Las Vegas Sun

December 21, 2014

Currently: 43° — Complete forecast | Log in | Create an account

The budget:

Budget negotiations affected by Supreme Court decision

The Nevada Supreme Court decision last week that picking among pots of local government money to pillage for the state budget is unconstitutional was a tectonic shift. The legislative landscape was instantly transformed.

Gov. Brian Sandoval, who had spent the past year saying he would not support extending 2009 tax increases set to expire next month, reversed course.

Democratic lawmakers, who appeared to have played their last card in their efforts to raise taxes and extend the temporary tax increases — which they saw as necessary to avoid the toughest cuts in Sandoval’s budget — suddenly had some momentum.

Where have the quick, drastic movements left things? Over the next few days, legislative leaders will negotiate among themselves and with the governor, hammering out what to fund and by how much.

Sandoval decided early that extending the tax increases would violate his promise not to raise taxes so he didn’t include the revenue in his budget. But the court decision has Sandoval reconsidering.

What follows is a look at the starting positions for both sides on taxes, K-12 schools, health and human services and higher education: What the governor originally proposed and what the Democrats propose for the $679 million that could be raised by extending the 2009 tax increases.

TAXES

SANDOVAL’S BUDGET

Were the 2009 tax increases to expire next month, consumers and businesses would see tax bills go down. The state’s sales tax rate would drop by 0.35 percentage points. The state business license fee would drop to $100 from $200. The payroll tax rate would drop to 0.63 percent from 1.17 percent on businesses with payrolls larger than $250,000. A rate of 0.5 percent would remain in place for businesses with smaller payrolls.

The mining industry would still prepay its net proceeds on minerals tax at the beginning of the fiscal year. Without that prepayment, the mining industry would not make a tax payment in fiscal year 2012. According to numbers compiled by Senate Majority Leader Steven Horsford, D-North Las Vegas, the average business would save about $5,900 a year and the average household would see an $88 tax cut. Wynn Resorts, Wal-Mart, MGM Grand, Bellagio, Venetian, Aria and Newmont Mining would see the largest tax cuts.

DEMOCRATS’ PROPOSAL FOR SUNSET MONEY

Unable to win enough Republican votes, Democrats waved the white flag on raising taxes and have devoted their attention to extending the 2009 tax increases — a position the Nevada Supreme Court bolstered significantly with its decision. Extending those taxes would bring in an estimated $679 million as consumers and businesses pay the same taxes they have paid for the past two years.

Democrats would use that revenue to reduce Sandoval’s proposed cuts to education and social services. They also would eliminate some of Sandoval’s more creative financing mechanisms: They want to avoid borrowing against future insurance premium tax revenue and taking money from school districts’ debt reserve funds.

K-12 EDUCATION

SANDOVAL’S BUDGET

Sandoval factored into his budget a pay cut for school district personnel of 10.75 percent, according to Chief of Staff Heidi Gansert. After the Economic Forum in May projected the state would receive more tax revenue, the governor restored almost all funding for basic school support but the pay cuts remain. Additionally, the governor’s plan allows districts to lower school bond reserves to pay for operating costs.

Gansert said districts can avoid layoffs entirely if employee unions accept the 10.75 percent pay concessions.

The Clark County School District said if unions made concessions equal to a 7 to 8 percent salary reduction, it would eliminate 1,800 positions, about 900 of which are currently filled.

Were that to occur, class sizes in elementary schools would rise by an average of three students and by two students in middle and high school.

But all of that depends on negotiations between the district and union. The district is asking employees to take a monthly unpaid furlough day, pay more toward retirement and health benefits and forgo pay increases for experience and attaining more education.

DEMOCRATS’ PROPOSAL FOR SUNSET MONEY

Democrats want to let school districts keep their bond reserve money for construction, not the classroom as Sandoval proposes.

Jeff Weiler, Clark County School District chief financial officer, estimates the district gets about $110 million a year from the sunsetting taxes, and if they’re extended, “class sizes might not have to increase.”

Only 800 positions would be cut, instead of 1,800. Additional money would be used to add back teachers, then administrators.

HEALTH AND HUMAN SERVICES

SANDOVAL’S BUDGET

Spending on health and human services — health care for the poor, welfare and care of the mentally disabled and mentally ill — would increase under Sandoval’s budget, but not by enough to make up for the increase in demand for such services and rising costs for things such as health care.

Sandoval’s budget calls for less than 40 health and human services employees to be laid off on July 1. About 5 percent of the positions would be eliminated, said Mike Willden, Health and Human Services Department director. Payments to hospitals, dentists and other providers to care for the poor would be cut 5 to 20 percent.

Counties and local governments would be responsible to provide services costing the state $68 million. And the state would stop reimbursing local governments for about $39 million in health and human services costs.

DEMOCRATS’ PROPOSAL FOR SUNSET MONEY

Democrats want to provide about $80 million more for Health and Human Services than the governor proposes. They would put most of that money — about $50 million — toward eliminating the pay reductions for doctors, hospitals and other providers serving the poor. Without that money, hospitals have said, they would eliminate services or close access to the poor, said Assemblywoman Debbie Smith, D-Sparks, chairwoman of the Ways and Means Committee.

Democrats would fund several programs Sandoval would cut, such as:

• Half the cost of youth parole services, with counties paying the other half. (Sandoval proposed pushing the entire cost onto counties.)

• Group counseling services for the mentally ill.

• Mental health courts. (Sandoval proposed pushing the cost onto counties.)

HIGHER EDUCATION

SANDOVAL’S BUDGET

Sandoval’s original budget proposed cutting $212 million from the Nevada System of Higher Education at the same time it was losing another $185 million in federal stimulus money. He proposed softening the blow by diverting about $119 million in property taxes from Washoe and Clark counties directly to UNLV and UNR — those funds are at risk from the Supreme Court decision. When the Economic Forum increased its revenue projections, Sandoval proposed adding $20 million back to the budget.

Even with the additional money, Chancellor Dan Klaich estimates about 12,000 students would lose access to community colleges and universities, 46 degree programs would be eliminated and about 500 employees would be laid off. Tuition would likely increase at least 13 percent in 2012 and 2013.

DEMOCRATS’ PROPOSAL FOR SUNSET MONEY

If they had gotten their way on taxes, Democrats would have added another

$80 million to the higher education budget. With only the expiring taxes in play, they dialed that back to $60 million. The additional money would not limit access to the 12,000 students and protect the 500 positions Sandoval would cut.

Democrats disagree with Sandoval about permanently dedicating 9 cents of the property tax rate in Washoe and Clark counties to UNR and UNLV. The decision would have given the universities a permanent revenue stream that likely would have grown over time, but perhaps not as quickly as overall state revenue. Democrats voted to replace that money with money from the state’s general fund.

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy

Previous Discussion: comment so far…

Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.

Only trusted comments are displayed on this page. Untrusted comments have expired from this story.

No trusted comments have been posted.