It’s time for change

Friday, May 21, 2010 | 3 a.m.

An initial report presented last week to the Nevada Vision Stakeholders Group confirmed the obvious: “Nevada’s lack of economic diversity clearly has a negative impact on the quality of life of its residents.”

Moody’s Analytics developed the report for the group, which was created by the Legislature to look at the state’s tax structure and come up with a vision for the state’s future.

With state funding provided largely by the gaming industry, it’s well established that even during the boom years Nevada failed to properly invest in public schools, higher education and basic social services — key drivers in efforts to diversify the economy.

Now, Moody’s said in this new report: “With the gaming and construction industries having matured, new engines of growth will be required going forward.”

Some observers will react to the report by saying that the state’s low tax rate is the key to attracting those new engines of growth. They’ll say Nevada can’t attract businesses if business taxes are increased and broadened to include more industries.

But what many Nevada policymakers have long failed to recognize is that businesses considering moving look at more than a state’s tax rate — they want good infrastructure and are looking for strong schools and solid government services for their employees and their employees’ children.

For proof, look no further than the newest Fortune 500 list of the nation’s largest companies and look where those companies are located.

California — often maligned as having high taxes, excessive social services and onerous regulation of businesses — is home to 57 of these companies, including Hewlett-Packard, Wells Fargo, Apple, Cisco Systems, Intel, Google and Oracle.

Where’s the exodus to low-taxing Nevada of headquarters for these and other California Fortune 500 companies such as Yahoo, Mattel and CB Richard Ellis Group?

There is no such exodus, because these companies choose to stay in a state where taxes may be higher but where companies large and small benefit from a highly trained workforce, and their employees and their families benefit from superior schools and social services.

It’s been noted the report suggests solutions that have been kicking around in Nevada for decades. Some of the recommendations mirror a 1988 Price Waterhouse report, and some of the suggestions date from the administration of Gov. Grant Sawyer, who in the 1960s pushed for diversifying the economy.

But there’s hope that this report, once it’s finalized, won’t sit on a shelf collecting dust. That’s because the current recession, easily the worst since the Great Depression, has propelled Nevada to the top of the lists of commercial and residential foreclosures and for unemployment.

This recession has highlighted the structural inequities in Nevada’s tax system that have left thousands of business virtually untaxed and exacerbated funding problems for already underfunded schools, colleges and universities and essential health services.

As Moody’s noted: “Rates of food insecurity (i.e. hunger) are high relative to other states in the region, and very few children living in poverty have access to health insurance. Overall, local health expenditures and the number of health practitioners per capita are among the lowest in the nation.”

Further, the report found: “Most performance indicators for education look bad in Nevada relative to other states ... There was consensus among stakeholders that the state could, and should, do more to educate its residents. However, funding increases that are not accompanied by structural reforms are unlikely to have much success.”

“For higher education institutions, there is a strong sense that the research capacity of the state’s institutions needs to be expanded. Investments in higher education have not kept up with Nevada’s rapid growth and represent an important component of its transition into future growth industries,” Moody’s found.

These dreary circumstances, now amplified by Moody’s, must change if we’re going to create a climate in Nevada ripe for economic diversification and an improved quality of life.