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July 30, 2014

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A battle of wills

Nevada legislators doubt that their return to Carson City Wednesday will bring any more solutions to the state's fiscal crisis than they found in the 120-day regular session or the first special session that spanned 10 days.

The end of the fiscal year on June 30 leaves them just six days to complete a budget for schools and a tax plan to cover the state deficit. But philosophical differences over the size of the budget and the means to support it are stronger now than they were six months ago when Gov. Kenny Guinn first proposed nearly $1 billion in new taxes.

The sharpest differences in the Legislature are between the ruling Democrats in the Assembly and the vocal minority of 15 Republicans.

It takes two-thirds of the Legislature to pass a tax and if those 15 members vote together, they can block any tax plan in the 42-member Assembly.

The 23 Assembly Democrats all back a plan to raise $870 million in new taxes designed to hit banks, large businesses and gaming at higher levels. Five of the 19 Republicans must vote with the Democrats to form the two-thirds majority needed to pass any tax plan, but only four are ready to do that.

The battle of wills heated up at the end of the regular session June 2 and has cemented in disagreement in the three weeks since.

Assembly Speaker Richard Perkins, D-Henderson, Senate Majority Leader Bill Raggio, R-Reno, and Guinn have all expressed staunch opposition to reopening the budget to allow fiscal conservatives a new chance to make spending cuts they weren't able to achieve in the previous 144 days.

Guinn has not given lawmakers the ability to reconsider the appropriations act and repeated this week that he won't.

"Absolutely, not," Guinn said. "That is over."

Assembly Minority Leader Lynn Hettrick, R-Gardnerville, isn't cowed. On Monday he will unveil a plan to cut an estimated $170 million from state spending in welfare, a contingency account, higher education and contributions to the public employees retirement account.

"We can't just roll over and go away," Hettrick said. "I think we would look foolish if we do that."

Perkins is still hoping to win Senate support for a tax compromise that he hopes will help those in his house bring one more vote to the table.

"I thought the endgame should have been June 2," Perkins said. "Now the only endgame I see is continuing hope of picking off the last vote."

In interviews with the 15 Assembly Republicans and two of the eight senators who voted down tax plans, the message is clear -- there will be no support for taxes until the budget number is reduced or until more consensus builds on which taxes should be included.

Here is what they say.

ASSEMBLY Walter Andonov

Few Assembly Republican candidates in 2002 boasted Walter Andonov's credentials. The Henderson representative was an Army captain educated at West Point and Oxford University before obtaining an MBA from The Wharton School at the University of Pennsylvania.

Andonov, 34, served on the Ways and Means Committee and learned quickly that the way Nevada constructs a budget was not the way he would.

"My biggest concern is if you look at the budget holistically, it's a 33 percent increase from the last budget," Andonov said. "Our state historically only grows by about 3 or 4 percent each year. To me, that doesn't make sense."

Andonov figures the $870 million tax plan would generate more than $1 billion in the two-year period when all taxes are fully implemented. That figure, coupled with the increase in revenue already expected to come in, leads Andonov to believe that the total spending increase is $1.3 billion.

"That equates to about $500 per person in Nevada," Andonov, a management consultant, said. "For a family of four, that's $2,000, and that's not acceptable."

Andonov said he was disappointed lawmakers didn't get to scrutinize the base budget, but only the budget areas dealing with growth or new spending.

"There's no zero-based budgeting," Andonov said. "If a company budgeted the way we do, it would go out of business. If a family budgeted the way we do, it would go bankrupt."

Andonov said he is open-minded about taxes, but does not believe Nevada needs to establish a revenue service at a cost of $35 million to collect certain taxes.

His support for reopening the budget stems from the fact that he wants to reduce new spending in areas outside of K-12 education. Andonov said the Legislature needs to reduce $250 million in spending just to prohibit a hole of that size from arising in the next biennium as a result of disappearing estate tax funds that were once used to fund education.

Andonov said he and the others are not new to the tax dance, but were simply wallflowers not invited to the floor by Democratic leadership.

"Our minority leader put out a plan on Day 54 and we had senators supporting us," Andonov said of Hettrick's plan to raise $511 million in new taxes. "I would argue that that was ignored. We're in the minority. We're involved in the discussion, but we don't have a real say."

