Panel hears alternatives to tax plan

Erin Neff

Wednesday, March 5, 2003 | 11:16 a.m.

CARSON CITY -- The state will be forced to make drastic funding cuts if emergency taxes don't take effect April 1, the governor's staff told legislative taxation committee members Tuesday.

But a legislative fiscal analyst gave the committee members four alternatives to Gov. Kenny Guinn's emergency tax bill and Assembly Taxation Chairman David Parks, D-Las Vegas, asked whether the state could take out an emergency loan from the highway fund instead of raising taxes.

Beginning Thursday the individual Assembly and Senate taxation committees will meet to discuss the alternatives and Guinn's proposed $77 million in emergency increases to cigarette, business license, liquor and slot route taxes.

The Guinn administration emphasized during Tuesday's committee meeting that his proposed taxes are needed.

"If these bills don't pass in the next 10 days then we will have to take a roll of the dice," Guinn's budget director Perry Comeaux said.

The state has a projected $704 million deficit for fiscal years 2004-05. Under Guinn's identical proposals in Assembly Bill 204 and Senate Bill 219, the state would have an ending fund balance of $107 million on June 30 -- enough to meet the required 5 percent reserve, and pay back $45 million of the anticipated transfer of $100 million out of the so-called rainy day fund.

"That's if the revenues come in as the Economic Forum forecasted they'd come in," Comeaux said. "It's going to be a crapshoot -- $107 million sounds like a lot of money, and it is ... but that represents about 19.4 days of state operations."

Comeaux told lawmakers the state has spent down a once healthy $100 million intergovernmental transfer fund and wiped out a $20 million federal reserve for Temporary Assistance to Needy Families.

"If we end up going into war, or (see) another terrorism event, or (have) anything that impacts our tourism, this money will be gone very fast," Comeaux said.

Rick Combs, deputy legislative fiscal analyst, said the state could maintain the required 5 percent fund balance without raising any emergency taxes.

Under that scenario, the state would transfer out $135 million of the $136 million Fund to Stabilize Government -- the rainy day fund -- and end up with $106 million as an ending fund balance.

"It's imprudent," Guinn's Chief of Staff, Marybel Batjer, said after the hearing. "To totally drain the rainy day fund, would be flirting with disaster."

Combs also presented three other options involving some variation of Guinn's tax recommendations. Guinn is expected to introduce his large tax proposal in both houses of the Legislature today. The measure includes increases to cigarette, liquor, business license, slot route, property and gaming taxes and creation of a gross receipts tax on business and an amusement and admissions tax.

Guinn is recommending raising taxes for the last quarter of the current fiscal year. The taxes would be raised only from April 1 to June 30 as follows:

The fees paid by slot route operators would be increased 30 percent, generating $600,000.

Comb presented three scenarios:

Batjer said there are too many unknowns for the state to drain its rainy day fund.

"We have a war looming and I think it would be imprudent not to have a savings account for the state," she said.

Parks asked for information about borrowing the needed money for the current fiscal year from the highway fund based on intergovernmental transfers he conducted 20 years ago while working for the city of Las Vegas.

"There's obviously a substantial amount of funds that could be used," Parks said. "I don't advocate that we cavalierly explore that, but it is something we should look at."

Lawmakers struggled with the presentation by Comeaux and Guinn's deputy chief of staff Michael Hillerby.

Sen. Sandra Tiffany, R-Henderson, asked why the state doesn't use the rainy day fund now and seek emergency taxes if the revenues come in below projections.

"Right after April 1, there's a point of no return where you can't raise the money for this fiscal year anymore and the cuts become very hard," Hillerby said.

Hillerby also said the state may make it to the end of the fiscal year without needing the emergency taxes, but suggested lawmakers enact them and use the revenue to offset the need for other new taxes in the next biennium.