Capstone to taxing career

Cy Ryan, Sun Capital Bureau

Saturday, Nov. 25, 2006 | 7:01 a.m.

Carson City

Gov. Kenny Guinn probably will be most remembered in the history books for championing the largest tax increase in the state's history and then pressing for the biggest tax refund ever for Nevadans.

But his eight years in the state's top elective office also saw major policy initiatives and accomplishments: a prescription drug program for low-income seniors, a new scholarship program for university students and a system to make medical malpractice insurance more affordable for doctors.

"He put his stamp on social programs, there was a lack of corruption and he didn't seem to let the criticism of his own party ruffle him too much," Dave Damore, an associate professor of political science at UNLV, said in summing up Guinn's governorship.

Damore, a Democrat, noted that Guinn backed some programs "not typically associated with Republican governors," such as health insurance for uninsured women with breast cancer and eliminating the asset test for pregnant women for prenatal and after-birth care.

UNR political science professor Eric Herzik, a Republican, said Guinn "often took on some hard issues and did so without concern about his own partisan future," adding: "He's leaving and he's not beloved by the Republican Party.''

Herzik also praised Guinn for being "far more active" than his predecessor, Democrat Bob Miller.

When Guinn took over in 1998, he found the state in difficult financial shape, a situation he confronted by directing a state hiring freeze to save $12 million and by delaying programs.

Eight years later, he is leaving the state in strong financial condition with nearly $300 million in the state's "rainy day" fund, which was drained after 9/11.

Guinn, who leaves office Jan. 1, has no set plans for his immediate future, other than a hip replacement operation in February or March.

"I've been asked to do a lot of things, but I don't want to get into something that ties me down," said the 70-year-old Guinn, who has headed banks, Southwest Gas, the Clark County School District and UNLV.

"I'm pretty tired. I'm going to take some time off."

He and his wife, Dema, are building a home south of Reno, and they intend to split their time between Las Vegas and Reno.

During Guinn's tenure, Nevada remained the fastest-growing state in the nation, a fact that brought with it both opportunities and challenges. Guinn said that in the next few years he hopes the state's annual growth rate - 4.5 percent last year - levels off to a more manageable level of about 3 percent.

In speaking of the strides Nevada made during his administration, Guinn points with particular pride to the Millennium Scholarship, which has helped 40,000 Nevadans attend college.

The university system had only $8 million in scholarships until Guinn started the Millennium Scholarship, which this fiscal year will receive an estimated $17.1 million from Nevada's tobacco settlement fund. Overall, the state has received $157 million during the past four years as its share of the settlement of the anti-smoking lawsuit filed by the states against the big tobacco companies.

With legislative approval, Guinn also used tobacco settlement money to fund another major program to help more than 9,000 low-income seniors purchase prescription drugs.

Guinn also persuaded the Legislature to jettison a state-run workers' compensation program - under which Nevada faced a potential liability of more than $1 billion - in favor of a private company plan.

Previously, the Employers Insurance Co. of Nevada was a state-run system that wrote policies for businesses to cover workers' on-the-job injuries.

Converting the program into a privately run system meant that the state no longer had to worry about a possible $1.4 billion debt if the system defaulted, leaving Nevada responsible for workers' medical care and subsidies for those employees unable to return to their jobs.

That change, Guinn said, resulted in the state achieving a better financial rating, which in turn has lowered the cost of major projects by millions of dollars thanks to lower interest rates on bond sales.

Since 1999, Nevada's bond rating, then AA, has improved to AA+, in part because the $1.4 billion liability was taken off the state's books. That has allowed Nevada to sell highway construction bonds at an interest rate of 4.151 percent, well below the 5 percent-plus rate of earlier years, according to the state treasurer's office.

Against the backdrop of doctors threatening to leave the state because of high medical malpractice insurance premiums and a lack of companies to write the policies, Guinn convened a special session of the Legislature to put a $350,000 cap on noneconomic damages for pain and suffering and make other changes.

To provide malpractice coverage, the state in 2002 started its own insurance association to write policies. Insurance Commissioner Alice Molasky-Arman said that since the association's creation, the availability of malpractice insurance has improved dramatically in Nevada, with at least 17 companies offering it. Next year, the association, which covers an estimated 650 doctors, will become a private company.

State financial support for public schools tripled under Guinn, rising from $570.5 million in 1999 to $1.7 billion this year.

The extra money has gone for a wide range of programs, including signing bonuses for new teachers, teacher training and $100 million to help schools that are not meeting the federal No Child Left Behind standards.

Despite the additional funding, 288 of the state's 613 public schools didn't make the grade last year.

"Keeping up with growth has been difficult," Guinn said. "Kids are coming in from all parts of America. There is great diversity in the schools."

Many students do not speak English, placing burdens on teachers and school administrators, he said.

Guinn predicts that the No Child Left Behind law will be modified, in part because "it is impossible in some areas to accomplish." For instance, an entire school is designated as failing even if only one grade or one segment of the student population - such as Hispanics or the mentally challenged - in that grade do not meet the federal standards.

Some, however, said they had hoped for more from Guinn in education.

