All eggs in gaming basket for the birds

Fri, Jul 11, 2008 (2:01 a.m.)

News Item No. 1 — In a comprehensive, detailed analysis of the business climates of the states, CNBC ranks Nevada 45th.

News Item No. 2 — Nevada’s gaming win in May 2008 was 15 percent less than it was in May 2007.

Two seemingly unrelated stories this week about Nevada, but taken together they contain cautionary tales about the state’s future fiscal health and what should — and should not — be done to ensure long-term prosperity.

Expanded coverage

The national business network study is disturbing and depressing, casting a cloud over the constantly sunny pablum from the chamber of commerce and economic diversification types. CNBC used 40 measures of competitiveness, ranked all the states and then distilled those findings into 10 broad categories.

Nevada finished in the bottom third in half the categories and no higher than 16th in any one — you can see the study’s ranking at: www.cnbc.com/id/25501924.

But what is most germane here are two of the indices CNBC measured — and they say it all.

First, for all of the Chicken Little dances we have seen for two decades from clucking business leaders about how any new tax on the Free Ride Crowd would cause companies to run for the border, consider this: Nevada ranks 37th among the states in the cost of doing business.

There is no oppressive tax burden here for companies and a reasonable, broad-based business tax, with exemptions for small outfits, surely wouldn’t move the state very far up in those rankings. Indeed, it would add very little to the cost of doing business.

Second, as if to reinforce all the numbers we have seen in previous studies and disputed by no one except state Sen. Bob Beers, Nevada ranks 49th in education. Indeed, in this category we are the Mississippi of the West because that state is the only one below us. That number, more than any other, helped drag Nevada down to 45th in the overall rankings and helps explain why this state is in such dire straits with the ongoing onslaught of budget cuts. If it keeps going the way it has been, we could easily sink one more notch and make Mississippi the Nevada of the East.

Which brings me to the other bit of ominous news from this week, those gaming numbers, which represent the largest percentage decline in more than 10 years, the Sun reported. They also are well below the bleak projections approved a few weeks ago by the state’s Economic Forum, and induced Gov. Jim Gibbons to release a statement that said, in part:

“This is an incredibly difficult time for the state of Nevada, and it appears that we may need to prepare for an additional shortfall to our General Fund for the fiscal year that just began. We will continue to watch our state revenues very closely in the coming months to determine whether any additional reduction to state spending will be necessary to maintain a balanced budget.”

And I called the chamber’s mantra pablum?

But one part of Gibbons’ highly unoriginal statement is worth repeating because it is relevant to the discussion of the state’s future: “The gaming industry is an essential thread in the fabric of Nevada’s economy, and while times may be difficult now due to economic struggles nationally, I am fully confident the industry will turn back around.”

I know — like the other excerpt, it says nothing. But the point that Gibbons is making without knowing it and the point that needs to be reinforced, despite the Pavlovian fury of the populist masses, is that increasing the gaming tax is not a panacea.

Yes, a gaming tax increase is an essential part of a holistic solution. But the overreliance on gaming revenue has created the worst revenue crisis in Nevada history, in a state that has one of the worst business climates in the nation, according to CNBC.

No economy, no matter how many legs you add to the stool, will be immune from economic downturns. But some economies will be hurt more than others if their eggs are mostly in one basket. It’s time to fill up another basket, perhaps the one carried by the group that has a low cost of doing business, sends much of its profits out of state and puts little into Nevada coffers.

I don’t expect Gibbons to be the one to propose such a bold plan. But does anyone else think it might be time to try something new? Or is everyone happy being mentioned in the same breath as Mississippi?

Discussion: 11 comments so far…

By JohnF

7/11/08 at 10:30 a.m.

Suggest removal

Jon,

I've been reading the RJ for a long time now so naturally I thought that our state's low tax rates on businesses made Nevada an attractive environment for those businesses. What's going on here?

Does anybody out there (are you listening, Governor?) understand that one of the big reasons businesses don't locate in Nevada is our lack of an educated work force?

When you look up "penny wise and pound foolish" in Bartlett's you see pictures of Jim Gibbons and all those who continue to support him.
By MysterMr

7/12/08 at 4:42 a.m.

Suggest removal

LOL... Jon (Ralston? LOL) - You don't own a business, do you? Our low tax rates ARE the ONLY reason businesses come to this state. Wha? You thought it was the temperate summer weather?

If Microsoft moves here - trust me, the "educated workforce" will follow. The truly educated workforce goes where the jobs are. Also, if you think about it hard enough, you'll realize that the most powerful companies and largest employers in this state are hardly interested in too large an "educated" workforce.

