Sunday Morning

Yesterday, the Senate overturned the Governor's veto on SB 201/RTC5. We just need a vote in the Assembly and that bill will become law!

All of the energy bills have fallen into place, but Debbie Smith's attempt to change the STAR Bond process may die in the Senate. This has been her main priority this session, and one she has spent countless hours on. There are developers who claim to have made their plans based on the current formula for tax abatements, and they have been working overtime on this bill.

The Speaker certainly wants to override the governor's misguided veto on her bill to create a K-12 education rainy day fund.

The Raggio-Horsford tax study is a done deal.

Ironically, the one thing that may be holding up the session adjournment is the Governor's veto stamp! While he has railed against the wasted time and money of the session, his record-setting veto extravaganza may cause the legislators to hang around until 1 am Tuesday just to ensure that they have time to overturn any bills returnd by the Governor.

Assembly is currently honoring, one by one, their term-limited members.

Saturday in Carson City

We are winding down to the final hours down here, which means a lot of hurry up and wait time.

The biggest issues remaining are the final four or five vetoed budget bills that need to be overridden by the Senate, the Raggio-Horsford fight on what an interim tax study should look like, the SB 201/RTC-5 veto override, and Barbara Buckley's reserve account for k-12 education.

Apparently, Senators Raggio and Townsend want an override vote on SB 201 to occur before they agree to override the final budget bills.

As for the tax study, Senator Raggio proposed an open-ended study conducted by a private, outside firm. Senator Horsford, on the other hand, wants to put together a commission that will focus on some specific business taxes and a mechanism that will allow these various new taxes to be outlined completely for quick consideration by the 2011 Legislature and quick implementation by the Department of Taxation, etc.

As for the Speaker, the Governor vetoed AB 458, which would set-up a special reserve account for K-12 education. Current practice forces any extra education funding left-over at the end of a biennium to be reverted back to the general fund. This bill would allow that left-over money to stay in a separate account and be utilized specifically for education during budget downturns.

The Chamber testified in strong support of this bill and other bills that set up reserve accounts for such things as higher education.

In a bizarre act that seems to make the perfect the enemy of the good, the Governor vetoed AB 458 because the Legislature ignored his bill that would have set up similar reserve accounts for k-12, higher ed, and health and human services.

While the Chamber supports all of those concepts, it would seem to me that AB 458 is better than current practice, so it should have been signed into law.

Now, back to waiting....

Reforms passed, taxes vetoed, lobbyist exhausted

Things are moving along rapidly in Carson, with the potential to be out of here by Saturday.

As I type this, the Senate is taking up SB 427, the long-term spending reform bill, which includes changes to PERS, PEBP, and collective bargaining for local government employees that is outlined in the post below. They just voted 19-2 to send the bill to the Assembly.

As soon as this bill gets through both houses, that should grease the skids for the tax increase override vote.

That bill, which the Governor vetoed at 5 pm today (along with 19 or so other bills), has to make its way over to the Legislative Building by midnight tonight.

That should allow an override vote by tomorrow.

Other than that, there are about a zillion conference committees meeting to has out disagreements and the renewable energy bills should be wrapped up soon.

Less than a week left...

The biggest vote of the session occured last Friday. That was when SB 429, the tax increase package, sailed through both houses and landed with a thud on the Governor's desk.

So, this week is kind of surreal, with several conference committees meeting to hash out differences on some remaining policy bills. Usually, budget issues get shoved right up until the last day of session. Given the quirkiness of the calendar this year, there may be hope that we get out by this weekend!

It would seem to be in the Speaker and Majority Leader's best interest to adjourn a few days ahead of time, enabling them to argue that they saved tax dollars. (Apparently, it costs around $120,000 per day to run the Legislative Building).

The renewable energy bills are still being hashed out. While most folks would assume that the major policy differences occur between Democrats and Republicans, the Assembly and Senate Dems have different ways to look at things as well! Everyone, including the Governor, wants to be in front of the renewable energy issue, so everyone seems to have their own bill on the subject! It will all get worked out, and Nevada should be well-positioned to take advantage of our abundant natural resources and (for now) business-friendly climate.

The Governor has until midnight on Thursday night to veto the budget and tax bills, which leaves plenty of time for an override vote in both chambers.

Word has it that the "reform package," which the Senate Republicans demanded before signing off on the tax increases, was in drafting this morning. All of the reforms are supposed to be wrapped into SB 427, which began its short life last week in the Senate Finance Committee as a PERS reform bill.

