Growth issues cloud spending picture

Expect to hear cheers from fiscal conservatives and groans from Nevada government employees when Gov. Kenny Guinn delivers his first State of the State address Monday.

Fiscal conservatives will applaud Guinn for recommending no new or increased state taxes and fees for the next two years beginning July 1. State workers will detest the governor for recommending no pay increases, either.

While Guinn has issued a few statements about these and other budget proposals for the next biennium, he has remained virtually mum about any long-term plans to handle Nevada's rapid population growth.

During his successful gubernatorial campaign last fall he said urban growth in the Las Vegas Valley was a local rather than a statewide issue. Guinn spokesman Jack Finn added only that the governor has made growth a "focal point" of the long hours he has spent on his budget proposal.

The state continues to face more demands for education, social services, transportation and public safety. Guinn and fellow lawmakers could find themselves in a dilemma if tourism, the state's bread-and-butter industry, slows again as it did for much of last year.

State Sen. Jon Porter, R-Boulder City, one of 63 lawmakers who will grapple with Guinn's budget, described Nevada's economy as a two-legged stool in need of a third leg. One key, he said, is to diversify the economy so it doesn't lean so heavily on tourism.

"Our revenue sources are based on people spending money because the revenues are driven by sales taxes and gaming taxes," Porter said. "But if the nation's economy stops growing, people will stop coming to Las Vegas. If people stop spending money, our revenues will diminish. We need something else that isn't always driven by a strong economy."

Porter and other lawmakers, particularly from Southern Nevada, plan to push growth-related bills through this legislative session, which begins Feb. 1. But there is virtually no appetite to raise taxes, even among Democrats.

Fitting that pattern is Senate Minority Leader Dina Titus, D-Las Vegas.

"I'm certainly not advocating any type of tax increase," Titus said. "Growth is mostly a local issue in terms of payment through property taxes and redistribution of sales taxes. The way the state pays for growth is for things like education and social services like Medicaid."

Another influential Democrat, Assembly Ways and Means Chairman Morse Arberry of Las Vegas, said he would consider tax increases only as a last resort.

"How do you justify an increase to taxpayers when they're paying their taxes on time and the city is growing the way it is?" Arberry said. "That's a slap in the face to the taxpayer."

Senate Majority Leader Bill Raggio, R-Reno, said every lawmaker he recalls who ran in 1998 supported a platform of "not raising any taxes."

"Ordinarily growth brings in revenues," Raggio said. "The problem we have is that the type of growth we have hasn't been bringing in the revenues to support the growth."

Lawmakers have been studying the redistribution of taxes involving local governments. But Raggio, the state's most powerful legislator, said he knows of no proposals involving Nevada's tax structure.

At UNLV's Center for Business and Economic Research, director R. Keith Schwer keeps tabs on tax revenue trends. He is troubled by the fact that while gaming revenues have slowed, nongaming businesses continue to generate high demand for government services without producing sufficient tax revenues to pay for them.

"There aren't a lot of people talking about a major overhaul of the tax system, but down the road it will have to be addressed," Schwer said. "One attribute of sales and gaming taxes is that they tend to be cyclical. They're not keeping up with growth."

It is considered political suicide in Nevada to advocate a state income tax. Almost as rare is the lawmaker who supports increases in gaming taxes. State Sen. Joe Neal, D-North Las Vegas, made such a pitch when he ran for governor last year but was trounced in the Democratic primary.

A sales tax increase may seem palatable to some, but not to Jan Gilbert, Northern Nevada coordinator of the Progressive Leadership Alliance of Nevada. Gilbert said many alliance members, including organized labor, environmentalists and social-service providers, view sales taxes as regressive, particularly to the working poor.

But the membership is divided on other taxes. While some in her organization support gaming tax increases, unions that work in the resort industry oppose them.

Bipartisanship needed

Getting the Legislature to approve any tax changes obviously would require solid bipartisanship, given the fact that Republicans control the Senate 12-9 and Democrats run the Assembly with a 28-14 majority.

Chris Giunchigliani, D-Las Vegas, said she thinks Guinn has a golden opportunity to tackle Nevada's tax structure, which she said was criticized as far back as 1985 by the accounting firm Price Waterhouse. But she added that legislators also must step up to the plate despite their past reluctance to do so.

"We have no tax policy in this state," she said. "Price Waterhouse said our tax system is fundamentally flawed because it is based on sales taxes, which are regressive for seniors and the poor, and on gaming. We have to look at the whole tax base and determine who is paying their fair share and who isn't."