Also, it is true that our workforce is um... underwhelming, but it has nothing to do with a lack of funding, but rather apathetic parents, (some - not all) lazy teachers, a greedy union, and a massive bureaucracy of bloated fat cat administrators with no accountability headed by Rulfles and his corrupt educrap mafia who will NEVER give teachers more than enough to scrape by on since the unions and the administrators know this is the key to being able to cry and beg for more cash every 2 years. Wah wah.

Ask Rulfles how many six-figure administrators were let go in the recent cutbacks. Uh huh...

As for Gibbons, I didn't support him initially, but it is refreshing to see a politician keep his campaign promises for once. Go Gibbons! (are you listening Governor?)

I own several businesses in Nevada so I like to think I know what I'm talking about. If Nevada implements massive business taxes, watch all non-gaming jobs defect to other states.

The real key to the current budget crisis is to fire 2/3 of the useless administration at the school district, use 1/2 of that money to give to teachers, and return the other 1/2 to the taxpayers. Then, cut all other agencies across the board until there is money left over.
By lvmachead

7/12/08 at 8:36 a.m.

Suggest removal

I would say that any businesses that run because Nevada enacts a business tax is probably not a business we need. Good solid high paying businesses need to know their employees will have a high quality of life where they operate, including good public schools and "high quality" colleges for growing a competitive workforce. Microsoft is in the Seattle area because of quality schools and educational opportunities and publicly funded arts programs and parks that enhance the quality of life of everyone who lives there. (Of course it's also Bill Gates and Paul Allen's home town.) Look at the other major high tech corridors in the West. Silicon Valley is just south of San Fransisco and an extremely expensive place to live and do business and we all know about California' taxes. The Wasatch front range in Utah also has much higher taxes than we do, but once again a superior quality of life. Our tax structure has not in the almost twenty years I've lived here brought in very many "quality" high tech businesses.

A solid public school system and post secondary opportunities are crucial to bringing high quality jobs to the state. Reduce class size (No one can successfully teach 40 kids at a time.), create a competitive pay scale to entice the best educators to move here, and fund the university and community college system at a level that will allow them to truly become quality institutions people want to attend.

Or of course we can maintain the status quo and keep feeding the casinos housekeepers and valet drivers while Mississippi moves ahead of us as an educational mecca.
By term2

7/12/08 at 10:23 a.m.

Suggest removal

I am very tired of the arguments that support raising taxes for government, as if the only reason we all exist is because of government. This is just not true. Apart from protecting property rights and our personal safety, government is a drain on people, not a help.

Try and build a house in the valley and deal with the clark county building department. It is the paragon of disorganization and inefficiency, and exists primarily for its OWN survival, not to help people.

Watch the clark county commission meetings on Ch4. They spend ridiculous amounts of time to simply control every aspect of what happens here, causing inordinate delays. Consider that they recently spent almost an hour debating whether new massage parlors should be required to close at 8 pm, but existing ones can stay open 24/7 and exempting those connected with casinos. That decision probably cost hundreds of thousands of dollars in administrative and compliance costs in itself.

Cut out the bloat in government instead of adding new taxes which contribute to the bloat.
By DavidMorgan

7/12/08 at 2:37 p.m.

Suggest removal

Arguments offered by term2 have been, are, and continue to be the "talking points" of the "leave my world alone" crowd. They have nice little lives, no kids, no need for schools, or any real public service other than occassionally dialing 9-1-1 when their neighbors begin throwing objects at each other. Government is services, teachers, university instructors, planners, traffic engineers, NHP, fire departments, medical and mental health professionals and many more public employees who are part of the launch pad for any community or state's future. Term2 needs to broaden his knowledge of what's real, rather than just re-spewing what he heard at the golf course.
By MysterMr

7/12/08 at 3:14 p.m.

Suggest removal

lvmachead,

I don't want to be insulting, but you have no idea what you're talking about. Perhaps you could use some of the "education" you speak of. ;-)

Washington state was dealt a crippling blow when they lost their LARGEST (by far) employer (Boeing) by enacting the dreaded kiss of death, the gross receipts tax. Care to guess where Microsoft keeps their money and liability? Actually, this was Nevada. (I'm not sure if this is still the case) - this is how they avoided the gross receipts tax on 50b in annual revenue. (Microsoft actually has a large office in Reno btw negating your argument).