The two-thirds requirement on taxes, which gives Andonov and the others a voice now, is something he would like to see applied to the budget in future years. The budget requires only a simple majority for passage.

Sharron Angle

Sharron Angle, a third-term Republican representing Reno, has distinguished herself as a naysayer for years, often providing the lone no vote on non-controversial bills.

So Angle's opposition to new taxes is not unique, and has not been a secret. What has been is the support she picked up from 14 others -- beginning Jan. 20 when Guinn, in his State of the State address called those who ignore the need for new taxes "irrelevant" and "heartless."

"The governor pretty well framed the debate by calling me irrelevant," Angle, 53, said. "The Democrats then fell in line with him, and I don't think people really knew how seriously we were taking it."

Angle said her constituents are upset about the expansion of government, and she said, "If we're not allowed to go back in and reopen the budget, we won't get anywhere."

The one way Angle still stands out from the others who voted no is her view that the state needs no new revenue at all.

"Nevada's in pretty good shape compared to other states," Angle said. "If anything, we should follow the president's lead. He set the climate for tax rebates to fuel the economy. We can do the same."

Angle is furious that lawmakers may only consider the $1.7 billion K-12 education budget and the $226 million class-size reduction measure during special sessions.

"We need to look at those other appropriations," Angle said. "We are spending unnecessary money in Medicaid, health and welfare and the university system."

Angle wants to throw out the $226 million class-size reduction program completely, calling it a waste and micromanagement of local school boards.

"There's no evidence that smaller class size leads to better education," Angle said.

Angle and other Republicans vow they would unanimously support the Distributive School Account budget just to prove they have nothing against education.

"This has never been about kids," Angle said. "This is all politics."

And Angle said she does not believe resolution is possible without the ability to reopen the budget.

"I don't see how," she said.

Bob Beers

Bob Beers has been Guinn's foil since the State of the State address, packing his website with numbers in an attempt to erode support for what he calls the governor's excessive tax plan.

The debate he initially promised was largely absent during the regular legislative session, but it has found a new toehold.

"This is like a fundamental Democrat-versus-Republican discussion," said Beers, 43, who is a computer accounting consultant. "The governor criticizes those who point to a 33-percent increase in state government when our population is only going up 3 percent. But it is unreasonable to expect that the demand for services outstrips the growth in population.

"We can't be everybody's mother."

Beers said he believes the $4 billion the state's existing tax structure will bring in over the next two years should be enough, despite economists predicting a $704 million shortfall and pointing to the need to correct a structural deficit -- overreliance on sales and gaming taxes.

"There is a structural deficit," Beers said. "But it's a 1 percent difference in revenues versus spending because of the gaming win being down and sales on the Internet that aren't taxed."

Beers called the current K-12 education budget "healthy" and said the 27 percent increase from the previous biennium is not simply a result of student growth.

"If you support the (school funding) bill, as we said we would, you have virtually no choice but to increase funding in education," Beers said.

Beers served on the Ways and Means Committee, where he consistently raised questions about the growth in the state's welfare caseload.

David Brown

David Brown, 41, is in his second term representing Henderson and, as one of the Assembly GOP's whips, has learned to count opposition to taxes this session.

Brown is an attorney who practices civil law largely related to construction trades. He served on the committee that examined the education budget and taxes during the first special session and often commented that the Assembly should follow the Republican-held Senate's lead on certain taxes.

He did not respond this week to repeated requests for an interview.

John Carpenter

John Carpenter has represented Elko for nine legislative sessions, and he said if he is going to continue, he can't support hundreds of millions of dollars in new taxes.

"The folks in Elko are wild about these taxes," Carpenter said. "They are fuming and they don't understand how you can build a budget and then figure out the taxes after."

Carpenter, 72, is part rancher, part restaurant owner and full-time cowboy who frequently takes sides on issues the way he sided with Nevadans in a dispute with the Bureau of Land Management over a road along the Jarbidge River.

"Folks are so concerned they're coming up to the house to talk to me," Carpenter said, noting that people had only done during the Jarbidge dispute.