The Las Vegas Chamber has been instrumental in the negotiations on this bill. Below, you will find the reforms that were agreed to. This language was sent out to the members of the Vegas Chamber:


Public Employees' Retirement System (PERS):

(Effective for employees hired after January 1, 2010)

-Increases the number of years of service required for firefighters and police to retire with full benefits from 25 years to 30 years

-Increases the retirement age required to retire without penalty

-Increases the early retirement penalty from 4 percent to 6 percent per year

-Reduces the benefit factor from 2.67 to 2.50, adding 2 years to the number of years required to fully vest

-Reduces the ability to take advantage of the system by controlling spikes in compensation for the 5 years before retirement by capping the annual increase in pay at 10 percent (excluding promotion and assignment related bumps)

-Lowers the cap on Cost of Living Adjustments (COLA) for post-retirement increases

Public Employees' Benefits Program (PEBP):

-Increases number of years required to begin vesting in program from 5 to 15 years of service for public employees hired after June 30, 2009

-Requires retirees to be continuously enrolled in PEBP immediately upon retirement to receive benefit, eliminating adverse selection issues

Collective Bargaining Reform:

-Brings fairness to collective bargaining process by changing law so fact-finder must consider state employee compensation, as well as local government ability to pay for life of contract

-Brings transparency to collective bargaining process by requiring a full fiscal hearing before elected officials vote on a contract

I can see the end...

The Senate passed SB 429, the tax bill, by a vote of 17-4. Four Republicans voted no.

A few minutes later, the Assembly passed it 29-13, with John Carpenter from Elko as the only Republican voting yes, along with every Democrat.

The Governor has the bill and has until Thursday to veto it.

There was some back and forth between Senate Majority Leader Steven Horsford and Minority Leader Bill Raggio most of the afternoon, as Raggio insisted on a hard sunset for the new tax rates and some haggling over the language of an interim tax study.

While all the rates remained the same, Raggio's sunset demands were agreed to. The new tax rates will sunset on June 30th, 2011 unless the 2011 Legislature renews them. (Shall we place our bets now?)

I must point out that there has been no reform package introduced yet. There was a PERS hearing on Thursday, but the bill has not gone to a vote yet. So far, I have seen nothing on PEBP, prevailing wage, or public employee collective bargaining.

Therefore, we remain opposed to the inevitable tax increases.

The autism bill is still out there, as is the binding arbitration bill.

The SB 201 (RTC-5) veto has not been taken up for an override vote, and the new RTC-5 bill, with a diesel tax addition, is still hanging out there.

Both chambers are meeting on Saturday morning, but then have the rest of the weekend off!

Since the budget and tax bills have been sent to the Governor, next week is wrap-up and veto overrides! If she is going to run for Governor, it would seem to be in Speaker Buckley's best interest to wrap up session early, before the June 1 deadline. She can then claim that she saved the taxpayers money, given that it apparently costs $120,000 every day to run the show down here.

Ready for the circus to end.

And then, a long nap...

Taxes, Ethics, Caffeine

I am at the end of a second long day in Carson City.

Given the Governor’s promised veto of any budget package that includes a tax increase, there is a legislative self-imposed deadline of Friday to get the bills to the Governor so that there is enough time for a veto override.

Things were slowed down a bit tonight as an ethics bomb went off in the Senate Chamber. Senator Raggio has been threatened with an ethics complaint if he votes on the tax package because a member of his law firm testified on a tax proposal a week or two ago. Therefore, Raggio asked for a legal opinion from the legislative council and received a letter that stated he should abstain from voting on the issue.

This prompted a rushed bill that would allow and require every legislator to vote on bills of “immense statewide importance.”

There always seems to be wrinkles in the rush to close…

The tax bill finally has a name: SB 429. It would raise $781.2 million total. The revenue breakdown is as follows:

-Sales tax increase of 0.35 percent: $280 million
-Tiered Modified Business Tax rate: $346 million
-Doubling of the business license fee: $61 million
-Changes to governmental services tax on vehicles: $94 million

The payroll tax rate would be further complicated by reducing the tax rate from 0.63% to 0.5% on all annual payroll over $250,000, while increasing the rate to 1.17% on payroll above that amount.

While the Chamber understands the need for small business tax relief, we are concerned about instituting a hiring disincentive for any company that is near the $250,000 cap.

Up later this morning in Senate Finance is SB 427, the PERS reform bill. While it is a good start, it does not include a minimum retirement age and some other details.

Stay tuned, as things are moving fast….

Not Enough Time for Spending Reforms

As you know by now, the Legislature has begun to roll out its tax proposals to fill the $800+ billion hole it has created by adding a lot of spending back into the Governor’s budget.

The tax show began on Thursday afternoon, when the Assembly and Senate Taxation Committees met in a joint meeting to discuss Speaker Buckley’s proposal to “protect” small businesses by cutting the Modified Business (payroll) Tax from 0.63% to 0.5% of payroll under $250,000/year.

That equals out to about a $325 tax cut. Of course, a business with $250,000 in payroll could have as few as three people or as many as 13 or so. Everybody has a different description of a small business, but this proposal seems to define it as exceptionally small.