You refer to a "solid public school system"... what exactly is it that you think is holding us back from that? It sure isn't money. Schools in Nevada are MORE than well funded. Factor in the constuction bonds that the crybabies love to ignore and we're right in the middle as far as funding goes.

If you look at the most well funded school districts in the country, you will find that their performance is dismal. You're missing the point. Schools are a business. They don't make money if they turn out honor roll students. If they turn out garbage, they can go beg the legislature for another billion dollars going wah wah... they've figured out this secret, and it's a great scam. Sure there are great teachers in the system that want to teach, but they are more than often held back by the district. CCSD has NOTHING to gain by doing a good job - and EVERYTHING to gain by turning out morons. When Las Vegas Academy was turning out the most well educated kids in the state, what did the CCSD do? THEY CHANGED ALL OF THE MANAGEMENT THERE. I'm sure the "problem" at LVA has been "fixed" now and that they are turning out the morons the CCSD needs to keep fueling their cash cow.

If we outlawed the NSEA and NEA and enacted the death penalty for school administrators found guilty of corruption, you'd be shocked just how quickly things shaped up around here.

UNLV is never going to be MIT or Oxford. If you want MIT, you attend there. Conversely, MA has lousy gaming resorts. Do you think they are stressing out about not having great casinos? No place can be all things to all people.

I know some valet drivers that clear 80k+ a year. Try that in Mississippi. Also, with Mississippi's tax structure, I wouldn't worry about them surpassing us in any regard.

You also seem to be missing the point that all of those companies in CA generally put their money in another state or incorporate elsewhere - Wyoming or Nevada or Delaware precisely to AVOID California taxes.

Once it costs as much to live here as it does in California, people will just move back there... why? The ocean, the beauty, less police to harass you. It sure won't be for their failed and collapsing school system which will only get worse now that we have the architect of CCSD's downfall Carlos Garcia guiding them.
By bob_cirelli

7/13/08 at 7:44 a.m.

Suggest removal

How about someone taking a long hard look at how Florida works their infrastructure? They have no state income tax, the sales tax rate is similar, as are property taxes. They have nowhere near the tax revenue from thier casino industry either. Yet they provide services to many more residents than NV. BTW, auto registration is a small percentage of what we pay.
By MysterMr

7/13/08 at 2:14 p.m.

Suggest removal

Re: "How about someone taking a long hard look at how Florida works their infrastructure?"

Because, it's not about raising revenue... we have plenty. It's about the spending and the waste of the money that is generated.

What is really bad is the PERS bill that is coming up for Nevada. As with the auto companies, unions will be the death of Nevada as well.

If you think you're paying more for food and services over gas prices - just wait for the "broad based business tax" and the "Nevada efficient" beheamoth agency that will be formed and staffed with morons to assess and collect it.
By DavidMorgan

7/14/08 at 9:47 a.m.

Suggest removal

Check with your local economic development agency (NDA, EDAWN, NNDA, etc) and you will find that many, MANY companies leaving Califoria are not EVEN considering Nevada to re-locate to. They've figured out that Nevada's stupid mantra of "no new taxes" translates into "no good labor force." Nevada has a dumb work force. Check it out. The percentage of higher degreed residents and highly skilled science driven occupations is abysmal. Slashing taxes just slashes our future. Taxes, intellegently applied, are an INVESTMENT. Get involved. Follow those dollars and demand they be intelligently applied. Start with your local schools boards. Go to their meetings, surf the internet for innovative programs and then demand accountability from your local educators. Democracy is NOT a spectator sport.
By teacher

7/14/08 at 9:48 a.m.

Suggest removal

Ditto to John F. Good, informative, eye-opening column, Ralston.
By Renoite

7/14/08 at 9:52 a.m.

Suggest removal

I didn't look at Florida's tax structure, but I did check to see how it's doing: Here's from a news story last week:
"Prompted by dismal revenue projections, Florida lawmakers earlier this year eliminated two tax holidays as they try to balance a state budget hamstrung by a frigid housing market, fallout from the subprime lending crisis and the rising price of oil.
"Florida residents accustomed to a 10-day sales tax reprieve on back-to-school supplies will not benefit from a holiday that last year saved them about $41 million thanks to a temporary suspension of the state's 6 percent sales tax.
"Also gone is a similar tax holiday on hurricane supplies. That $12 million break, in place since the devastating hurricane seasons of 2004-2005, was also jettisoned in May as lawmakers tried to fill holes in a 2008 budget of $65 billion that was nearly $6 billion less than the previous year."
Florida is raising taxes with the support of a Republican governor.