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April 23, 2014

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jon ralston:

Sandoval budget gives business leaders pause

The voice on the other end of the line radiated frustration.

One of the state’s most successful businessmen was on the phone and he was beside himself — as he said others are — about the upcoming legislative session. But, specifically, about Gov.-elect Brian Sandoval.

“There are a lot of very smart people, and we are all just shaking our heads,” said the business leader, to whom I granted anonymity so he would talk freely. “There were a lot of people who thought he (Sandoval) would get elected and soften his rhetoric.”

Trust me, dear readers, this man is no tax-happy lunatic. He is a thoughtful guy whose business has taken a gigantic hit during the Great Recession. But he — and he says several others who have been meeting to discuss the state’s future — are concerned that the governor-elect’s inflexibility on new revenue could be an impediment to the state’s economic future, especially if cuts in education are implemented.

“The business community is speaking as much as ever with one voice,” he told me. “It’s happening.”

I have heard about this convergence for months, with gaming and mining and chamber types realizing that the lack of a long-term plan while enacting devastating cuts could … obviate the need for a long-term plan.

“If those cuts happen, we’ve gone so far back,” he lamented before his frustration resurfaced. He fretted “people will not stay engaged” and that it “will take 20 years to get back” to a low level of service.

I have picked up on this frustration from other engaged business types, who are sick of the partisan maneuvering and the binary “to tax or not to tax” discussion. And they were counting on Sandoval to be the leader who could move the state beyond it.

“Everyone says he’s a good guy, a smart guy,” he confided. “But they wonder why he is doing these dumb things. He’s not doing what politicians do, which is say what you have to do to get elected, then soften the rhetoric.”

Alas, many folks will hear that and cheer Sandoval for refusing to holster his no-tax guns. As I have written before, Sandoval, who developed a reputation as that good, smart guy, was so afraid of Gov. Jim Gibbons in the primary that he so hopelessly boxed himself with no-new-taxes rhetoric that he has no wiggle room. You cannot soften that rhetoric; you can only contradict it, and he appears unwilling to do so.

I still think Sandoval could have hinted at a billion-dollar tax increase and still defeated Rory Reid because people were simply not going to elect two of that family to the state’s highest offices. Just as more people in 2006 voted against Dina Titus than for Gibbons, I’d guess more people voted against Rory Reid because of his last name than for Sandoval.

Granted, Sandoval has a reservoir of goodwill just because he is not Jim Gibbons. But that could evaporate very quickly because he said so little during the campaign to engender support, other than he wasn’t the guy named Reid.

The business leader told me many in the community embraced state Senate Majority Leader Steven Horsford’s claim this year that the budget needed $1.5 billion in cuts and $1.5 billion in new revenue. “The challenge for him (because of Sandoval’s opposition) is that one of the easiest ways to get (part of the way) there is to not sunset taxes and keep the furloughs,” he said.

My phone pal argued that Sandoval and lawmakers should paint “a realistic picture of what we are talking about with these budget cuts.” But he also acknowledged the political dynamic beyond Sandoval: “A number of people were elected on an anti-tax platform so there are a lot of mini-Sandovals running around right now. We have to turn a few of these people around. It’s just a challenge.”

He added, “We could craft a package; we will craft a package. The solution is not difficult; the politics are difficult.”

Ah, the gift of understatement.

He hung up. But then he called back almost immediately to make two more points. One was that the budget deficit should be pegged at closer to $3 billion by all the politicians to establish a large enough target for negotiations. But, more importantly, he said, “Anybody who is talking about economic diversification — that’s the political buzzword — can’t start by cutting the higher education budget. Study the states that are successful and it starts first and foremost with the higher education system.”

The lesson: Myopia (just cut) by those driving the state will lead to a deadly crash (irreparable damage to the quality of life) down the road.

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  1. I will suggest a tax that will affect me and not the locals; how about a big ole tax on Resort Fees? I think they are a private tax imposed by the casino companies on tourists and the state should get their fair share of the take. A 50% tax rate would be perfect, high enough to shame the companies out of charging it, forcing them to raise their regular rates and pay taxes they are currently circumventing. I think is a tax that could easily be sold as a populist strike against The Powers That Be, and allows the Governor a smoother transition to other, more necessary taxes.

  2. 20 years? That is hyperbole. On an inflation adjusted per-capita amount we're spending about as much as 2008 I bet. To avoid raising taxes we'd have to cut back to 2004 maybe 2003 - both years were above 2001 and 2002.

    And there are also studies that show that spending more money on higher education retards economic development. We may have already reached the point where a dollar invested doesn't even produce a dollar in returns.

    States like Arizona, North Carolina, and Utah - all states that Nevadad's elite class wants to emulate on higher education - tax less per-capita than Nevada. They are spending their money more effectively than we are. http://prgibbons.blogspot.com/

  3. Coming from business is the recognition that we can't diversify our economy by cutting higher education. Hear that Sandoval? That means you also have to protect and provide for primary education; you know, that thing that prepares children for higher education.

  4. The big business community will have to get-over "politics as usual" and realize that SOME of our elected officials are not easily swayed. Mr. Sandoval is sticking to his guns and he has the intestinal fortitude to do what is necessary rather than what is politically expedient and conciliatory to special interests. This is why we elected him and he is doing the will of the voters. We know big business is not used to this kind of politics because Carson City has been on the take for too long.

  5. Education is a special interest? Right up there with gaming and brothel licensing and city road funding and Spanish on drivers license tests? Thank you RH for explaining the Republican platform so succinctly.

  6. "Throwing more money at a broken system simply makes the broken system spend more money."

    The 'broken system' is relying on Loosers to pay our bills. That is the Nevada Tax System. The main product in this State is feeding off Loosers, which unfortunately is the main product of Nevada.

    And don't forget the Real Estate industry, i.e. "Judas Goats of America, Inc." that led their victims to Liars Loans to build the Great Bubble that Burst. Loosers and Real Estate bubbles were Nevada's economy during the Bush Years and now they want to destroy Education because 'it doesn't work'. It's gambling that doesn't work, take it apart.

    Eight years of Bush tax cuts destroyed the job market and now the Republicans want to continue the tax cuts to 'help the job creators'. Where are the jobs after eight years of tax cuts for the rich? Try India and China - that's where the jobs were created.

    Go figger.

  7. We aught to outsource Nevada education to India, get rid of the teachers and make public education kiosks available in poor neighborhoods. Get rid of the buildings, contract to Mumbai and then contemplate changing the child labor laws to accommodate all those "non progressive" 10 year olds that need a job to help chip in and support their families.

    Welcome to America, the third world country of the future.