In a bold move, teachers reach for gaming’s pockets

By Liz Benston, J. Patrick Coolican, David McGrath Schwartz, Michael Mishak

Wednesday, Oct. 10, 2007 | 7:17 a.m.

So now the moment of reckoning has arrived.

For years, the political warning signs have been building for Las Vegas Strip casinos: a smaller slice of the population working on casino floors; a fast-growing city lagging in education, health care and transportation systems; and a steady stream of news about record casino profits, stock prices and executive pay.

In time, someone was going to take on the Strip, and the Nevada State Education Association, 28,000 strong, is steeling itself for the fight in 2008.

It is planning a voter initiative to increase by almost half the 6.75 percent gaming tax to 9.75 percent and commit the money to improving education and increasing teacher salaries. The money would be split, with 40 percent to adding instructional days and otherwise improving education outcomes, 40 percent toward higher salaries and bettering working conditions, and 20 percent for merit pay.

Most remarkably, the teachers are virtually all alone, spurned in less than 24 hours by other unions such as the Culinary Local 226 and the AFL-CIO, Gov. Jim Gibbons and powerful legislators allied with gaming.

The teachers will be taking a lonely plunge into the very deep end of a politically dangerous pool. Nevada's history is filled with career-ending gambits for those who took on the casinos.

Despite its isolation, and the challenge of taking on Nevada's hegemonic economic power, the union thinks the moment is right, while casinos and their highly developed infrastructure of public relations and political consultants know they're vulnerable.

Terry Murphy, a political consultant whose clients include Stations Casinos, said a tax system based so heavily on one revenue source is bad policy, but acknowledged the industry will have to face the teachers' initiative head-on: "If this particular initiative gets on the ballot, it's an easy win (for them)... To the voter, this is a no-brainer. We get better schools, and somebody else pays."

All the polling from the past decade would seem to support this assessment, with recent polls showing that more than 70 percent of the public thinks the schools need more money, and gaming should provide it.

Moreover, gaming is a victim of its own success. A spate of news stories in the local and national media - Las Vegas Sands Inc. Chairman Sheldon Adelson is the world's sixth richest man, MGM Mirage is flush with money from Dubai, gaming executives' pay reaches stratospheric heights, gaming companies win large tax breaks for environmentally friendly building - have hardened voter perceptions that gaming companies can afford to pay more for a public school system that is one of the worst in the nation, according to many metrics.

With about $40 billion in development projects going up on the Strip, the most expensive and concentrated building boom in U.S. history, the industry faces an uphill battle trying to muster public sympathy against a tax increase. Companies aren't just flourishing here but are becoming global hospitality giants, expanding with luxury resorts in places such as China and Singapore.

The arguments marshaled on either side of what will be a brutal debate are fairly straightforward.

Lynn Warne, president of the Nevada State Education Association, pointed to low salaries and per-pupil spending and lagging student achievement as issues that must be confronted now. She also cited Nevada's low gaming tax - it's the lowest in the nation - and said putting two and two together was a no-brainer.

"Certainly it's not politically easy to take on gaming, but the public supports funding for education, and the public points to gaming as the place where we should turn to. We think it's fair and the public agrees."

Warne cited the analysis of outside consultants to Nevada's Legislature, which said the state needs to pump $1 billion into education to achieve adequacy on federal No Child Left Behind standards. Nevada's per-student spending lagged nearly $1,900 behind the U.S. average in 2005.

Just 21 percent of Nevada fourth graders read with or exceed proficiency on the 2005 National Assessment of Student Progress test. The national average was 43 percent, according to a report of The Education Trust, a think tank.

The state also has one of the largest class sizes in the nation and a teacher shortage.

Gaming officials argue that to keep a competitive advantage and thus continue to drive Nevada's economy forward, they need a lowest-in-the-nation gaming tax.

MGM Mirage Chief Executive Terry Lanni called the plan "ludicrous."

"The predictability of taxes allows investors to invest and banks to lend. If the teachers union wants to bring this all to a screeching halt then God love them. But that would be a big mistake for this state and for our schools. It would drive investment out of Nevada."

Increased taxes, he said, would compel the company - which is building the $7.6 billion City Center project - to place other large projects elsewhere.

"Not that we would go away, but instead of doing a $7 billion project here we'd do it someplace else," he said.

