Gibbons stands firm on state spending cuts

Tuesday, March 20, 2007 | 7:11 a.m.

CARSON CITY - Gov. Jim Gibbons intends to cut back on government spending rather than abandoning his plan to give tax breaks to business and banks.

But some Democrats say it would be unwise to reduce business taxes at a time when the state's revenues are falling short of expectations.

Gibbons, in his executive budget, proposed to give a $5.8 million tax reduction to banks over the next two years. And he also has suggested a $28 million cut in business taxes during the coming biennium.

Democrats, however, have questioned the timing of the proposed tax breaks, noting that budget forecasters predict a $40 million to $50 million shortfall in tax revenue over the next two years.

"It may not be sensible to give money back now when we're short of revenue," Assembly Ways and Means Committee Chairman Morse Arberry, D-Las Vegas, said.

Members of the committee told state Budget Director Andrew Clinger on Monday to return in two weeks with some suggested cuts to keep the budget balanced.

Mike Dayton, Gibbons' chief of staff, said the administration will look at the budgets of agencies to realize savings, rather than eliminating the proposed tax cuts.

The tax reductions for banks and business are fair and will spur economic development, Dayton said.

One thing that won't be cut, Dayton stressed, is the $170 million recommended for freeway construction in Las Vegas.

Arberry said "everything is on the table," referring to the possible budget cutbacks.

Assembly Speaker Barbara Buckley, D-Las Vegas, agreed with Arberry on that point, but declined to single out any area for possible cuts.

Gibbons' proposed tax cut for banks would repeal a measure approved by the 2003 Legislature imposing a $7,000 tax on each bank branch, with one branch per county exempted. That tax brings in an estimated $2.9 million annually.

The 2005 Legislature reduced the general business tax from 0.65 percent to 0.63 percent on wages. That cut is due to expire June 30 this year and return to 0.65 percent, but Gibbons has proposed lowering the reduction to 0.62 percent. That proposal would lower general fund tax revenues by $13.5 million next fiscal year and $14.6 million in the 2008-2009 fiscal year.

Dayton said if the Legislature does not approve Gibbons' plan, it would effectively mean a tax increase for business.

Gibbons also sent word to the Ways and Means Committee on Monday that he does not approve a bill to raise fees charged by the state Commission on Post Secondary Education, the panel that regulates private postsecondary schools in the state.

Clinger told the committee that Gibbons opposes Senate Bill 63, which would raise the fee for a new private postsecondary school license from $1,500 to $2,000. The measure also would increase other costs associated with things such as adding new courses or ownership changes.

The administration's position brought a sharp response from Buckley, who said it has always been Nevada's philosophy that businesses or users should pay for the state's regulation, not general taxpayers.