Teachers give up gaming tax bid in deal

By David McGrath Schwartz

Tuesday, May 20, 2008 | 2 a.m.

Teachers made a Las Vegas deal Monday night, trading the chance at a big score for a quicker, more modest gain with backing from at least some of Nevada’s biggest gaming houses.

Less than 24 hours before the deadline to submit its petitions, the Nevada State Education Association announced Monday it is dropping its effort to raise the gaming tax by 3 percentage points.

In exchange, Wynn Resorts, Harrah’s Entertainment and Station Casinos have agreed to back an advisory question on the November ballot and legislative action in 2009 that would increase the room tax rate by 3 percentage points.

In a joint release sent late Monday evening, executives from Wynn, Harrah’s and Station, as well as the president of the teacher’s union, Lynn Warne, announced the agreement. All the gaming executives said they are “proud” to be supporting education in Nevada. It’s clear that they hope MGM Mirage and Boyd Gaming will eventually back the agreement.

Despite entreaties by Assembly Speaker Barbara Buckley, those companies have not signed off on the deal, and Las Vegas Sands is forging ahead with its own initiatives to divert room tax money from the Las Vegas Convention and Visitors Authority.

The deal is the result of last-minute negotiations that revealed a fractured community of gaming companies and perhaps a more powerful role for the teachers in Nevada politics.

The teachers’ tax proposal had forced an old-fashioned stare-down. Gaming companies pushed hard to prevent teachers from gathering the tens of thousands of signatures needed by today’s deadline. In particular, the gaming companies focused on rural areas, where collecting registered voters’ signatures is more difficult.

Some gaming companies believed the teachers did not have sufficient signatures. And even if the teachers crossed that threshold, gaming leaders believed, the teachers’ initiative could be thrown off the ballot by the Nevada Supreme Court.

Other gaming companies, however, believed the gamble was not worth it, in large measure because the teachers’ proposal to raise the gaming tax from 6.75 percent to 9.75 percent consistently drew 60 percent-plus favorable ratings in polls.

But the teachers also gave in. They now are dependent, at least in the short term, on the Legislature, where their clout has waned.

Even if the Legislature approves the deal, education would get less money than the gaming tax hike would have generated. The room tax increase would raise an estimated $180 million annually, well below the estimated $250 million to $400 million a year the gaming tax increase would have produced.

But the gaming tax would have been a constitutional amendment requiring approvals by voters in 2008 and in 2010, meaning it could not have gone into effect until 2011.

Under Monday’s agreement, money could start coming in after the 2009 Legislature passes it. That scenario, though, is far from certain.

The money generated would, in the first biennium, go to the state’s general fund to offset budget shortfalls estimated at $400 million a year, according to sources familiar with the deal.

In subsequent years, money would be earmarked for education initiatives, including teacher pay raises.

A number of “what ifs” remain, starting with the fact that the teachers union and its current gaming allies will have to persuade 17 county commissions to put an advisory question on the ballot. Gov. Jim Gibbons and Senate Majority Leader Bill Raggio, R-Reno, have said that would be necessary to approve raising the room tax, generally considered the most palatable increase because it is paid primarily by out-of-towners.

But even if Gibbons promises to sign the bill, two-thirds of both houses would have to pass the tax increase. If only seven state senators can be persuaded by MGM Mirage, Boyd, Las Vegas Sands and the more militant anti-tax wing of the party to vote no, there is a problem.

As a political safety net in the event the matter does not win legislative approval next year, the teachers union and the three casino companies onboard agreed to collect signatures for a separate statutory amendment to be placed before voters later in 2009.

For that initiative to raise the room tax to take effect, voters would need to approve it only once.

The room tax increase would be capped at 13 percent statewide. On the Las Vegas Strip, the room tax currently is 9 percent.