New tax shift
How to balance the state budget: Seize local government money
On Jan. 26, the Elko County Commission voted to empty a $20 million fund earned from the sale of Elko General Hospital and devote the money to paying county debts.
The reason the action was taken was to keep the money away from the Nevada Legislature.
It was a bold action in a state where counties have little power compared to the state. Legislators regularly make the point that “counties are the creatures of the state” and reporters who cover the Legislature in Nevada after covering the same beat in other states are always astounded at how little home rule there is in Nevada.
Elko’s action may become contagious. Other local governments are looking at how to shield their own funds from state government. Some local officials say they are not unsympathetic to the state’s problems, but the state has had repeated opportunities to fix the state fiscal system and did not do it. Local governments were tapped by the last legislature in 2009, as with Assembly Bill 543, which took $150 million from the counties. Moreover, turning to the localities to balance the state budget has been happening for a long time. A decade ago, during the 2001 legislature, Washoe County Commissioner Ted Short was complaining about legislative plans to drain property tax money from the counties. Local officials believe the state should have long since remedied its unstable and unpredictable funding system.
The problems faced by local governments are illustrated by an episode in Southern Nevada. A number of southern local governments and water districts formed a coalition to build a pipeline to put treated wastewater into Lake Mead for dilution. The Nevada Legislature grabbed off $62 million collected by those governments for the voter-approved project. The localities sued to get it back. The city of Reno filed a friend of the court brief in support of the southerners, arguing that if the money grab was upheld by the courts, local government would be discouraged from forming coalitions to solve problems. The Nevada Supreme Court upheld the Legislature’s action. (The pipeline project was halted because of the recession and dwindling population growth.)
But simply taking money is not the only way the state can relieve its own burdens. It can dump them on local governments. Gov. Brian Sandoval’s budget recommends continued state operation of some services that would, however, be paid for by the counties. These include Elder Protective Services; Assistance to the Aged, Blind and Disabled; the Medicaid Waiver; Mental Health Court; food provider licensing and inspection; Emergency Medical Services licensing and training; child developmental services; child protective services for rural counties and youth parole. This shift in responsibility for funding would cost counties nearly $80 million.
On top of that, operational responsibility for some programs would—if the legislature agreed to the governor’s recommendation—shift to local governments. They include child support enforcement, juvenile justice programs, child mental health room and board, youth camps and medical care for tuberculosis and sexual diseases, pre-sentence investigations, senior citizen tax relief, short term emergency welfare assistance. Dropping these programs on local governments would relieve the state of a little more than $40 million.
During his campaign Sandoval supported lifting tax caps on local governments, which would mean that he is balancing his budget by shifting programs or their expense to local governments and then letting them raise taxes to pay for it—a way of raising new taxes to pay for state programs without breaking his promise not to raise state taxes.
Reno Mayor Bob Cashell said he believes the city will take a look at whether there are options similar to Elko’s that it could pursue. “It depends on what they’re coming after,” he said. He said there was some city discussion about three or four months ago, that “any excess money we had, we should obligate it before the legislative session.”
But he also said it’s not a great way to determine spending. He said then, “That’s a hell of a way to run a railroad.”
He went on, “You go out and spend money before you need to spend money, just to rush and spend something before you know what you need to do with it. Now, there’s things we know we need to do—roads and sewer, things like that—that we can commit money to.”
It’s not like Reno has a lot of money to spare, he said, and it would be nice to be able to plan cautiously. The threat of state seizure makes that difficult.
“It’s awful nice to have a cushion, and that’s one of the things we’ll be looking at, is how we’re going to rebuild our reserves, because we’ve used a lot of our reserves in the past.”
Washoe County government is taking a more accommodating approach toward the legislature than Elko County. Washoe decided not to use any of its bill drafting requests for this year’s legislature, hoping to send a message to the lawmakers that the county was not adding to their workload. The hope is that the legislature will go easy on the county in return.
County Commissioner Kitty Jung spoke with Washoe County Manager Katy Simon and the county staff about putting as much available money as possible under contract to shield it. She was told that might not be the best possible strategy because the state has a habit of dumping programs on the local governments without including a check to pay for it. “If we commit all of our money in contracts that are legally binding, we then can’t service other responsibilities with revenue,” she said. “So it could probably put us in a very terrible situation. It’s such a crapshoot.”
Jung does not take a hard line against the notion that the state could dump some of its services on localities.
“And we’ll probably get, in some way, wounded by what they have to do,” she said. “And all [Washoe] asks—‘Just wound us. Don’t be the cause of our death as a local government.’ Because I think there are things that we could probably fill in. It’s not good for local citizens, it really isn’t. But it’s probably utilitarian—like, probably good for the whole of the state. And I think that’s much more realistic. And I think to expect that we can lobby strong and hard enough to keep ourselves totally solvent is completely irrational. That’s not going to happen that way because of the deficit. … And that real deficit also affects my constituents, so I can’t be so hard and fast against them, because they’re servicing the same people that I take care of.”
Some legislators resent local governments because the state does not pay its workers well enough to stay competitive with the private sector or the local governments, and taking money from them is a way of punishing them.
Although Gov. Sandoval spoke in the campaign about bringing state workers’ pay more in line with that of the private sector, Nevada state government actually has difficulty keeping its most skilled workers from leaving for the private sector, which usually pays better. This is particularly true of those with advanced degrees—biologists in conservation and wildlife agencies, for instance, or attorneys who serve as counsel for state agencies.