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twitterSTATE GOVERNMENT:
Pieces of budget puzzle falling in
Key lawmakers agree on outline of deal to close massive shortfall
Sunday, May 3, 2009 | 2 a.m.
CARSON CITY — Legislators have not reached a final agreement on how to solve Nevada’s budget crisis as they face key deadlines this week to fund state spending, but the broad outlines of a deal have emerged.
Legislators are working on an agreement that would raise taxes by $700 million to $800 million, while reducing the salaries of state workers and teachers by as much as 4 percent and cutting a broad swath of programs, according to two of the dozen or so lawmakers participating in the closed-door “core group” meetings.
To raise the new revenue, legislators would increase the modified business tax, essentially a payroll tax, from 0.63 percent to 2 percent, and raise the sales tax, perhaps a quarter percentage point, said the legislators, who asked not to be identified because of the sensitivity of the ongoing negotiations.
The legislators are also considering hikes in so-called “sin taxes” on alcohol and tobacco, though the recent steep increase in the federal tobacco tax to pay for health care for poor children has made a tobacco tax increase less likely, according to a member of the core group, which includes representatives of both parties and both houses.
The mining industry, which has racked up record profits with the soaring price of gold, is likely to take a small hit.
Assembly Speaker Barbara Buckley, D-Las Vegas, wouldn’t discuss a tax increase. But, she said, the core group is close to a deal on which of Gibbons’ budget cuts to restore.
“We’re making significant progress and working together. There’s no partisan bickering,” Buckley said.
State Sen. Warren Hardy, R-Las Vegas and a core group member, agreed with Buckley and said a deal is close: “I felt strongly that we’re moving forward toward a consensus. I came out optimistic that we’re going to work together to get it done. It’s the most optimistic I’ve been.”
The mood is hardly celebratory, however. Never before has the Legislature had to make such deep cuts to cherished programs in health care and education, areas where Nevada lags in performance measures.
The tax increase will be equally painful, as Republicans will be accused of betraying party principles and Democrats will be charged with going their usual route.
The crisis was laid bare late last week, when Gov. Jim Gibbons’ budget director, Andrew Clinger, and the Economic Forum, the state’s official fiscal forecaster, said legislators would have to find close to $900 million to meet the governor’s recommended budget.
That budget, which included a 6 percent pay cut for teachers and state workers and a 36 percent cut in higher education, was considered unacceptable in the Legislature.
Reacting to the latest bad news, the governor said he would ask for even deeper cuts in state salaries along with additional budget cuts.
Legislators of both parties think the governor’s budget, and his plan to cut even deeper, would devastate state government, K-12 education and public colleges and universities. That, in turn, has motivated them to reach a deal quickly so they have time to override his expected veto of a tax increase before the 120-day session ends June 1. Buckley said lawmakers will pass a plan by May 21 so they can finish by June 1.
“If we don’t reach a consensus and process an alternative to the governor’s budget, the governor’s budget will be the alternative,” Buckley said. “I haven’t talked to anyone who thinks that’s possible for our state.”
The urgency of a deal is heightened by the need to close key budget holes this week.
Monday, a committee will decide how large a pay cut state workers will face. In the following days lawmakers will decide on Medicaid’s budget, retiree benefits, and K-12 and higher education funding.
To do all of that, they will need to know exactly how much money they have, which means agreeing to the size of a tax increase and knowing how much the state will receive in federal stimulus money.
Clinger has said the federal stimulus will offset the estimated $900 million shortfall by $350 million. Buckley thinks the state’s take from the stimulus will be higher.
Legislative staff continues to be uncertain about the size of the stimulus and accompanying mandates on how it can be used. Core group members say that is holding up final negotiations. They will meet again Monday and hope to have an agreement then.
It’s not clear that everyone is completely onboard, however.
Senate Majority Leader Steven Horsford, D-Las Vegas, seems less willing to agree to steeper budget cuts and more willing to support a bigger tax package. He said he is open to a tax increase greater than 2003’s $836 million hike.
“I don’t know $836 million is some magic number,” he said. “This is a different time, we’re at a different point in our state. There are difficult decisions to make.”
Though Horsford is the majority leader, he doesn’t have much leverage because at least two Republican votes will be needed to override a veto by the governor, and Minority Leader Bill Raggio, R-Reno, wants the backing of many more Republicans so the plan has a bipartisan stamp, providing everyone much-needed political cover.
Republicans are using that leverage to push for changes in public employee benefits and retirement programs to reduce long-term costs.
Republicans have also demanded that any tax increases automatically end after two years unless they are renewed by the 2011 Legislature.
Clark County will also take a hit. Legislative leaders said last week that a plan to take property tax revenue from the county is in the mix.
Republicans would like to give the county relief by granting the Clark County Commission more legal leverage in its bargaining with local government unions. That would be a bitter gift for the all-Democrat commission, whose members are almost uniformly close to organized labor.
Meanwhile, the 2010 governor’s race is providing a telling backdrop to the budget drama.
Gibbons, who has a long record of opposing taxes even though he included a 3 percentage point room tax increase in his budget, must oppose additional taxes to have any shot of winning the Republican primary.
Buckley, meanwhile, doesn’t want to be saddled with the largest tax increase in state history. And, she will likely be running in the Democratic primary against the chairman of the Clark County Commission, Rory Reid.
Despite the long-term partisan implications, for the most part the negotiations have been amicable, Hardy said.
