Nevada Legislature nears end

As legislative staffer Lauren Soper carried what appeared to be a small book from the Nevada Legislature to the governor’s office, she was protected by three guards, John Drew, Nick Gillen and Dennis Tucker. The impression could be that she carried something precious and valuable.

That case can be made. The book Soper carried was the product of a republican process in a democratic society, the outcome of four months of work, and that has value. But that was not the reason for the guards. Speed and an unimpeded passage were. It was a half hour before the governor’s office closed and state legislators did not trust the Gov. Jim Gibbons to keep his doors open after 5 p.m. If Soper’s charge—actually two senate bills—did not reach the governor’s office by then, legislative leaders worried Gibbons’ office would be closed. That would delay delivery until after the Memorial Day holiday. The governor could then sit on the bill, forcing an override vote of his expected veto into a special session in which he controls the agenda. No one in either party wanted that.

These last bills were the final two to arrive at the governor’s office. All day long bills that, in their totality, make up the tax program and two-year budget of the 2009 Nevada Legislature had been voted on and sent to the governor—eight bills in all, not counting miscellaneous other measures dealing with small taxes and fees.

After the expected override of the governor’s veto, lawmakers will scatter to their homes, hoping that their budget work will last until 2011. Nevada’s legislature meets only every other year, so foresight and planning must be built into every tax program and budget. Some years are better than others. In the nearest analogy to the current situation, the 1981 legislature nearly doubled the sales tax, and then the state was hit with a recession a few months later. On its first day, the 1983 session had to quickly transfer some retirement money into the general fund to keep the state’s checking account balanced.

There’s another analogy to that 1983 session, too. The 2009 tax package was finally sent to the governor only after Republicans and Democrats agreed on an “ironclad” sunset (automatic repeal) of tax increases enacted to make this year’s budget balance. But there is no such thing as an ironclad sunset. One legislature can’t bind the next. A sunset was put on the huge 1981 sales tax hike, too. But when the 1983 lawmakers arrived back in town, it was the sunset, not the tax hike, which was repealed.

As to whether the budget will carry the state through two years, there are storm clouds in sight. The legislators’ Fiscal Division has kept them as up to date as possible on what federal dollars can be expected, but it’s a moving target.

A study by the National Priorities Project shows that in the next fiscal year, Nevada will receive more federal money for Medicaid and a state energy program—but the same amount or less in every other category. Federal dollars for children’s health insurance, weatherization for the working poor, heating and energy assistance for the working poor, Title I education grants, Head Start, and community development block grants will all decline. Social services block grants and energy efficiency block grants will remain at the same level.

“I haven’t heard anything about that,” said Assemblymember Sheila Leslie, vice chair of the Assembly’s budget committee. “I mean, we’ve just been focused on the stimulus. … I have not heard any of that. Why would that be?”

Federal funding for other small Western states like Utah and Wyoming followed the same general formula as Nevada.

The budget written by the lawmakers for 2009-2011 is larger than that proposed by Gov. Gibbons. In real dollars, it is smaller than the budget enacted by the lawmakers two years ago, so service levels that were maintained in the past may not be in the next two-year period. It is funded not with new taxes but with hikes in existing taxes—the business payroll tax, sales tax, car registration fee, annual business license fee, room tax, plus a raid on county funds and federal stimulus money.

The final tax program and budget was, to the lawmakers’ own surprise, the product of a genuinely bipartisan process that had none of the rancor that accompanied the monumental 2003 battle over taxes. There was even some latter day appreciation for that 2003 tax package. “If we hadn’t passed that, we’d have had to raise another $800 million now,” one GOP member said.

Democrats had the majority and Republicans had the time deadline to give them each power. Senate GOP leader William Raggio, knowing the Democrats had to deliver the final tax measure to the governor by 5 o’clock Friday, was able to use that leverage to get everything he wanted, including the feckless sunset. Democratic senate leader Steven Horsford had to keep his eye on his most important goal, thus yielding on the smaller issues. The only way he could have avoided being in that position is if he had driven the budget committees to get the budget done sooner—something that hasn’t happened in years.

Assuming the governor’s veto is overridden as expected, the lawmakers still have one major task to complete—arrangements for a tax study to be done between now and the 2011 legislative session.

Nevada has had several such studies done since World War II, and many of them have been useful and influential. The most influential was the “Zubrow Report,” as it came to be known. (The lead expert on the panel that wrote it was Reuben Zubrow.) Commissioned by the legislature in 1959 and delivered in 1960, it recommended against ever letting the sales tax get too high and against depending on tourist taxes.

Those recommendations were followed for many years, but eventually the state broke away from them, most notably with the 1981 sales tax hike. Ever since, the state has experienced chronic budget crises.

In 1987, recognizing that the state had gone off the tax policy tracks somewhere, the legislators commissioned a new report from the Urban Institute and Price Waterhouse. The final product found that Nevada was in pretty good shape, but that some strains were coming, and the state would need to enact some tax changes in the 1990s. That lag time proved to be fatal.

“The one that Price Waterhouse did didn’t need to be in place immediately,” Senate Republican leader William Raggio later said. “They projected something like a 10-year period before taxes would be necessary or revenues or change in policies. And, you know, of course it got forgotten because we had good times. Things kept rolling in, and we were doing retroactive stuff, [catch-up] pay raises, retroactive.”

No one was put in charge of institutional memory to later remind the lawmakers that they had tax changes to enact, so it never happened—public officials seldom need coaxing to avoid difficult tax decisions—but a couple more state budget crises did.

Some legislators, such as Leslie, believe the 1988 study is still viable and—together with studies she has read by the University of Nevada—could avert the need for a new tax study.

But a new study was one of the points of dispute between Republicans and Democrats in that final battle that got the tax program delivered to the governor by 5 p.m., and in all likelihood, Horsford and Raggio are now intent on it.