Uneducated

At a time when next-door Utah is having enormous success in luring new corporations by pouring money into its higher education system, Nevada has competed by shredding its campuses.

Gov. Brian Sandoval last week announced his support for raising $620 million in taxes back up when they expire and said he would recommend no more cuts in education to the Nevada Legislature.

“I’m not going to cut K-12 or higher education,’ the governor said at a Board of Examiners meeting.

That leaves the state where it is now, after years of cuts, with campuses that are in no position to compete with other Western states whose economies are showing greater recovery and thus have greater ability to rebuild their educational infrastructures. And given inflation, keeping education spending at its present level would mean continuing deterioration.

Nevada higher education chancellor Dan Klaich said he is not assuming that the governor’s promise not to cut education means the state will simply rest there.

“I don’t read the action of the governor, which I am very supportive of, as saying that’s the end of the discussion,” he said. “But what I do think he did was he gave us some very significant room to plan.”

He said he has heard reports that the governor is considering restoring pay cuts and merit and longevity benefits, “which would be a very significant improvement for us.”

There are growing challenges to the state’s strategies for luring businesses and workers to Nevada, including the notion of incentives.

Nevada faces aggressive competition from other small Western states and is being especially outstripped on the Wasatch Front. Utah has been named two years in a row by Forbes Magazine as the best state to do business and has lured numerous major corporations. Just last week new Utah legislation became effective that will ease the way for Ebay to expand its operations there, adding 2,200 jobs to the 1,500 already existing. In Nevada, progress in jobs is usually counted in hundreds, as when Customlink, a shirt manufacturer, said this week it would bring 75 to 100 jobs to a new Reno location.

Last month, NOW Foods announced it will build a new plant in Sparks. Gov. Sandoval said, “This is exactly the kind of project that shows how teamwork can pay off. We worked with business leaders and the universities, EDAWN [Economic Development Authority of Western Nevada] and the local governments, and it’s paying off. It’s a great success story we can use to bring other businesses here.”

The NOW plant will employ 100 people.

All along, there have been doubts about Nevada’s supposed strategy of becoming a Mecca for renewable energy, and it is facing more questions all the time. Last week, the Virginia think tank State Budget Solutions issued a report, “Green Jobs Don’t Grow On Trees,” that questions the approaches taken by states like Nevada.

“States face a hard and fast budget constraint; [because of local legal prohibitions] they cannot deficit spend or take on debt for general operating expenses,” the report said. “This means that every dollar spent by states on green job training programs, grants to green firms, or subsidies for renewable energy producers is a dollar that cannot be spent on teachers’ salaries, educational tools, or social safety nets.”

The report also says that incentives or subsidies interfere with the workings of the marketplace: “Many green incentives come in the form of tax breaks. … Without a doubt, financial incentives are the most costly way for states to promote green industry; whether they provide a commensurate benefit is less clear.”

Even if Nevada wanted to compete with other states in incentives, it would likely fail—some states offer up to 22 different incentives. Nevada offers seven, and their value is in dispute.

The report adds, “Green growth proponents are convinced that if they could only offer the right subsidies, their agenda would prevail. Unfortunately, subsidies are doomed to fail because they try to make fundamentally economic decisions through the political process. State officials, no matter how well-informed they are, simply don’t know what demand for green products will look like or what the opportunity cost of different technologies may be. Examples like Solyndra, Evergreen Solar and Cascade Grains illustrate the enormous costs when the government gets it wrong. Far from being the exception, failed investments are by far the more likely result when state governments try to steer the market.”

Workers

Whether a state has the workers a company needs is always a consideration on relocation. Executives who go to Nevada’s state economic development website will find verbiage like this:

“Nevada’s workforce consists of skilled labor and an opportunity to create and maintain a pool of talented workers. … Nevada’s workforce and comprehensive training services can not only fulfill, but exceed the expectations of any employers. … Nevada has had one of the fastest growing skilled workforces during the last decade. During the period 2002-2006, Nevada was home to a lower unemployment rate than the national average, due to dynamic growth and burgeoning economic diversification.”

This is pretty good tap dancing. It dances entirely around the recession, which is generally dated from 2007.

Less stale data is also less positive. During the recession, Nevada’s population has gone from the fastest rising in the nation to substantial emigration from the state and growth that depends nearly entirely on births, not new arrivals from out of state. Among those in flight from the state were skilled workers. And among actions taken during the recession was decimating higher education, which reduces the state’s ability to produce skilled workers. Those needing workers knew where to look. At one point—September of last year—a Canadian newspaper even pointed to the state as a lode to mine: “In Nevada, [joblessness is] 13.4 per cent. … We need workers. Americans need jobs.”

At the higher education level, when educated people leave the state, they often take grant moneys with them, increasing the cost to the state. “Research money tends to follow people, not institutions,” Las Vegas economist Steve Brown said last year.

This week Brown said, “If you look at the employment data provided by DETR [the state Department of Employment, Training and Rehabilitation], you can get a sense [of the loss of skilled workers] by looking at categories of jobs and where they’ve shrunk. The categories haven’t gone away but they have a lot fewer people than they did a few years ago. That includes construction. … But certainly we have smaller employment bases than you’ll find in Arizona or California.”

Construction was one of the two strongest drivers of the state’s economy for the past half century.

“What draws people back would be job creation,” Brown said.

Luring both companies and workers back to Nevada depends in large part on education spending. The companies see higher education as a component of research on which they depend. The companies and workers see good schools as necessary for quality of life.

By saying he will make no further cuts in education, Gov. Sandoval is embracing the status quo, an education level that is already keeping workers and companies away.