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December 22, 2014

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All eggs in gaming basket for the birds

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.

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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?

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