Nevada’s been growing—to the tune of 900,000 people in the past decade. And why not? It’s a great place to live, even if the residents and lawmakers are a bit short sighted. Population growth is outpacing our state’s economic growth—as it has been for years. Every other year, when the Nevada Legislature meets to figure out how to spend the state’s money—about half of which comes from gambling and tourism—they tend to hold out for a miracle. Then, finally, faced with the demands of a balanced budget, they trim spending here and there. In 2001, those trims turned into meaty hacks that left public schools and social services with gory gaping wounds.
Population increases. So does the gap in funding. It would take, as you’ve no doubt heard, a whopping $700 million in new revenue just to keep our state spending at its current level—gaping wounds and all.
We don’t have $700 million. This presents a challenge to those at state agencies who’ve spent the past two weeks defending their diminishing share of the pie during state budget hearings. It’s going to mean some tough calls for those convening in Carson City on Monday for the 2003 Nevada legislative session.
Gov. Guinn identified only $24 million in new revenue for the next two years. Making a state budget work with this amount of money would be a disaster, he told Nevadans in his State of the State speech.
“It [would mean] leaving thousands of senior citizens without nursing home care, affordable medicine and the dignity of their independence, forcing 27,000 new students into overcrowded classrooms without employing 900 new teachers and without buying new textbooks, denying access to higher education for our high school graduates, eliminating health insurance for 25,000 needy children and cutting prescription medicine for Medicaid recipients and the mentally ill,” Guinn said. “These are not threats, they are realities.”
There you have it. Anyone who would choose to attempt this would be making “a choice of political cowardice,” Guinn said, calling the state of our state “fragile.”
But fragile seems too delicate a word.
“Train wreck” seems more apt.Here’s the trouble: Nevada has bet more than half its money on what’s starting to look like a losing hand.
While most states get more than a third of their money from a personal income tax, in Nevada at least half of the state’s revenue comes from gambling and tourism.
This heavy dependence on one source of revenue makes Nevada’s tax base “unquestionably among the narrowest in the nation,” according to the “Analysis of Fiscal Policy in Nevada,” released in November by the Governor’s Task Force on Tax Policy.
It’s inherently dangerous to have this much of the state’s money riding on the health of Nevada’s core industry. For example, the national post-Twin Towers decline in tourism coupled with a rise in tribal casinos hasn’t exactly resulted in a gambling boom for the Silver State.
The task force’s report warns of the instability of a narrow tax base.
“While Nevada’s economy has proven itself resourceful and resilient, it has also shown that it is neither impervious nor indestructible,” the report says. “To believe that Nevada’s economy and tax base are somehow both narrow and stable is to turn a blind eye to history and economic reality.”
While most Nevadans realize that the state can’t cut much more of the budget unless it starts turning off the electricity in public schools, there are those who don’t believe government can be trusted to spend money wisely. A state law that says that any proposal to raise taxes must be approved by two-thirds of the state Legislature. (Republicans hold 13 of 21 seats in the Senate, while Democrats hold 23 of 42 seats in the Assembly.) These anti-tax folks suggest that the state should “just cut the fat.” The task force, created by the 2001 Legislature to study the possibilities of broadening Nevada’s tax base, heard 30 hours of testimony on the subject of fat cutting and reviewed dozens of written submissions.
“There are those who would argue that state services are woefully underfunded, and there are those who would argue that the state provides too many services at too high a cost. The identification of optimal public-service levels most assuredly rests in the eye of the beholder.”
Tell that to the drivers of overcrowded school buses. Or to those teachers held to new stricter standards of such national legislation as Leave No Child Behind, who haven’t been given the tools needed to make changes. Or to the disabled, to uninsured sick children, to seniors unable to afford prescription medication and to low-income pregnant women.
“Pick almost any index of social well-being, and Nevada ranks at or near the very bottom of the 50 states,” wrote a New York Times reporter last year, “though it ranks near the top in personal wealth.”
Gov. Guinn, who falls in the “state services are woefully underfunded” category, has called those who want to continue to cut state spending “irrelevant.”
Guinn agrees with most of the task force’s new and increased tax recommendations. He’s for hefty increases in cigarette and alcohol taxes, corporate filing fees and slot machine license fees. Guinn is asking legislators for an immediate increase in the business activity tax (a tax paid by businesses for each employee) from $100 to $300. He proposes a 15-cent increase (per $100 valuation) in property taxes—that’s about $150 on a $100,000 home. He’s seeking the creation of an admissions and amusement tax that would raise the price of things such as movie tickets by a few dimes. A new gross receipts tax would impose a one-quarter-percent levy on all Nevada businesses with gross revenues of more than $450,000, an amount designed not to discourage small-business start-ups.
Though Guinn doesn’t mention that touchiest of subjects—a personal income tax—he’s still proposed plenty of new and improved taxes.
“Our tax system is broken,” Guinn said. “In order to build a more prosperous Nevada we need to change that system.”
Supporting Guinn’s quest to broaden Nevada’s tax base are educators, social-service providers and the members of such coalitions as the Human Services Network and the Progressive Leadership Alliance of Nevada (PLAN). Broadening the tax base is the one legislative decision that’ll make or break almost every other issue.