Now, the MBT rate described above applies to the first $250,000 of payroll of EVERY business. But, on any payroll above that $250,000 magic number, the rate is set to increase to an undetermined amount. That new rate could double to 1.25%, or even triple to 2%, which is the rate that our bank members currently pay.

You want to know what the most disheartening thing about this is? I was one of the only lobbyists that stepped up to the table to say that we could not support any tax increases because long-term spending reforms had not yet been implemented! The Retail Association stepped up to the plate to offer an alternative solution, and the NFIB representative opposed the plan as well.

I reiterated the Chamber’s support of the list of long-term spending reform that you are familiar with. I stated that, at this point in time, the Chamber could not support ANY tax increases because very little progress had been made on these reforms.

While I can respect a position of “our tax rates should be higher,” I have a hard time fathoming how anyone can claim that there is “no where left to cut.”

A system that allows public employees to retire at age 50 with 75% pay for the rest of their life is not “bare bones.”

A system that forces local governments to beg public employee unions to take only a 1% COLA instead of the 4% they were promised is not “bare bones.”

A prevailing wage survey system that calculates the prevailing wage by including prevailing wages in the formula is not “bare bones.”

I have been told by a few legislators that “we do not have enough time to deal with all of these reforms in 120 days.” I respectfully disagree. We seem to always have time to spend tax dollars, but then run out of time to save tax dollars.

For those of you who are not familiar with the legislative process, it usually works as follows: bill is heard in committee on one day, it is decided upon in a work session on another day, it goes to the floor, then goes through the same process in the other chamber. In other words, one bill could get through the entire process in about two weeks if there was strong legislative will to do so. 120 days is plenty of time!

While I have not seen the results of whatever reform package is going to come out of the “core group,” I have a feeling that it won’t be comprehensive enough and that the Chamber will not be able to support the final budget package.

While some may call this unreasonable or unrealistic, it is the position of this Chamber that every last dime must be spent as efficiently as possible before taking almost $1 billion out of the economy.

More on the rest of the tax package soon…

A few updates...

AB 119, the PLAN anti-growth water bill, passed out of the Senate Government Affairs Committee today.

Both Washoe County legislators on the panel, Randolph Townsend and Bill Raggio, voted against the measure. The rest of the committee voted for it.

It now moves to the floor.

AB 162, the autism mandate bill, was passed out of the Senate Commerce and Labor Committee today as well.

SB 201, the RTC-5 implementation bill is due to have its final vote on the Assembly floor on Friday, then it moves to the Governor.

There is rumor of a workers comp compromise and it sounds like all of the most egregious issues that the business community has been worried about have gone away.

Until something is on paper, we can't commit to anything.

The Governor's sunset commission bill, AB 519, is finally getting a hearing on Friday morning. This bill comes directly from the SAGE Commission recommendation.

Finally, there may be hearings next week on the grand tax proposal, if the core group of legislators can cut a deal this weekend.

A Good Day

It was a good day at the Legislative Building.

SB 201, the RTC-5 bill, was heard in the Assembly Transportation Committee today. The Chamber joined the RTC, Sparks Mayor Geno Martini, Chamber Member Norm Dianda of Q&D Construction, and Skip Daily from the Laborers union at the table in support of the bill.

Better yet, the committee voted to pass the bill with a unanimous vote just moments after the testimony concluded! It is pretty rare for a committee to hold a vote the same day that they initially hear a bill, so this issue is showing great momentum.

It is being widely reported that AB 495, the med-mal bill, will not even receive a hearing in the Senate! It was due to be heard tomorrow in the Senate Judiciary Committee tomorrow and was abruptly pulled from the agenda this afternoon.

Rumor has it that since Assembly Judiciary Chair Bernie Anderson is refusing to hold a hearing on the construction defect bills that came out of the Senate, Senate Judiciary Chair Terry Care is returning the favor on med-mal.

While this issue can always appear in another bill in the waning hours of the session, this is certainly good news for every individual in this state, as it will be one less cause of rising health care costs.

While this is bad news for our members (and home buyers) who have to deal with the construction defect lawsuit mess, it is good news for our health care system.

You win some, you lose some.

Nevada has a Broad-Based Business Tax!

Just to set the record straight, there is currently a broad-based business tax in the State of Nevada.

There are several elected officials and lobbyists in the Legislative Building who continue to claim that there is no such thing or that we need to “broaden the tax base.”

The Modified Business Tax, the payroll or “Jobs Tax,” is assessed on any persons doing business in Nevada who are required to pay unemployment insurance. Who is required to pay that insurance? With very few exceptions, employers of one or more person with total wages paid of $225 or more during a calendar quarter pay the Jobs Tax.

That is about as broad-based as you can get!

