Bill Clinton once said, “It would be great to be the president like Reagan, who cut taxes so that every governor, including Republicans, had to raise them.”
Gov. Jim Gibbons is following the Reagan example, proposing to raise property taxes indirectly by taking them from Washoe and Clark localities, making them find new sources of the lost revenue.
This is a plan he did his best to mask from the public in his televised message to the Nevada Legislature on Jan. 15 by describing it as a “temporary reallocation of some revenues from our most populous counties to the state general fund to help us through these challenging times.”
His budget director was a little more candid: “We’ve looked at it as the counties have been—that the counties have a stable revenue source. The counties have historically been in a better position, especially when it comes to paying their employees and … we tried to balance out in filling this gap with as many different ways as we could and tried to keep it somewhat even. And that was one piece that was missing, was county involvement, so that was where that came in. … Property tax is generally a more stable source.”
However, the relationship of local to state governments normally is one of states aiding the locals, not the other way around.
And in Nevada, the counties have the more stable property tax as a revenue source because state government swore off property taxes in favor of reliance on the sales and gambling taxes in 1981. At the same time, local governments were put under caps that prevented them from approving other-than-minor property tax hikes without votes of the public.
“It’s very serious—$12 million over the biennium,” said Washoe County Manager Katy Simon. “We don’t know if it’s applied to all local governments or if the proposal is just to take it away from the county’s portion. But either way, it will hit hard. … We’re already cutting $10 million out of our budget. We’re facing layoffs of employees.”
The fact that local governments have been able to learn so little about the plan suggests to some officials that it is uncooked—that little planning for how it would work was done before it was added to the Gibbons program.
On the day of the governor’s speech, as word spread that he wanted to tap the local governments for new taxes, both Republicans and Democrats were hostile, and the assumption was that the idea was going nowhere. But Democrats may have warmed up to the notion, because they began making neutral statements that commit them to nothing. That has complicated the life of local officials.
“We are not putting together contingency plans [for the loss of property tax revenue] because we don’t know how far that particular proposal will go,” said Simon.
Simon said the state has a different fiscal system and that state officials sometimes don’t understand the consequences of their decisions affecting the local governments.
“We have binding arbitration we’re involved with,” she said. State workers do not have collective bargaining.
Losing property tax money on top of the decline in sales tax earnings would aggravate things still more.
“That’s such a huge portion of our revenue,” Simon said. “We’ve had sales tax revenue go down 28 of the last 29 months.”
Nor does it stop there. Assemblymember Pete Goicoechea and other lawmakers object to Gibbons’ plan to take the Indigent Accident Fund, supported by local property taxes, and use it to match federal Medicaid funding. That would presumably force the counties to pick up the cost of indigent health with a different funding source. It would be easier, legislators say, for Gibbons to deal with the Medicaid problem directly instead of through the circuitous indigent maneuver—but that might force him to agree to new taxes. By using the indigent money, he forces the counties to do the tax hiking.
But that won’t work, at least in Washoe County. The county has no elbow room on property taxes. In 2007, the legislature and Gibbons imposed limits on counties so they can only increase 3 percent for primary residences and top out at 3.64. In Washoe County, it’s already topped out.
“Washoe County could have raised the property tax rate about 30 cents, which we did not do,” Simon says.
But in the months since, other jurisdictions besides the county have used up the rest of Washoe’s 3.64. (The county is a patchwork of overlapping jurisdictions—cities, the school district, etc.)
Then there is the possibility of unfunded mandates hitting the county.
“The state is talking about shifting new services to us,” Simon said.
An example would be having county assessors’ offices administer the state senior tax rebate program.
Reno Mayor Bob Cashell, a former lieutenant governor and Nevada Republican chair, was nearly apoplectic when he heard Gibbons’ plan and told everyone who would listen (including Democrats at the Washoe inaugural ball on Jan. 20) the same thing:
“He’ll veto [Democratic] tax increases, and then he can stand on the sideline and say, ‘Oh look! The Democrats did it!’ … They’ll override him, good Republicans included.”
In his town hall address the day after Gibbons’ message, Cashell had more to say:
“Sales tax, property tax, room tax—almost all of our revenues have continued to decline. The governor’s budget proposal diverts local taxes to the state level, which could further reduce our revenues. We will work together with the county and Sparks to defend our revenues from being poached by the state.”
Cashell said later that he can’t find anyone in local government who was informed that the proposal was coming.
“I’ve always had better communications than that from the governor’s office. Even when I was chairman of the Board of Regents, they would tell me what was going on. We need to sit down and talk about things like this. … Well, I think it’s wrong, and I hope we’ll be able to sit down with legislators on both sides and work this out. … It would kill us.”
He said Gibbons was not being responsible when he made his “No new taxes” pledge in a state with unstable taxes and a history of budget crises, and the public should not be made to suffer because of that pledge now.
“He painted himself into a corner. There’s no question that the state needs to get more stable taxes, but we need to sit down and talk to each other before we do these distributions. They [state government] need a stable tax. They can’t live with a floating sales tax.” He said he thinks that can be accomplished without the state using property taxes, but that it requires all the parties, including local government, being in on the discussion.
Cashell, who served as a member of the Nevada Board of Regents from 1979 to 1983, said he was disturbed by Gibbons’ draconian cuts in higher education (more than a third of the entire higher education system, 48 percent of UNR and 52 percent of UNLV).
“Made me sick. I just can’t imagine—you could close all the community colleges and you still wouldn’t get there [to a balanced budget]. The community colleges have done everything they were designed to do for the local communities. If there’s fat, go in and take care of it, but don’t carve it up like this.”