“It’s not that we’ve found religion. It’s just that there’s nothing to fight about,” he said. “Nobody likes this — the revenue or the cuts. Nobody in either house, either party. We’ve gone so far on the cuts, and more revenue in this economic environment is offensive to everybody.”
Discussion: 18 comments so far…
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"Legislators are working on an agreement that would raise taxes by $700 million to $800 million, while reducing the salaries of state workers and teachers by as much as 4 percent and cutting a broad swath of programs, according to two of the dozen or so lawmakers participating in the closed-door "core group" meetings."
I thought the government was not allowed to hold "Closed door" meetings. Isn't there a requirement for them to be "open to the public"?
OK, let's take the governor at his word that he wants government to "work for for the people, not against them." If that is the case he should want to get the taxpayers the biggest bang for their buck.
Well, he doesn't accomplish that with his plan for the universities. Rather than chop the two institutions in half, the more prudent course of action would be to close one so that the other could maintain its quality.
If the governor truly wants to stand behind his statement that Nevada needs to live within its means and use that money wisely, he will tell the taxpayers which university he thinks we should close.
Tax what you want less of. The legislature is taxing employment. The employer will reduce his payroll by 2% to break even and more unemployed will then be drawing benefits from the state and losing their homes.
The government is here to help us all, hang on to your wallets, they are going to HELP us all.
Nevada does not have an adequate taxing structure. The state relies too heavily on the gaming industry which is threatened by Indian gaming and the recession. Gibbons refuses to see this and I refuse to call him governor.
brst, I agree with you. In my opinion, it would be best to have just one state subsidized university (UNR) and cut the other one. Why run two under-funded universities when you can at least make sure one is good. Based on performance and rankings, I'd personally support UNR.
"nevada apple slices";
well, nance, you DO live in Reno, but what a silly comment nonetheless. If a state the size of Nevada won't support 2 universities, it's because they don't want to, not because they can't. You are too darn funny.
why do you take every single opportunity to bash
UNLV? What's your agenda?
it's a lot easier to complain that to solve problems. there is not enough money to go around. there are many things that would be great to have, but you can scream until you are blue in the face and that won't change the current budget situation.
Again, you are TOO FUNNY! You should take your act on the road...please? and nance, say it with me right now; NEW TAXES.
Let's see:
UNLV is bigger by more than 10,000 students. If the market says one product has twice the demand of the other at the same price, which one is the better product? If you check the actual US News ranking criteria, the difference is in the budget category, because UNR gets $2,500 more per student than UNLV.
So UNLV is just as good in the other ranking numbers, has much higher demand for its product, and does it for $2,500 less per student. Seems to me that UNLV makes more sense to keep by all criteria.
But the bigger question is the long term one. It costs more to keep someone in jail for one year than to put them through college for four. The answer for this state is to keep kids in school, so they don't end up unemployed, in prison, or working for minimum wage. That actually lowers the cost of government and makes all of us better off, not just the kid who earns the degree.
bill777
Thank you for an intelligent take.
bill777-one other point to add to your post is that the majority of state taxes are paid by residents and businesses in Las Vegas, not Reno.
"one other point to add to your post is that the majority of state taxes are paid by residents and businesses in Las Vegas, not Reno."
And here we go with the North/South disparity stuff again.
If Nevada had a graduated income tax, then we would each deduct state taxes and pay pay less in federal tax. Moreover, Nevada would be able to pay for its share of various federal/state programs, and thus could offer programs which 1) help our citizens, and 2) increase the federal dollars that return to our state. Instead, Nevadans pay federal taxes so the feds can give our dollars to other states.
Why did I vote for Democrats if their solution is just going to be more regressive taxes?!?
Low taxes may sound good in campaigns, but Nevadans are just being outfoxed by states that are happy to take the tax dollars we send to the fed.
Jon Ralston said that raising the MBT was a stupid idea. Steve Wynn says that anyone who wants to raise taxes now is psychotic.
I can't say I disagree with either opinion. The MBT is a horrible, horrible tax. If your goal was to reduce wages and increase unemployment this is the type of tax you put in place.
The MBT taxes companies on their gross payroll. That is, each dollar paid to each worker. The more workers you have and the more you pay them, the more taxes you pay.
To avoid the tax you hire fewer workers, pay your workers less, or both.
This is just disgusting.
Patrick, John Ralston told the guy from your organization to his face that raising the MBT was trivial and would not cost jobs. Steve Wynn said that raising gaming taxes would cost gaming jobs, but then railed against mining, and banks, and other industries for paying nothing. (Gaming plays 50% of the taxes, from 15% of the jobs).
Doubling MBT won't cost jobs at this point in the recession. If you have any actual evidence other than your opinion, I'd be happy to see it. Raising the mining tax to get the max of 5% won't stop one gram of gold from being mined at $900 an ounce, or cost one job.
Scary proposals are big increases in sales taxes, and robbing the county to pay the state. Don't know how they know what the actual impact of those will be.
The real concern isn't those tax proposals, its that Nevada has to decide what it wants to be, and not by six people sitting behind closed doors deciding for 2.2 million. You don't really know what to spend until you know where you want to go.
Hmmm... Has everyone forgotten about the community colleges? They too are part of the higher education system. Why cut either one of the universities when there are the smaller community colleges??? WNC, TMCC, CSN, GBC.
Give us a state lotto and add a surcharge on the chicken ranches.