Casino executives say even a 1 or 2 percentage point increase in gaming taxes can mean the difference between building one or two hotel towers, or the difference between a high-end resort and a mid-market property.

A tax rate of 9.75 percent would eclipse those of New Jersey and Mississippi, which levy an 8 percent tax on gaming revenue, though both states, unlike Nevada, have corporate income taxes. Executives say their companies pay higher taxes outside Nevada as a trade-off for limited competition.

Interviews with gaming executives and their allies in government led to a whole genre of metaphor about geese and golden eggs, and eggs in a single basket. In short, they say, the burden should be shared more equally with other industries to create a more stable and predictable revenue stream.

This was the grand effort of the 2003 Legislature, though it didn't succeed.

"Asking one industry to solve an issue of importance to every Nevada resident is ill conceived," Boyd Gaming spokesman Rob Stillwell said. "Shouldn't all companies contributing to growth help pay for the cost of keeping up with that growth?"

Economists agree that a state's tax structure should be as broad-based and predictable as possible.

These arguments, for whatever their merit, are destined to be distorted in a long and expensive political battle.

For both sides, the political stakes are enormous: If the teachers fail, the union will be vulnerable to the argument that the voters have rejected their plea for more resources, which will badly weaken the union. If the effort succeeds, casinos fear a long line of other interest groups lining up to raid their treasuries. Gone would be gaming's reputation of omnipotence, which would embolden potential adversaries.

Gaming lobbyists offered a first shot across the bow, in one line of attack saying the union is in duress, with newly elected President Warne dealing with a membership frustrated by years of small raises and now having to confront a challenge from the Teamsters Local 14, which aims to represent the Clark County Education Association's 18,000 members. Gaming and the Teamsters say the Nevada State Education Association leadership is lashing out at the most powerful interest in Nevada to deflect attention from its failures.

Warne scoffed at that notion: "That's not the issue. The issue is that education funding in Nevada is woefully inadequate and has been inadequate for years. The studies show we're a billion short. That's the issue."

Although the Nevada Resort Association has launched a preemptive advertising campaign boasting about its contributions to schools, the Strip's real response won't roll out for some time. It will be well-conceived, well-financed and well-executed, said a gaming lobbyist.

The first step for teachers will be amassing a total of nearly 60,000 signatures in all 17 Nevada counties, which will cost as much as $300,000. The union says the early Democratic presidential caucuses will provide bucketloads of cheap and easy signatures as volunteers collect them outside caucus sites.

Next, there are likely to be legal challenges. That way, gaming interests can fight the union out of the public eye.

Then, the casino interests will craft a competing measure, perhaps a carrot approach that will offer something for the schools but leave the industry largely untouched, though a stick approach is also possible. For instance, one gaming lobbyist mentioned the possibility of pushing a measure that would hold teachers more accountable and pay them based on performance. That would badly weaken collective bargaining rights for teachers, which is why unions exist.

Finally, if the measure reaches the ballot, the industry will invest heavily in its defeat with an expensive ad war. The teachers will hard pressed to respond dollar-for-dollar, though it's possible money would flow in from out of state. Then, for the measure to become law, it would have to pass on the ballot again in 2010.

This is not the first attempt by the teachers to go straight to the voters.

In 2004 a union-sponsored ballot initiative to raise the per-student minimum to the national average by 2012 narrowly lost. Clark County was the only county to support the measure.

The failure was the second ballot defeat for the union in as many years. In 2002 its attempt to add a ballot measure to increase taxes for education was blocked by the court.

Still, the teachers could very well have the politics on their side.

The electorate is trending Democratic here and nationally.

In a town that is becoming less reliant on casinos for direct employment, some experts say the gaming industry may be losing its significance in the community. About 19 percent of employed people worked in casinos or gaming, compared with 24 percent in 1990, state figures show.

Moreover, as Nevada historian Michael Green pointed out, casino executives are no longer seen as part of the community:

"We've lost some of the personal feel in the corporate culture," said Green, who's broadly sympathetic to the teachers' goals. "Back then, they didn't answer to Wall Street. Their stockholders were not retired librarians in Cleveland. They were a few guys with a percentage.

"There was a degree of gratitude that they could operate in Las Vegas, so ponying up money for a cause was not a big deal. It was a very different system."