Legislature’s fear will paralyze the state

By Jon Ralston

Wednesday, April 22, 2009 | 2:01 a.m.

With apologies to Tolstoy, all unhappy legislatures are unhappy in their own way. (There are no happy legislatures, so the first half of the famous “Anna Karenina” beginning is not relevant here.)

Unhappiness reigns here in the capital, more so than in past sessions and mostly because no one likes the inexorable resolution to the state’s budget nightmare. That “solution” is widely expected to be a doubling of the state’s payroll tax, aka the Modified Business Tax, and perhaps a slight uptick in the state’s sales tax. Those visionary moves will raise the $500 million to $750 million expected to be in the final tax package, which will be vetoed by The Man Formerly Known as Governor and then, presumably, reinstated by two-thirds of lawmakers.

This will not be accomplished before several time bombs explode, raising the specter of special sessions, lawsuits and citizen revolutions. “It is going to come apart at the seams,” foretold one veteran observer, with many echoes throughout the Legislative Building. That is, the same as it always is, same as it ever was.

All unhappy legislatures are unhappy in their own way.

All sessions end ugly, but this one has the potential to be especially so. Why?

Because they are scared. And when people are scared, they act foolishly, irrationally and destructively.

Lawmakers are terrified of raising taxes, but also frightened of demolishing the state’s tangible and intangible infrastructure. They are petrified of jeopardizing their political careers — many of those who are term-limited are eyeing other offices — but also shaking at the prospect of alienating core constituencies with the cuts to come.

Consider: Lawmakers are not guided, as they were not in 2003 during the last Great Tax Non-Debate, by crafting good policy but by hitting a number. In this case, no one wants to go over the $833 million tax increase enacted six years ago.

But how will the final number be calculated? For instance, suppose the package is $700 million. Won’t some folks add the room tax increase already enacted and say the overall tax increase is close to $1 billion — that is, the largest in history?

All unhappy legislatures are unhappy in their own way.

Most lawmakers have concluded that all they can do is address the short-term economic downturn and worry about the tax structure infirmities in 2011. Do a tax study, put off major decisions, attach sunset provisions to any tax bills and pray voters will forgive them for not doing much.

We have seen this before, regularly, along with the hoary arguments about why not to tax corporations or their profits, as most states do. Businesses will flee the state. No businesses will come here. Economic development will be doomed. I must have missed how the gaming/service economy here has been diversified over the past 25 years. Silly me. But straw men often are the most powerful men here.

Politics underlies almost all of the major decisions in the Rush to Close. It would be naive not to think so, impractical to think those considerations should not play some role. Assembly Speaker Barbara Buckley is mulling a gubernatorial run. Senate Majority Leader Steven Horsford doesn’t want to lose the majority. Senate Minority Leader Bill Raggio doesn’t want to see education gutted. It’s about futures and legacies — at least partly, perhaps too much.

All unhappy legislatures are unhappy in their own way.

Today marks the two-thirds point in Session ’09 and lawmakers are not close to that point in their tax discussions. And they are running out of time — the final projections come out May 1, and most observers believe the final plan must be in the governor’s hands three weeks later so the passage-veto-override scenario can occur without a special session Ø can control.

They have yet to know how much stimulus money will be available, but it will be hundreds of millions — money that will immediately create a budget hole in the next biennium. But never decide today what can be put off two years.

Each side is collecting hostages to be traded later. The real skill here is not telegraphing which hostages you are taking, which ones you plan to take and which ones you don’t mind dying.

All unhappy legislatures are unhappy in their own way.

The 2009 session will end in the same way Tolstoy’s classic concludes, with a train wreck, perhaps not quite as tragic or heart-rending, and no one will throw himself or herself in front of the train and commit political suicide.