"Even though he took some risks ... I had hoped he would have been more of a leader in education," Assemblywoman Chris Giunchigliani, D-Las Vegas, said.

For instance, while Guinn recommended all-day kindergarten, he didn't aggressively push for the plan, instead allowing "Senate Republicans to control much of the agenda," she said.

"It was not a commitment to work with both houses," she said. Eventually, the plan died in committee.

"Everybody liked Kenny," said Giunchigliani, who was elected to the Clark County Commission on Nov. 7. "He could have used that to make a greater mark for the state we all care about."

Guinn did, however, capitalize on his popularity and spend some of his considerable political capital to tackle one of the most difficult challenges he faced as governor.

After his landslide 2002 re-election, in which he defeated Sen. Joe Neal, D-Las Vegas, 344,001 votes to 110,935, Guinn recommended an $833 million tax increase to address a wide array of shortcomings in the state's budget.

"Republican governors don't like to raise taxes," Guinn said. "It was one of my toughest decisions."

Without the tax package - which included new business taxes, higher cigarette and liquor taxes, property transfer fees, live entertainment taxes and a 0.5 percent increase in taxes on casinos' revenue - education, aid for senior citizens, Medicaid and other programs would have "been at the point of no return," Guinn said.

It also would have meant insufficient funding for a growing public school system, reduced health benefits for the poor and cutbacks in programs for seniors.

"I would not let that happen on my watch," Guinn said.

Although tax increases are almost always politically unpalatable, Guinn said that he pursued his plan only after no one offered any viable alternatives.

"I asked the public if they did not want the tax to tell me where to cut," Guinn said. "No one presented any cuts."

Despite opposition from a majority of Assembly Republicans, Guinn won two-thirds approval for the plan in the Legislature.

"The extreme (right) wing said we didn't need any taxes," Herzik said. "He (Guinn) stepped up and took some huge hits."

Two years later Guinn proposed and the Legislature agreed to a $300 million refund - money that came from, the governor stressed, Nevada's booming business, not the tax increase.

Above all else, the tax increase, "no matter if it was a good or bad idea," will become the most lasting chapter in Guinn's political history, Damore said.

It also is one, Guinn said, that appears to have not done any permanent damage to his public standing because he is leaving office with a popularity rating of about 70 percent.

Other gains under Guinn include building mental hospitals in Sparks and Las Vegas, starting suicide prevention and problem gambling programs and expanding the university medical schools.

Although many Nevadans still grumble about how long it takes to register cars or obtain driver's licenses, they can thank Guinn for staffing additions and other improvements that have shaved hours off that wait.

Nevada's economy took a roller-coaster ride during Guinn's years as governor, often for reasons beyond his or the state's control.

After the 9/11 terrorist attacks, Nevada's economy nose-dived, in large measure because of the combined $245 million loss reported by the 39 major Strip casinos in fiscal 2002.

Within three years, that major revenue source rebounded, with 42 Strip casinos enjoying a $1.1 billion profit in fiscal 2005.

Similarly, collections from the state's sales tax rose only 1.4 percent to $665 million in 2002, down from the typical 5 percent to 10 percent increases of prior years. By fiscal 2005 that figure showed robust growth to $896.3 million.

Further evidence of the state's economic growth under Guinn can be seen in the fact that Nevada's general fund budget and one-shot appropriations went from $1.6 billion in fiscal 2000 to $3 billion in fiscal 2007, an 81 percent increase.

But Guinn also suffered some high-profile disappointments.

He proposed that the federal government release land in Las Vegas to allow construction of medium-priced homes for schoolteachers. After three years that idea still is buried in the federal bureaucracy.

Assembly Democrats rejected his proposal to cut off subsidies for insurance premiums for future state employees when they retire - a step that if not taken soon, Guinn warns, could become a burden on the budget.

He also failed to create a zero-based budgeting system, under which state agencies would have to start at zero in preparing their next budgets rather than using their current funding level as the base for future spending. What Guinn ended up with was a system in which state agencies, in submitting their two-year budgets, can seek no more than double their current funding amount.

And he also was unsuccessful in his bid to privatize the medical services in the prison system.

On the plus side of the ledger, another significant mark in Guinn's column is that he was untouched by scandals that enveloped a number of other officeholders in Carson City and Clark County in recent years.

"Guinn didn't get himself into trouble," Damore said. "There were no ethical issues. That counts as a positive."

In addition, Guinn "didn't politicize the office," Damore said.

An important contributing factor to Guinn's success, Herzik believes, is that Guinn viewed the governorship as a way to cap his career, not a steppingstone to another office such as the U.S. Senate.

"He wasn't partisan - he didn't have his eye on another prize," Herzik said.

If not barred by the Nevada Constitution, Guinn easily could have won a third term, Herzik said.

Guinn, though, is content to be turning over the reins of state government to Rep. Jim Gibbons, a fellow Republican elected this month to succeed him.

"It's very hard work," Guinn said of the job. "But people have treated me with great respect."

Asked whether he has any advice for Gibbons, Guinn said: "No. They have competent people."

But if anyone solicits suggestions, Guinn said, he has eight years of experience to draw upon in offering them.

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