guinn and lawmakers did little more than break even this time, leaving unanswered the questions of how to properly fund education and other state services, and glossing over the debate over how to reform the tax structure, their legacy seems to be taking shape. With the '05 Legislature unlikely to do much but cut back the state's progress after this fearsome, taxing session, instead of sailing away under clearer fiscal skies, Guinn and the lawmakers may discover that they have merely rearranged the deck chairs on a fiscal Titanic.

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