A post-casino future

Nevada Controller Kim Wallin is talking up the need to diversify the state’s economy, cautioning other officials that—unlike past recessions—there is no guarantee the casino economy will ever rebound.

“It’s been about 80 years since Nevada has suffered this bad, and that’s when gaming was legalized in the state to help us pull out of the depression,” Wallin told the Lyon County Commission last week. “As a result of that, I think that gaming was our hope and our savior 80 years ago, but gaming is our downfall now because we’ve gotten used to the easy money, and we’ve placed such a reliance on it that we always thought we don’t have to diversify our economy, we don’t have to broaden our revenue sources.”

In an interview, she did not shy away from the implications of her statement—that if tourists are no longer paying the state’s way, residents will have to take up the slack.

Over a couple of generations, state legislators have made an art out of tapping other people’s money to keep residents’ taxes low, as with casino taxes, room taxes and sales tax on prepared—usually restaurant—food. But if tourism does not rebound after the recession, those sources will no longer pay the state’s way, at a time when Nevada needs to beef up higher education for its goal of attracting energy investment.

“Well, you know, we have to start facing up to the hard choices that we’re going to have to make,” Wallin said. “We’ve had it good for so many years. And because gaming was our way out of the Depression about 80 years ago, we came to rely on that source as being the way that we fund our state. And the times have changed, like I’ve said. We’re not the only game, so to speak, for gaming anymore. And I think because of the easy money—I’ll call it easy money—it’s kept Nevada from making the tough decisions that we’re going to have to sit down and make.”

She said there is no likelihood that the public will repeal the ban on a state income tax in the Nevada Constitution, so if the state is going to follow through on its effort to become an energy-exporting state, it will have to find money from other sources to invest in the education resources high tech companies demand.

“And the other thing that Nevada has to do is something that we haven’t focused on because of our reliance on gaming, is we need to have an educated workforce here,” Wallin. “And that’s probably one of the big complaints when companies want to come into Nevada.”

At one of Wallin’s appearances, she was asked, “But aren’t low taxes—don’t they go and bring more businesses into the state?”

Wallin replied, “Companies do not come to a state just because of the low taxes. They come to a state because of quality education, quality lifestyle, and having services in place for their workers. Because if low taxes brought businesses into the state, I mean, we should be having tons of businesses coming from California into our state, and we aren’t.”

She acknowledged that enhancing education to attract corporations that then will pay taxes will be expensive, but she said the state’s investment must precede the influx of companies. And it won’t be cheap.

“It’s kind of the chicken or the egg, right?” she said. “I guess with this crisis, you know, hopefully the public will start sitting down, saying, ‘All right, what can we do if we really want to make Nevada a great state like it once was?’ We need to go and make those hard decisions and step up to the plate.”

In 1983 the Nevada Legislature, at Gov. Richard Bryan’s recommendation, created a new state program to attract businesses to the state in an effort to diversify the economy. It was a reaction to the crippling 1981-82 recession. While that program had some successes, it was also a period of growth in the casino industry. As a result, casino growth kept pace with the arrival of new businesses and in the end, economist said, the state’s economy was diversified little if at all.

And as time went on, the sense of urgency imposed by the 1980s recession was lost. Even the advent of tribal gambling in the 1980s (which would eventually come to California, Nevada’s big market) did not cause state legislators to step up efforts to build a post-casino economy. The casino lobby even funded a study that claimed the economic development program was not worth its funding.

Historian Guy Louis Rocha, who has been speaking to community groups around the state about the need to let go of reliance on the slowly declining casino tourism economy, praised Wallin for being willing to say things that other politicians have not. Rocha said many state leaders are like those who governed Nevada in the long state depression of the 1880s and ’90s, endlessly expecting the Comstock Lode to come back instead of coming to grips with the state’s problems. Now, he said, state leaders are making half-hearted efforts at diversification while expecting casino tourism to recover after the recession.

“She’s saying the king has no clothes, and I really appreciate her candor,” he said. “What I would say is that we always thought that we don’t have to diversify our economy. … We diversified but nowhere near what we needed to, and I would say that that’s where gaming hurt us, that even when we did make a reasonable effort to diversify, we still were addicted to gaming.

“So I would congratulate [Wallin] in being forthright here and really saying some things about an industry that’s had its way with the state. Certainly we’ve enjoyed relying on it now, and now we’re in the position of trying to figure out, ‘What do we do now?’ and we’re late to the game.”

For instance, he said, plans to connect the power grids of Northern and Southern Nevada next year should have been done in the early 1990s, but the political leadership was lacking. Now Nevada is playing catch-up to states like Utah with better planning. And the problem of leadership is still with the state, Rocha said, because most politicians have not embraced Wallin’s thinking. He said they’re like the state legislators of the post-Comstock depression.

“They’re still drinking the Kool-Aid of casino tourism,” he said.

Rocha is also less optimistic than Wallin about the public pitching in. He said Nevada’s current tax structure attracts people who bring their financial assets to the state but want to avoid engagement with the community or responsibility for it. Many Nevadans, he said, are “residents but not citizens.”

Rocha’s message of warning, though, has received a positive reception from his audiences. At one conference of county school board members—a relatively conservative group—participants crowded around him after his remarks, seeking more information.