Thursday, May 24, 2007 | 6:51 a.m.
CARSON CITY - The day began with a bold stroke from Gov. Jim Gibbons, a threat to veto the $7 billion two-year budget.
The governor was laying down a marker, drawing a line in the sand, slamming the door on any violation of his principles.
Give me my priorities, or else.
The priorities, however, were curiously small: the continuation of a $27 million tax break set to expire this year; $15 million for an education pilot program; $1.7 million for a military-style alternative education program; and $651,493 to staff a homeland security intelligence hub in Carson City.
They seemed smaller when compared with the big stakes being discussed a few hundred yards away, as lawmakers struggled another day to rein in massive tax breaks for environmentally friendly, or "green , " buildings. An Assembly committee considered hacking away at the tax credits until they were in single digits.
Big casino developers have lined up and are set to reap enormous windfalls, as much as $900 million during the next 10 years - at the expense of schools, police, roads and other state services. Property tax breaks are based on standards adopted by the U.S. Green Building Council.
By making certain modifications to the building's design, builders can attain silver, gold or platinum levels of certification. The current law gives property breaks of 35 percent to 50 percent for five to 10 years, based on the degree of silver certification achieved. For gold, the tax breaks can be from eight to 10 years, from 43 percent to 50 percent. There is no current platinum property tax break.
A bill was offered Monday to drop the tax breaks to 25 percent for silver certification over 10 years, 30 percent for gold and 35 percent for platinum.
By Wednesday afternoon the tax breaks were in free fall, with Assembly Democrats, concerned about the state's long-term fiscal outlook, acting to trim them even further - down to 2 percent for silver, 5 percent for gold and 8 percent for platinum.
A significant obstacle to scaling back the breaks has been the threat of lawsuits from companies that planned and built their buildings with the green tax benefits in mind.
Assembly Democrats were emboldened, however, by a legal opinion provided by legislative counsel, which said the Legislature has the right to freeze or rescind tax breaks if it sees fit. Citing case law, the opinion states, "The power to tax is one of the essential attributes of sovereignty, and it is presumed that in any tax abatements and exemptions, one legislature does not intend to create private contractual or vested rights which prohibit successive legislatures from changing the tax policy of the state."
Gaming lobbyists, who saw breaks involving tens of millions of dollars suddenly evaporating, were displeased. They noted, rather gravely, that they have good lawyers who would attack the Legislature's legal opinion and sue the state if the breaks were taken away.
One attorney said he was so confident he could win such a case that he'd be happy to take it on a contingency basis, meaning he'd take a percentage of an award, rather than be paid by the hour.
These significant goings-on offered a stark contrast to the governor's news conference and his modest demands.
Gibbons' must-have list amounts to well less than 1 percent of the total budget, which Assembly Democrats and Senate Republicans are trying to finish, and the list doesn't address transportation or education in any fundamental way.
Gibbons went so far as to acknowledge that his demands amounted to "small requests."
At times, Gibbons seemed to be pleading for attention from the Legislature: "Every time I go over there or send my staff over there, I get the idea they're not listening," he said at his news conference.
The veto threat seemed to baffle Republican Assembly Minority Leader Garn Mabey, R-Las Vegas, who said he couldn't guarantee his caucus would sustain the veto. (To override a veto would require two-thirds of both houses. Assembly Republicans would have to hold together to prevent an override.)
"They need to resolve these differences and move on," he said.
Senate Majority Leader Bill Raggio, R-Reno, said he shared the governor's priorities and has been fighting for them. Nevertheless, he added, "I'm negotiating on behalf of the Senate" and not the governor. He said he wasn't sure whether a veto could be sustained.
Assembly Speaker Barbara Buckley, D-Las Vegas, was dismissive. "I don't think it's going to affect us in any way," she said. Negotiators are busy trying to come to terms on education funding first, as the state constitution requires, she said.
It was a thinly veiled shot at Gibbons, who pushed the Education First constitutional amendment.
Despite Buckley's at-times mocking response, Gibbons holds significant influence. If he vetoes the budget and the Legislature doesn't finish in its constitutionally mandated 120 days, it may need a special session to finish . Only Gibbons can call a special session, and he gets to set the agenda.
Buckley seemed to be almost daring a veto. By her calculation, any delay in hiring teachers or delivering services would be blamed on the governor.
A government shutdown over a budget stalemate in 1995 proved a political fiasco for congressional Republicans, and a boon for President Bill Clinton. In that case, Republicans were blamed for the shutdown.
The largest item in Gibbons' list of demands is the small-business tax cut passed in 2005, which is set to expire this year. Allowing it to expire amounts to a tax increase, he said. "This governor made a promise" not to raise taxes, "and I intend to keep it," he said.
Gibbons' approval ratings are languishing around 30 percent, according to recent polls, and any tax increase could further erode his base. Although by one interpretation, allowing a tax cut to sunset isn't really a tax increase, Republicans have argued for years that allowing President Bush's tax cuts to expire, as scheduled by law, is a tax increase.
It's a line of argument well-known to the Republican base, which means it's known to Gibbons and his remaining allies.
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