Carpenter was one of 13 in the Assembly who voted against creation in 1991 of the business license tax -- the current per-employee tax paid by businesses.

"I've voted for some taxes over the years, gas taxes and certain fees when I thought they were justified," Carpenter said. "But this other is too much for me."

Carpenter said he opposes additional taxes that would impact his rural district and the still-depressed mining area in Elko.

"There are taxes that would hurt so bad in Elko," Carpenter said. "The liquor tax and the real estate transfer tax would really hit hard and the 10 percent tax on entertainment? I just can't see us taxing entertainment in the entertainment capital of the world.

"You know entertainment in Nevada began in Elko at the Commercial Hotel and then spread to Reno and Las Vegas. I don't know how we think we can tax that."

Carpenter, who is going to be a no vote on taxes no matter what, is still a moderate Republican whom many Democrats align with on other issues. Still, Carpenter can't understand why Democrats are pushing for a net income or franchise tax on business.

"This is what kid of perplexes me, they say we need to tax the Wal-Marts and banks, but those guys have too many lawyers and too many accountants who can do too many things to get around the taxes, and us small guys are just popped with the new taxes and we're not going to be able to pay at all," Carpenter said.

Chad Christensen

For what now seems to be a fleeting moment, Chad Christensen was once viewed as the potential fifth Republican yes vote on taxes.

Christensen, a freshman Las Vegas Assemblyman and tax planner, was courted heavily by gaming lobbyists on the final day of the 120-day session in hopes that he would support their efforts to pass a broad-based business tax. But Christensen remained resolute in his opposition, telling everyone who asked that the budget number was simply too high to fund.

Christensen said he "absolutely" believes the budget must be reopened, and that the size of the budget must be reduced.

"No tax increase is definitely something that is doable to me," Christensen said. "But, since I don't see that happening, I'm just waiting to see if the governor would open it."

If the amount of tax increase necessary is reduced, Christensen said he would be opposed to any form of personal or corporate income tax as the means to fund state government.

"The state's done great for 140 years and if we're smart in how we budget, we don't need to pass something like that," Christensen said. "The ability to attract businesses is our state's most important advantage and we don't want to lose that."

Pete Goicoechea

Eureka freshman Assemblyman Pete Goicoechea shrugs when told lobbyists and Democrats believe him to be a potential swing vote on taxes.

The 53-year-old rancher's district includes three rural counties and parts of four others that lean heavily to the right and give this "ultra conservative" little room to budge on taxes. But his openness to taxes and his views on the budget place him -- however inaccurately -- in the "possible yes" column.

"I think that, realistically, I do see the need for some new taxes," Goicoechea said. "The governor in his State of the State was enough to give us a mild heart attack, but his $1 billion proposal at least showed us he saw a need."

Goicoechea said he could vote for a tax increase of $704 million -- Guinn's line in the sand. The $704 million is exactly the amount of the state's shortfall, according to economists who studied the budget.

"I'm on record as saying if it's 704, OK we would be very close," Goicoechea said. "The less we're looking to generate the easier it is to find the tax."

For Goicoechea, the right tax would not have a lot of exemptions, would not be too costly to implement and would look something similar to the payroll tax proposed in the state Senate during the first special session.

"The rurals tend to be much more conservative and a tax hike, particularly of the $1 billion variety, is not going to fly," he said. "Representing White Pine County puts me in a much different spot than most because the majority of the people are against 30-percent increases in government spending."

Tom Grady

Tom Grady stepped in to fill what were arguably the largest Democratic shoes in the state Assembly -- former Speaker Joe Dini's.

But the freshman Republican Assemblyman from Yerington wasn't about to simply follow a Democrat who proved session after session that he could represent a massive rural district with ease.

"The number is too high," said Grady, 63, a retired banker. "My district is a very conservative district and, while I believe most folks believe some increase is necessary, the proposed increase is too much."

Like Goicoechea, Grady has been eyed as a possible swing voter because he served on the Taxation Committee and had open ears to most proposals. But as former mayor of Yerington and past executive director of the Nevada League of Cities he understands the budget situations of the state's municipalities and believes many of the tax proposals would stymie economic development.

