Doing it on the cheap

Economic development crawls along

In February last year, Nevada higher education chancellor Dan Klaich (second from left) listened closely as Gov. Brian Sandoval offered an economic development plan. Sandoval’s veto threat on taxes has limited legislative action on economic  development.

In February last year, Nevada higher education chancellor Dan Klaich (second from left) listened closely as Gov. Brian Sandoval offered an economic development plan. Sandoval’s veto threat on taxes has limited legislative action on economic development.

Photo By Dennis Myers

Two years ago, a month before the 2011 Nevada Legislature went into session, a conference in Las Vegas looked at the state’s battered economy. It was supposed to be a learning occasion, though it was marked by the traditional state chauvinism and boosterism. For instance, a prospectus for the conference read in part, “For years, Nevadans have understood the need to diversify the state’s economy beyond tourism, construction and mining”—though, in fact, there was substantial doubt that Nevada residents understood any such thing.

For those who were listening, the conference offered a lot of wisdom. Economic experts from other Western states—Arizona, Colorado, Texas, Utah—talked about how they had diversified and expanded their economies while Nevadans shrank theirs. Those states used public works like new airports, some incentives, and especially education at all levels—elementary and secondary schools for some economic development purposes, higher education for others.

But the Nevada Legislature that went into session the next month, with Gov. Sandoval’s tax veto threat hanging over like a sword of Damocles, adopted little more than a maintenance budget. Toward the end of its session, the Nevada Economic Forum—which produces binding estimates of the state’s anticipated revenue—predicted somewhat higher revenue than previously expected. Gov. Brian Sandoval recommended nearly all of it, $242 million, be used by elementary and secondary education, leaving higher ed with about $20 million. The state’s campuses were still left with major cuts and shutdowns—and that came on top of the previous four years of the governorship of Jim Gibbons, when the lawmakers went along with decimating the higher education system. Never in the computer era had Nevada been less able to compete in economic development. Commitment of state revenues to education was far below the national average. “And I just don’t see how we are full partners in that at the same time when we’re cutting $162 million out of our budget,” Nevada higher education chancellor Dan Klaich said during the 2011 legislature.

As the 2013 legislature neared, while there was still an awareness in elite circles that the state needed to repair its education system, little had been done to educate the public to that need. In the fall of last year, NBC News could report, “Many other students in Nevada, however, are giving up. In this world-famous gaming capital, the odds are stacked against them. Just 36 percent earn their four-year degrees within even six years, a smaller proportion than in any state except Alaska. And as tuition rises, enrollment has been falling. That, accompanied by an exodus of college-educated workers, has further shrunk the proportion of 25- to 34-year-olds in this state with degrees, already the lowest in the country.” The boosterish in-state news coverage aimed at locals could not combat that kind of message going out to the rest of the nation.

There seems to be little reason to expect substantial change in higher education spending. Democratic lawmakers announced an ambitious education program but were unable to answer the first question asked about it: How will you pay for it?

Once again, out-of-state news coverage of public relations tricks to make up for actual resources seems more insightful than local reports. Sacramento Business Journal: “If at first you don’t succeed at luring California businesses to a no-tax state, try again after re-branding and partnering with a friend of Google’s. … The Nevada Regional Development Authority is attempting to up its tech street cred with an announcement Tuesday that the group will now be known as the ’Las Vegas Global Economic Alliance’ and has moved into a new office called ’The InNEVation Center’.”

Since the Nevada Legislature meets only every other year, each time the lawmakers and governor adopt a maintenance program, the state loses another two years while adjoining states keep moving ahead.

In 2008, an Arizona think tank warned that state that it was in danger of becoming “an uncompetitive, unsustainable place where the standard of living stagnates or declines and the position of Arizona tumbles from its historic attractiveness to undesirable.” Every year since then Arizona officials have beefed up the state’s competitiveness.

Even more notable was Utah, where in 2005 and 2006 business leaders became alarmed by rising bankruptcies and falling wages, which meant falling taxes and declines in education and public works funding, portending a decline in Utah’s attractiveness to business. Before that trend could get traction, the state responded by throwing $179 million at higher education systems to lure teams of world class instructors and researchers and later imposing a 5 percent corporate tax. It’s called the Utah Science Technology Research Initiative (USTAR). The results have been very good. Dozens of distinguished engineers and scientists are now Utah-based. With USTAR support, numerous companies were created and patents generated (“USTAR,” RN&R, July 12, 2012). “In fact, Utah is proving to be a draw for a number of big corporate players these days,” Business Week reported last year. “Procter & Gamble chose the state when opening its first U.S. plant in more than four decades last year. ”

Wyoming, Idaho, New Mexico, Colorado, Montana and Arizona adopted Utah-style techniques, but though Nevada officials have been briefed on the Utah techniques at least twice, Nevada did not. Two more years went by.

Nevada has not stood still. The 2011 legislature created a “Knowledge Fund” to direct funding to academic research with commercial applications—but put no money in it. The lawmakers also changed the administrative structure of the state economic development program.

It was anticipated that the private sector would be asked to contribute to the Knowledge Fund, but businesses were not going to invest if state government didn’t. Or, as Chancellor Klaich said more tactfully, “When the Knowledge Fund was set up it was specifically anticipated that there could be private donations to it and that subject has been generally discussed within the [higher education] system. I would not say that there has been a concerted effort yet as I think it is appropriate that the State commit before private donors or business could be expected essentially to match that State appropriation.”

Two more years went by.

In the current legislature, Gov. Sandoval has recommended $10 million for the Knowledge Fund for the next two years. That is less than Utah has spent annually since its USTAR program began, and there is no start-up money equivalent to what Utah ponied up. The lawmakers are expected to provide more than Sandoval recommended, but even if they doubled it—as the Democrats want—it would still leave the state playing catch-up with its small state competitors in the West.

All this leaves the state higher-education system, by most indices, well below where it was a decade ago. Since the Gibbons administration, the legislature has been satisfied with not damaging the system any more, but rebuilding to get the system back to competitive seems as far out of reach as ever.