Arberry said he is considering "planting the seeds" this year to have his money committee begin discussion on the state's tax structure. But he said the discussion would have to be free of politics.

"We've got to do something to make sure the growth is managed and the money is managed properly so that if there is ever a downturn in the economy, we can cope with it," Arberry said. "People are demanding services. They don't want to stand in line. That's why they moved here from California."

What the polls say

A statewide poll of 1,200 Nevadans conducted jointly by researchers from UNLV and the University of Nevada, Reno, and released last week found that 69 percent favored a gaming tax increase, 65 percent supported higher cigarette and liquor taxes and 61 percent wanted a hike in corporate profits taxes. Conversely, only 38 percent favored a sales tax increase, 16 percent supported higher property taxes and 15 percent favored a gasoline tax hike. The poll had a margin of error of plus or minus 4 percent.

Those findings were fairly consistent with previous polls, said Grace Woo, director of UNLV's Cannon Center for Survey Research.

"People will be more supportive of taxes that are farther away from their pocketbooks," Woo said. "That's to be expected."

There are some Nevadans, however, who believe the state must first take a harder look at spending.

One is Carole Vilardo, president of the Nevada Taxpayers Association. She noted that since 1993 state agency budgets have been renewed on a "cost to continue" basis but often without regard to whether the services they provided were still needed.

"We haven't sat back to review how we established the base level of expenditures," Vilardo said. "We're ignoring whether agencies are ignoring their missions. Until we look at expenditures, I don't want to look at revenues."

Assembly Minority Floor Leader Lynn Hettrick, R-Gardnerville, added that there have been several instances where state employees hired with federal funds remained on the state payroll after the federal funds dried up.

"The idea is not to hurt people but to do away with jobs we don't need anymore, and there are lots of them in government," Hettrick said.

As a rural lawmaker Hettrick is not as enthusiastic about growth issues as are his Southern Nevada counterparts. Some rural Nevada counties are actually experiencing economic recessions. Mining, the state's second-largest industry, has been hit hard by slumping world gold prices.

Hettrick conceded that growth doesn't always pay for itself, but he also believes it's difficult to come up with statewide solutions, given the divergent needs of Nevada's 17 counties. "I'm not sure that the state wants to come up with a cookie-cutter solution to growth," he said.

With that in mind, Southern Nevada lawmakers have had varying degrees of success in recent sessions trying to pass growth-related legislation targeting Clark County.

Porter successfully sponsored a bill in 1997 that created the Southern Nevada Strategic Planning Authority. The 21-member authority, which represents the public and private sectors, plans to forward growth recommendations to the Legislature this year.

Among the senator's bill drafts is a proposal to give the Las Vegas Convention and Visitors Authority the go-ahead to recruit companies to do business in this state. He also wants to see better coordination of economic-development efforts among Clark County and its municipalities. Porter sees economic diversification as a key to strengthening Nevada's tax structure.

"The LVCVA already has contacts with Fortune 500 companies," Porter said. "They have offices all over the world and all over the country. They are already enticing these companies to bring their conventions here. Why not entice them to bring their business here?"

Southern Nevadans split

Getting Southern Nevada lawmakers to agree on growth policies is no easy task, however. Giunchigliani, for instance, believes the new planning authority lacks teeth.

She said she'll propose this session that the county's Efficiency Board, which consists of locally elected officials representing various cities, be given the power to set regional priorities. The board could then veto individual city projects viewed as harmful to the region, she said. She also wants to give town boards more teeth.

Giunchigliani also would like to expand the state's construction bonding authority so that it could help pay for the building of public elementary and secondary schools. Nevada pays for university and community college buildings but remains one of only 10 states that doesn't provide state funding for public school construction.

"I don't understand why we treat kindergarten through 12th grade differently than higher-education institutions," Giunchigliani, a special-education teacher, said.

Titus failed to get approval in 1997 for her proposal to establish a perimeter growth boundary in Clark County. But she said she'll introduce other growth proposals this session. One is a tax break for developers of vacant land that is already surrounded by other developments, which would encourage developers to "infill" the county rather than continue to extend the perimeter of the Las Vegas Valley.

"We can also beef up the state planning structure, which requires master plans at the local level," Titus said. "Now it's inconsistent. You can have all the master plans in the world but if you have all these zoning variances, what's the point?"

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