Asked why he's considered a swing voter, Grady said, he isn't really sure.

"I think we have been very up front all the while about the budget being too high to support," Grady said.

Grady said he is "anxiously awaiting" Hettrick's proposal tomorrow to cut the existing appropriations law.

If the number came down from $870 million to $704 million, Grady would probably be in the yes column.

"Although I wouldn't like it, I could live with it," he said.

Don Gustavson

Fourth-term Assemblyman Don Gustavson, R-Sun Valley, is known more for attempts to repeal the state's motorcycle helmet law than for tax policy.

But the 59-year-old professional truck driver is as conservative as they come on the budget and taxes.

Like Angle, Gustavson said he sees no reason for any tax increases.

"We had a task force to study taxes, but we did not have a study done to find how to cut government spending," Gustavson said. "I do not believe we have a need for new taxes."

During the regular session Gustavson suggested the $704 million shortfall could be eradicated through money he found in "a government slush fund." The fund in question was the Public Employees Retirement System -- and Gustavson's idea didn't draw a following in the Legislative Building.

Gustavson said the appropriations bill has to be reconsidered because cuts are needed, particularly in welfare.

"Welfare caseload is down and we should be cutting jobs, not increasing them," Gustavson said.

While he would not support increasing taxes at any level, Gustavson said an end to the political impasse could be found if the budget is reopened.

"If we pass the taxes at any amount, it's definitely going to hurt the economy of the state," Gustavson said. "Businesses are not going to come to Nevada. That's why I won't support taxes and 95 percent of my constituents agree with that position."

Lynn Hettrick

Hettrick manages investments in his private life and wants to manage the state's investments better in his public one.

Tomorrow he will unveil the plan designed to reduce the size of the budget that passed on the last day of the regular session despite 18 objections in the Assembly.

The list details cuts in new spending that can be made in each of the next two fiscal years.

"This whole thing has continuously boiled down to: No, this is too much money," said Hettrick, 59, who has served six regular sessions.

As Assembly Minority Leader, the Gardnerville Republican seemed to struggle throughout the early part of the regular session as his assistant leader, Josh Griffin, R-Henderson, came out in support of taxes and as Democrats forged ahead with a platform of consumer issues.

But Hettrick was busily working with staff to propose a tax plan that many saw as the floor of the tax debate -- $511 million in new taxes.

The plan, which featured a sales tax on services, was largely ignored by Democratic leadership, but found support from some Senate Republicans and members of the Assembly Republican Caucus.

"Our guys started for the most part at zero increase and they balked at 511 when I proposed it," Hettrick said. "Now I think there's enough votes at 700 million for taxes, but they feel as though they've gone as far as they can go in compromising up."

Hettrick said he believes the Assembly Democrats ignored his plan because, since they control the debate in the lower house, they could.

"Now they have to deal with the minority on taxes," Hettrick said. "To turn votes, or to have the votes, is going to require more than compromise, it will require opening the budget."

Hettrick's plan will include canceling the planned reversion of $30 million to the so-called rainy-day fund and will cancel $31 million earmarked to continue efforts to fully fund PERS reserves by 2020. The proposal is also expected to target higher education funding increases and certain areas of welfare spending. Hettrick said his proposal will fund welfare caseload growth.

Hettrick said he hopes enough pressure builds with the release of his budget-reducing proposal to force Guinn to reopen the budget. If not, he said, he sees no end in sight to the tax impasse.

"The Senate will still try to pass something, and I believe if they actually can, we'll kill it," Hettrick said. "At that point, I think they have to compromise, and I believe that ultimately they will compromise and open the budget."

Ron Knecht

Ron Knecht, a freshman representing Carson City, grabbed headlines by suggesting the state should be renamed East California and replace its official song with the Beatles' "Taxman."

But while many wrote Knecht out of the picture as a mere joker, the 54-year-old economist with the Public Utilities Commission was attempting to change the state's budget process by instituting a cap on future spending.

The proposal went nowhere, and Knecht says his support for taxes will do the same if serious budget reforms -- like the ones he offered in Assembly Joint Resolution 18 -- are not a part of the tax plan that passes.

"I'm good for 511 (million) if AJR18 is passed," Knecht said.