While some use the “no broad-based tax” line to argue for gross receipts or corporate income taxes on large, out of state firms that “don’t pay their fair share,” the truth is that every business pays the Jobs Tax, sales tax, property tax, unemployment insurance, workers comp insurance, local fees, etc. In fact, large corporations pay A LOT of taxes in this state.

So, while an intelligent debate can be had on whether or not this broad-based tax is too high or too low, it is absolutely false to claim that Nevada does not have a broad-based business tax.

RTC-5 Passes Senate 20-1

SB 201, which would implement the RTC-5 ballot initiative, passed the Senate today by a vote of 20-1! The only no vote was Senator Barbara Cegavske, who expressed concerns about the lack of a sunset clause and the timing of a tax increase in this economy.

The problem with a sunset is that the revenue received from this bill has to be bonded out over several years. In order to bond those revenues, you have to have a steady revenue stream. There is a mechanism in place to allow the Washoe County Commission to review the increased rates every year.

The bill is supposed to receive a hearing in the Assembly Transportation Committee next week.

Special Sessions and Lawsuits

I was fortunate enough to not be around during the 2003 legislative session, as I am told it was ugly.

There were two or three special sessions that lasted into July.

The governor filed a lawsuit against the legislature because of their failure to pass a budget on time.

The Nevada Supreme Court ignored the constitutional requirement that 2/3 of the Legislature must vote for any tax or fee increase (a decision they later reversed).

And the largest tax increase in state history was approved, which was somewhere in the neighborhood of $833 million.

It is that number that should be watched carefully. One line of thought has it that legislators will be loathe to pass a tax increase over that amount, because the campaign mailers in 2010 and beyond will read that they supported the (new) largest tax increase in Nevada history.

Some legislators have stated they want a new "broad-based" business tax.

Others, like Senator Raggio, seem to only support increasing existing taxes and would opppose creating new ones. Assembylman Pete Goicoechea has stated his public support for a sales tax increase, because it hits everybody. Senate Majority Leader Steven Horsford has stated that he is willing to go above and beyond the 2003 magic number and has hinted at some sort of "broadening" of the tax structure.

As the Governor has repeatedly stated that he will veto any and all tax increases, 2/3 of both houses will have to support the final tax package.

That means at least two Senate Republicans need to go along with the Democratic majorities in both houses. Bill Raggio has more power now than he ever had as Majority Leader. The Democrats need him to pass any tax package.

After the Governor receives a bill on his desk, he has five days to sign it, veto it, or let it become law without his signature. That means the Legislature has to send him a tax bill at least 6 days before June 1, the constitutional deadline for the end of session. If they do not get the budget/tax bill over to the Governor before Memorial Day, the Governor will have to call a Special Session in order to fund state services for the next two years.

The key is, the Governor determines what issues the Legislature may take up in a special session. If a special session necessity comes to pass, it will be the Governor's position that he can order the Legislature to consider the budget, but prohibit them from considering any tax increases.

The Legislature would argue, however, that while the Governor can limit the discussion to the budget, he can't limit the details (tax increases) of what the budget includes.

This is a situation ripe for lawsuits and court decisions, a la 2003.

The Speaker seemed to preclude all of this by saying that she is not willing to get into a legal fight and would just accede to the Governor's budget and adjourn on June 1.

This should get very interesting.

And the Number is...

The Economic Forum just approved a final number of around $5.3 billion in general fund revenues for the next biennium. That is over $900 million below the Governor's budget that was submitted to the Legislature in January.

Jon Ralston has reported that Nevada's application for federal stimulus dollars for education has been approved, but there is no word yet on how much of the hole that fills.

And now the final act begins...

The Hole Gets Bigger

The Economic Forum meeting is underway in Carson City, and, as expected, the numbers look pretty dismal.

The Forum's job is to receive forecasts from the Legislature's Fiscal Division and the Governor's Budget office of the major general fund revenue sources and then make their best educated guess as to what those revenues will be for the next two fiscal years.

The Legislature is then required to use this forecast as the baseline for their budget. Given that there is a constitutional requirement for a balanced budget, the final budget must either spend up to the Economic Forum amount, or if there is a desire to spend more, taxes must be raised.

Political guru Jon Ralston with the Las Vegas Sun summed up the competing numbers in an e-mail this morning. In its December meeting, the Forum predicted that Nevada's general fund would receive $5.65 billion over the next biennium. The Governor, required to build his budget based on that amount, submitted a budget of $6.2 billion (the extra amount comes from the new room tax increase that has since been signed into law).

Today, the legislative folks are estimating $5.57 billion and the Governor's people come in lower at $5.35 billion.

In other words, if you include the drop in local property and sales tax rates (some of which the state government has to make up to the school districts), we could very well be below the Governor's recommended budget by a billion dollars.

So far, the legislative money committees have added over $70 million back into the Governor's budget, making the hole that much bigger.

Stay tuned, as this meeting will be going on for quite a while.