“We feel that cutting the budget is definitely not going to cut it this time,” said Jan Gilbert, a PLAN lobbyist who represents more than 40 member groups. “This is not a far-out proposal. We need money. We feel we need to improve funding for education and human services.”
“The budget has been cut and cut and cut,” said Julia Ratti of the Human Services Network, which has 60 member groups. “From our standpoint, there just is no place left to cut, no place left to go. … Just to begin, to recoup last year’s 3 percent across-the-board cuts, just to get that back would be $16 million [in money for social services]. Maybe that’s not a lot, but those are people that this is impacting.”
No one is asking for “optimal” state services. The best many hope for is “adequate.” And the only hope for “adequate” is not only to make up for an anticipated $700 million shortfall in state revenue that would retain the pathetic level of services offered now, but to make enough money to increase spending a bit so that state services can inch their way toward improvement.
The crux of the anti-tax argument splits into two streams of argument. The first is simple: “We’re Nevadans, gol-durnit, and we don’t like to pay taxes.”
The slightly more sophisticated argument is that throwing money at a problem won’t make it better. That’s the point of view of such groups as the Nevada Policy Research Institute, a think tank that boasts of a political philosophy that leans about as far to the right as you can get without shaving your head, burning crosses or joining the Independent Americans.
“The most fundamental issue facing this legislature is whether [state legislators] will actually address the real sources of the state’s financial embarrassment,” said Steven B. Miller, NPRI policy director. Miller is not a lobbyist, though he will testify at the Legislature when asked. “It’s not that we’re not paying enough taxes. The real problem is that, some years ago, the brakes came off our fiscal vehicle and it’s been rolling downhill ever since.”
Miller’s basic argument boils down to the concept that, sometime in the ‘60s, governmental mucky-mucks began to steal their way into Nevada’s lawmaking apparatus, turning to obscene government spending that did more to feed a giant bureaucracy than it did to help the people.
Nowadays, at least during the 1999 session, 28 of Nevada’s 63 lawmakers, Miller said, were public employees or married to them.
“They have different incentives, different orientations,” he said. “For regular taxpayers, a tax cut puts money in their pockets. [The lawmakers] see money taken out of their pockets. … They think a government program is the solution to every political ill. Others look at needs in society and see these as something that maybe a business or private enterprise could meet.”
One leader in the anti-tax camp is Nevada Assemblyman Bob Beers, who earlier this month released a list of “enhancements”—$918 million of what he calls additional spending approved in the past three legislative sessions—that he proposed cutting.
This left folks at PLAN shaking their heads.
“Despite these so-called enhancements, we’re still at the rock bottom of every list you’d care to see,” said Jon Sasser of Washoe Legal Services, a PLAN member. He referred to recent studies and news releases that show Nevada as 51st (including the District of Columbia) in the nation for Medicaid expenditures. And the recent Children’s Advocacy Alliance report that gave Nevada a D- for health programs for children and an F in education.
“We’re getting Ds and Fs on services for kids,” Sasser said. “Get rid of those enhancements, and we’re back to the Stone Age.”
PLAN argues it’s high time businesses start paying their fair share. The tax proposal they’ve prepared to introduce to the Legislature includes a 5-percent tax on all business profits over $50,000 and a 6.8 percent investment tax for those with incomes over $100,000.
In 46 other states, business profits or income is taxed, PLAN contends. But not in Nevada. And Nevada is one of only four states that don’t collect a corporate income tax.
“Out-of-state corporations such as Wal-Mart and Bank of America are paying virtually no state taxes in Nevada. … They pay these taxes in other states and remain profitable,” a report by PLAN states.
“The taxes we’re looking at are geared toward large businesses,” Gilbert said. “They won’t hit low- and middle-income people.”
Bob Fulkerson of PLAN was even more vehement: “We feel the Wal-Marts of the world should be paying their fair share, and they’re not.”
The governor, in his budget, put in plugs for all-day kindergarten in at-risk schools and the continuation of signing bonuses to attract competent teachers. These are just a couple of facets of a proposal called “iNVest: Investing in Nevada’s Education, Students and Teachers,” a funding and accountability plan put together by Nevada’s 17 school district superintendents to introduce the concept of “adequate” funding for schools to the state Legislature.
To start with, the plan asks the Legislature for about $85.4 million—just to make up for the money cut from Nevada’s schools in the past three legislative sessions. Then, to provide basic support to the schools, iNVest calls for building annual inflationary costs into the district budgets and increasing funding for textbooks and supplies by about $50 per kid (enough to buy about one book or a tiny fraction of a new computer). That’s another $80 million and change.
You remember the cuts Washoe County had to make in March, right? New buses, textbooks, the Talent Academy, sex ed, driver’s ed and a popular music program for fifth-graders ended up on the block. Kids were added to high school classrooms to make ends meet. Across-the-board budget cuts complicated everything from purchasing classroom supplies to hiring janitors to clean the toilets.