"AJR18 would allow budgets to grow at the rate of the economy," Knecht added. "It's a soft cap and it's a very measured provision that would prevent the kind of fiasco we had this session."

Knecht said he has faith that at least 15 Republicans are going to reject a tax proposal of $870 million and force the budget reopening.

"We are not going to support the current tax-and-spend plan," Knecht said.

Knecht said he believed Hettrick was heading in the right direction and would not be cutting any current service levels or expansions for student and prison population growth. He supports eliminating appropriations to the rainy day fund and PERS pension account.

"It doesn't make sense to be funding the reserves when you're in hard times," Knecht said.

Knecht also said he thinks money can be cut from the higher education budget by funding the student formula at the existing 80 percent instead of the 84 percent level contained in the appropriations law.

While it's doubtful the tax number will fall to $511 million, Knecht said he could support a tax plan with a "reasonable mix" of proposals that do not include any form of a gross receipts tax.

Garn Mabey

Freshman Las Vegas Assemblyman Garn Mabey came to Carson City to work on the medical malpractice issue, but has been unequivocably clear about taxes -- Mabey is a definite no.

"People have stopped by my office and home and are e-mailing me all the time about these taxes," the 45-year-old obstetrician said. "The majority are like 10-to-1 in support of reopening the budget."

Mabey isn't one of those who could vote for a $700 million tax hike.

"Golly, we started at zero or $50 million or $100 million and for me to say $600 million is a huge, huge compromise," Mabey said. "But I just don't see that the governor would ever go that low."

Mabey said that while he was a no vote and "nobody comes to you and says what do you want when you're a no," he did think the payroll tax was a better proposal than the net profits or gross receipts variations.

"I don't like any of them, but I think the payroll tax was more agreeable," Mabey said.

Mabey said he doesn't see how compromise will occur unless the budget is reopened.

"I hope we work it out," he said. "I like Carson City, but I like my practice and I just feel that at 700 (million) everybody goes home."

John Marvel

John Marvel, 76, has the most seniority in the Assembly, serves on the Ways and Means Committee, and still seems to have no luck cutting back spending in this, his 13th term.

"Everything they're putting in right now becomes the base in future budgets and it just grows and grows and grows and you can't do anything about it," said Marvel, R-Battle Mountain.

But Marvel, who also served on the Taxation Committee, said he sees the need for some level of tax increases -- just not anything like a gross receipts tax, which he said was too expensive to implement.

"I lean more toward something like a simple payment, like businesses have with the head tax," Marvel said.

While he supports some increase in cigarette and liquor taxes, Marvel said the raises have to be checked against the rates in other states.

"I know in Winnemucca you have people driving in from Washington and Oregon and loading up," Marvel said. "We don't want to lose that business."

Although Marvel signed off on much of the appropriations act when it was before him in Ways and Means and in budget subcommittees, he said he does support reopening the act to reduce spending.

Marvel said that since welfare caseloads have gone down, he sees no reason to hire additional staff in that area.

"They'll actually go out and recruit more people to go on welfare," Marvel said.

As for an endgame to the second special session, the veteran simply notes: "We'll see who blinks first."

Rod Sherer

Rod Sherer, a freshman Republican representing Pahrump, has been touted to complete the trio of potential yes votes with Grady and Goicoechea.

But the 38-year-old Smith's grocery store manager isn't budging from his no vote just yet.

"I think the total budget number does have to come down a little bit," Sherer said. "The budget has to be reopened."

Sherer said he remains concerned about government accountability, and he said he does not think the current $870 million tax plan is very responsible.

The budget included $68 million in one-time federal grants and another $250 million in estate taxes that will no longer be available in future fiscal years.

"If we did pass the taxes right now, as is, at $869 million, we're going to have to find 250 for estate and 68 in federal money next time around just to stay even," Sherer said. "To me, that's not a very good job."

Sherer's district covers Esmeralda, Lincoln, Mineral and Nye counties totally and parts of Churchill -- a vast stretch of federal land, sparsely populated with very conservative voters.

"I gotta lay my head down on the pillow each night knowing I did the right thing," Sherer said. "Let's not just throw money at the wall and hope it sticks."

