GOP ceded to chamber in budget demands

By David McGrath Schwartz (contact)

Sunday, May 24, 2009 | 2 a.m.

When Democrats won control of both houses of the Nevada Legislature in November, few would have predicted the 2009 session would end with a veritable conservative dream list of changes in sacred labor union cows — cuts in public employee pay, pensions and health benefits, and a tilt toward management in collective bargaining rules for local governments and their employee unions.

How did Democratic dominance at the ballot box get us here?

The answer lies in the newfound political relevance of the Greater Las Vegas Chamber of Commerce.

The business group succeeded in placing its key issues at the center of this session’s budget debate and helped frame the discussion by staking out a moderate position and getting key Republican lawmakers to buy in. The chamber’s demands became Senate Republicans’ playbook, with GOP lawmakers making support of any tax increase contingent on Democrats agreeing to enact the chamber’s recommendations.

(Senate Democrats needed at least two Republican votes for a tax increase.)

During the final late nights of negotiations on the tax package, Steve Hill, chairman of the chamber, accompanied by lobbyists for the group, could be seen flitting in and out of the office of Senate Minority Leader Bill Raggio, R-Reno, conferring about what would and wouldn’t be acceptable in the state’s tax plan.

Union leaders and some Democrats were angered by the sight and wondered who was really in control.

“In my opinion, the chamber of commerce dictated the last three days” of negotiations on the tax package, said Dennis Mallory, head of the Association of Federal, State, County and Municipal Employees, which represents state workers.

“Clearly the Las Vegas chamber exerted far too much influence,” said Assemblywoman Sheila Leslie, D-Reno. “As an elected official, that policy negotiations were turned over to the chamber was offensive. The fact that we couldn’t get a deal until the Las Vegas chamber was satisfied is offensive.”

Democrats did confer frequently with labor union leaders and lobbyists, Leslie acknowledged. But “labor did not decide when we were done, what we did. It’s one thing to consult with a constituent group. It’s another thing to turn over your vote.”

The chamber’s prominent role was a shift from the state’s most recent major tax debate, in 2003. Gaming, mining and homebuilders supported then-Gov. Kenny Guinn’s proposal for a gross receipts tax, while the chamber vehemently fought it, opening a lingering rift in the business community. The tax died.

Before the 2009 session began — while Democrats, who found themselves in the majority in both houses for the first time since 1989, were keeping their ideas for the session under wraps — the business group paid for an outside analysis of one of its favorite targets — public employee salaries, pensions and health benefits. The group followed up with a list of recommended changes in the programs.

The chamber would, however, stake out a more moderate position than it had in the past.

After Gov. Jim Gibbons released his proposed budget in January, Hill joined an early chorus criticizing the governor’s budget cuts as too deep.

Hill added that a tax hike might be necessary, but support for a tax hike would be conditional on changes in pensions and health benefits and local government collective bargaining rules.

The chamber had long championed changing the state’s traditional pension plan into something similar to a 401(k). But Hill dropped that demand, realizing it would be a nonstarter with Democrats.

A key moment followed in April. The “core group” of legislators — about 10 Democrats and Republicans from the Senate and Assembly who were working on a budget deal — laid out the state’s financial condition for about 15 business leaders in a closed-door meeting at the Legislature, according to those with knowledge of the meeting.

During the meeting there was widespread acknowledgment that new revenue would be needed to close a $3 billion budget shortfall. But business groups independent of the chamber — some gaming companies, Associated General Contractors, other business groups — said they wanted to see long-term changes in public employee benefits. The groups would repeat those demands in public testimony.

Later that month, the chamber wrote a letter to legislators with a list of its proposed changes.

Hill was careful to say it wasn’t a list of demands. But it soon would be for Senate Republicans, who took the chamber’s letter, made some minor adjustments, changed the font to give it a different appearance and adopted it as their conditions for supporting a tax increase.

Although lawmakers had for years cited an $11 billion unfunded liability in the Public Employees Retirement System and Public Employee Benefits System as long-term concerns, those issues had little to do with the state’s current $3 billion budget gap.

Hill acknowledged as much, but said the crisis had provided the right moment to pursue changes. “When issues the state faces are this difficult, it does provide a catalyst for change,” he said.

For public employee unions, the chamber’s role was a tough pill to swallow.

In their view, the chamber’s opposition to the 2003 gross receipts tax is part of the reason the state continues to rely so heavily on gaming and sales taxes and faces the highest budget deficit in the country, in percentage terms, according to a recent survey.

“I do believe they changed the topic,” Rusty McAllister, president of the Professional Firefighters of Nevada, said of the chamber. “They diverted attention away from the fact that their members had a large part that created this economic environment.”

On Friday, legislators worked to get a budget and $781 million tax package passed by 5 p.m. Democratic Senate Majority Leader Steven Horsford agreed in the final hours to two-year sunsets on the tax increases and the wording of legislation on an interim commission to study the state’s tax system.

The final deal on changes in public employee pay and benefits had been struck earlier, around 1 a.m. Friday.

The chamber didn’t get everything it wanted, but Hill walked away satisfied.

“We think we got significant reform,” Hill said. “The state is back on a better fiscal path.”

Sen. Warren Hardy, R-Las Vegas, who was the lead negotiator for Republicans on the changes, said of the chamber, “They were certainly more relevant than they have been in a long time.” (Hardy recused himself near the end, because, he said, labor groups had threatened to file an ethics complaint against him. Hill sits on the board of the Associated Builders and Contractors, of which Hardy is president.)

Opponents of the chamber said its role was too prominent.

“It’s not right. We didn’t elect the chamber,” said Mallory, the state workers union chief.

Just how prominent became evident as the list of its opponents grew.

When the chamber first raised the issues of public employee salaries and benefits, labor unions took out newspaper advertisements attacking the chamber.

After the chamber had gotten its reforms in exchange for supporting a tax increase, the group was again publicly attacked, in radio ads. This time, by a more conservative business group.