This fiscal year wasn’t the first time the Washoe County School District had to cut its spending. Despite skyrocketing enrollment and overcrowded conditions in many schools, most county school districts in the past three legislative sessions have been faced with a funding gap that doesn’t keep pace with growth. In Washoe County, the disparity was $1.6 million for 2001-02 and another $8.5 million for this fiscal year. Northern Nevadans got off much easier than Clark County, a.k.a. Las Vegas, which was stiffed about $37.9 million in 2000-01, $15.3 million in 2001-02 and another $6.4 million this fiscal year. That left little money to address a teacher shortage of crisis proportions there.
“Clark County is having a horrendous time,” said Washoe County School District Superintendent James Hager. “So are some of the outlying school districts. … At this point, we [in Washoe County] have been able to get well-qualified teachers applying for jobs. But to be competitive, you have to look at what a school district employee is paid. If we’re going to carry out the important job of educating children, we need to be competitive with our salary and benefit package.”
Studies show that teacher quality has a direct correlation with student performance. Being able to compete for the best and brightest pays off in higher test scores, lower dropout rates and more students going to institutes of higher learning.
Nevada high schoolers have to pass proficiency exams to get their diplomas. But in many high schools, Hager said, subjects such as math and science are being taught by teachers who aren’t “endorsed” to teach math or science, because of a lack of qualified applicants for these jobs. The iNVest plan calls for $3,000 stipends to attract teachers qualified in math, special education and English as a second language.
Also, teachers who remain in at-risk schools would receive $2,000 for hanging in there.
“We’d like to keep teachers and principals consistent in at-risk schools,” Hager said. During a school board meeting with Hispanic parents, he overheard parents asking the school board president an important question: “Why do you put your least experienced teachers and principals at your most challenging schools?”
That brings up another pertinent trend at Washoe County schools.
“We don’t get the number of people applying for principal jobs that we once did,” Hager said. That helps to explain iNVest’s request for about $382 million to attract and retain an “adequate” work force.
Finally, iNVest requests $106 million for increased instructional time for students (all-day kindergarten in at-risk schools, along with more summer school and job training opportunities) and the implementation of a classroom discipline program at a cost of about $66 million.
Classroom discipline programs?
Well, with the state’s budget-cutting move to close group homes for young people, limit mental-health services and shut down an entire juvenile detention facility in Las Vegas came an influx of new challenges into the schools.
“Kids were released from these group homes and sent back home,” Hager said. “We have to take any student that walks through our doors. And some of those students have behavioral problems.”
Surprise. Poorly thought-out budget cuts often end up costing the state of Nevada more money in the long run.
The argument against funding schools? Folks such as Miller at the NPRI aren’t so sure that educators really want more money for teaching. After all, they became teachers because they want to see kids learn, right? Miller said he even knows of some teachers who’ve taken pay cuts to work in environments that he claims are more conducive to learning, such as private schools.
If only the state allowed the invisible free hand of the market to have its way—just say vouchers—teachers would be so thrilled they might even agree to a pay cut. Then, as schools compete with one another for the best and brightest teachers, the cream would rise to the top and be paid accordingly. The lumps would learn to swim. Or, following this line of logic, they’d sink.
A dwindling number of tourists translates to more than just sagging state revenues. Industry layoffs have catapulted the number of low-income Nevada residents on Medicaid to 165,000, and another 35,000 Nevadans are expected to need assistance before the end of 2005. Also, the number of individuals qualifying for Temporary Assistance to Needy Family grants has grown by 54 percent.
It’s important to realize that Nevada doesn’t exactly have loosey-goosey income guides for this kind of assistance. Nevada has some of the tightest eligibility requirements in the nation, and so it ranks 51st (including the District of Columbia) in the amount it doles out in, say, Medicaid assistance.
“And we are significantly lower than No. 50 on the list,” said Julia Ratti, head of the Human Services Network. “We’re already at the bottom of the barrel. You can’t get any worse.”
If the state doesn’t maintain even its current, desperate level of funding, practically no one who needs help will get it. Also, the lack of money that the state spends on human services correlates to huge reductions in federal matching funds. Each state dollar spent on welfare, for example, is matched by two federal dollars.
In other words, you have to spend money to get money. It’s no surprise, then, that the Tax Task Force found that Nevada also ranks lowest nationally in federal funding.
“Had Nevada obtained its … share of intergovernmental transfers, it would have reported hundreds of millions in additional funding,” the task force report states.
In some cases, you have to spend money to save money.
For instance, a disabled person who qualifies for Medicaid can get an assistant to help out at home with simple chores, and that may make the difference between independent living and being institutionalized, said Paul Gowins of the Center for Independent Living.
If restrictions are tightened due to budget cuts and that disabled individual loses Medicaid support to live at home, he or she will end up in an institution—at a much greater cost to the state.
“That’s just one of the many issues on people’s minds,” Gowins said.
State lawmakers will be addressing many more issues this session, from the funding of higher education to the oversight of utilities and mining to the administration of the death penalty in Nevada. But the overall question of funding state services and the debate over the quality of those services will prove essential to nearly every other debate.
Look for a busy, contentious, passion-filled 120 days.
“It’s going to be one wild session, boy,” PLAN lobbyist Gilbert says. “I think everybody agrees on that.”