Sherer said he's probably considered a possible yes because "I will still listen and I will still talk to them."

"Maybe there's something out there I haven't seen," Sherer said. "But I haven't seen anything close that's going to make me turn over and press that green button."

Valerie Weber

Freshman Assemblywoman Valerie Weber, R-Las Vegas, worked on Guinn's initial election campaign but hasn't seen eye to eye with the governor on taxes.

Throughout the regular and special sessions, Weber consistently said the budget number was too high for her to support. The 48-year-old consultant has shown no signs of changing from that position.

Weber did not respond to numerous requests for interviews this week.

SENATE

While there are 15 clear no votes in the Assembly, state senators have been flopping all over on the issue.

Two no voters present the extreme differences in the 21-member house where just eight votes have killed a tax plan three times.

Barbara Cegavske

Barbara Cegavske, R-Las Vegas, is the senator most like the 15 Assembly Republicans. Serving on Senate Finance, Cegavkse repeatedly objected to funding for higher education and other programs she thought was excessive. The higher education budget is roughly 40 percent higher than the one passed for the current biennium that ends June 30.

"I think we can crank down the university system spending," said Cegavske, a freshman senator who served three terms in the Assembly. "When we're in a position where we are in this state, where we haven't had the increases in revenue, all of a sudden to just hit people with that all at once is ridiculous."

Cegavske, 51, who is development director for Westcare, said she believes the tax discussions need to take "baby steps."

"Why can't we pass out at least what we agree about," Cegavske said. "The (Distributive School Account) should have gone out first."

Cegavske said she believes there is rationale for reopening the budget to reduce spending.

"How can we be spending money that we don't know we have," Cegavske said. "I just don't think that's responsible government, and responsible government is what I was sent up to do."

Cegavske said she could support a payroll tax and considers it a broad-based tax because all businesses would pay it. She opposes any proposal "that is going to create a state agency and be costly."

She also says the Legislature "shouldn't be hellbent on taxing a specific industry."

"Through the whole session I asked people to show me where the differences are between gaming and banks," Cegavske said. "The only thing people are able to tell me is, banks don't pay the gaming tax, but they pay everything else."

Maggie Carlton

Maggie Carlton, D-Las Vegas, is a no vote for a much different reason -- gaming is being asked to pay too much.

"We really aren't asking the industries too much," said Carlton, 46, and a waitress at Treasure Island. "Why can't we ask banks and retail to pay 5 percent? Why can't we ask them to ante up?"

Carlton said her company pays a plethora of taxes and still provides living wages and decent benefits for its employees -- benefits that keep the workers from taxing the public hospital as uninsured patients.

"It was very hard for me to vote no on that first proposal," Carlton said of a 3 percent net profits tax that failed on the fifth day of the first special session. "I just thought 3 percent with that foolish 15 that are down there (in the Assembly) right now, they'll never vote to increase it."

Carlton is among the Legislature's most liberal members and said throughout the regular session she thought the tax increase should be closer to $1.3 billion than the $870 million money that committees finally settled on.

But Carlton is staunchly opposed to reopening the budget, saying "this is a Democratic process, why would we let a vocal minority get its way when the majority says no."

She is also opposed to a payroll tax serving as the major business tax because it fails to account for a company that provides benefits or decent wages.

"If I am going to vote yes on a tax plan, any tax plan, it has to be fair," Carlton said.

Endgame unknown

Education representatives have stepped up efforts to lobby the no votes and Perkins and other leaders are still huddling to come up with some kind of tax plan the Senate can pass and the Assembly can accept.

But when the 20th Special Session in state history begins at 8 a.m. Wednesday and 16 freshman suddenly have more special sessions under their belts than regular ones, the "no" voice may be all that resonates.

Raggio, the Senate's majority leader, said he sees no way to get a tax increase out of his Republican caucus, let alone the Senate or the Assembly, at this point unless philosophical posturing ends.

"It makes no sense to take a hard line anymore," Raggio said. "We have got to compromise. We have got to have an education budget by June 30 and the revenues to support it.

"If not, we do run a very good risk of having a court tell this Legislature what to do. And none of us want to go there."

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