New Nevada Gov. Lombardo highlights freezing gas tax, support for education in State of the State

By Casey Harrison (contact)

Published Monday, Jan. 23, 2023 | 6 p.m.

Updated Monday, Jan. 23, 2023 | 9:13 p.m.

Nevada would temporarily suspend collection of a statewide gas tax and invest more than $725 million in education over the next two years, returning to pre-pandemic levels of budgetary spending and paving the way for a slew of new initiatives, if Gov. Joe Lombardo’s budget plans are put into law.

Speaking Monday evening to lawmakers for his first State of the State Address from the Nevada Assembly chambers in Carson City, the first-year, newly elected governor said the state’s general fund was expected to generate approximately $11.4 billion in revenue with proposed expenditures of about $11 billion.

“As governor, I am filled with hope and optimism of what we can accomplish if we simply summon the will to work together,” Lombardo said. “It is my intention to work side by side with all of you to write another chapter of Nevada history that will record that we did it the Nevada way — never give up, never stop dreaming.”

State economists estimate Nevada’s two-year general fund revenue is expected to increase by more than $2 billion because of increased economic activity as the state emerges from the COVID-19 pandemic. The 25% increase is driven largely by increases in sales tax and tourism-related revenues.

Along with an increase in operating funds, and the ability to fund certain programs with cash on hand, the state is expected to save $2.2 billion over the next biennium and still have $1.7 billion in cash, Lombardo said.

The rub for the Republican governor? Democrats hold the majority in the Nevada Senate and a supermajority in the Assembly, and the state budget must win approval in both legislative chambers before going back to Lombardo’s desk to be signed into law. That means there will need to be plenty of compromise between the governor’s office and the legislative branch when the Legislature opens session early next month.

Lombardo’s proposed budget represents about a 4.7% increase from the 2019 fiscal year budget, the last year before the Nevada’s economy was rocked by the COVID-19 pandemic, forcing gaming and resort properties throughout the state to temporarily halt business and presenting the state with over 30% unemployment for the first time in modern history.

“The executive budget reverses cuts to some programs made during the pandemic, and it addresses long-overdue investments in people, programs and facilities, but it does so responsibly,” Lombardo said. “Not a penny of the state’s one-time surplus will be used to fund any recurring programs.

“In simple economic terms, we’re buying with cash instead of credit.”

But the extra revenue, coupled with the measures expected to save the state over the next two years, puts the state in a unique position to restore financial stability, and an even rarer opportunity for bipartisan partnership, said Ben Kieckhefer, Lombardo’s chief of staff.

“We fully recognize this is a governor-recommended budget,” Kieckhefer told reporters Monday afternoon. “The legislative process is one that lends itself to negotiation, and I think that everything we’ve included in the recommended budget is good policy, fully defensible and, frankly, funds a lot of the priorities that a lot of the majority-party legislators have been talking about for years.”

Here’s are some highlights from Lombardo’s address:

On education

Lombardo unveiled a pupil-centered funding plan, which aims to increase education by $2 billion over the biennium, increasing per-pupil funding by $2,116 to $12,406 in the 2024 fiscal year, which begins July 1, and to $12,881 by the 2025 fiscal year. He also aims to allocate $50 million for Opportunity Scholarships and related tax credits, which would allow parents to use public dollars on a private education, a cornerstone promise Lombardo made on the campaign trail.

“Traditional public schools are not — and should not — be the only option,” Lombardo said. “My goal after we finish this legislative session is to give Nevada parents significantly more choices to make about their child’s education.”

The governor is also proposing $728.5 million be added to the state’s education stabilization account by the end of the 2024 fiscal year. Created at the onset of the pandemic, that account that can be used to fund public schools. Lombardo also hopes to pre-fund $75 million for Millenium Scholarships through the 2027 fiscal year. That program awards up to $10,000 in tuition to Nevada students who stay in the state to pursue higher education.

To further address a need for educators, Lombardo suggested letting retired teachers be able to collect their retirement and also a salary, with no strings attached and no unnecessary administrative hurdles to clear.

“Nevada’s public schools have been historically underfunded and have historically underperformed for our children,” Lombardo said. “Tonight, I’m proposing the single largest investment in K-12 education and raising the bar on expectations and accountability to a level not yet seen in Nevada.”

Additionally, Lombardo is seeking $10.5 million to be used for dual-language pilot programs across the state, $30 million for scholarships and stipends to train student teachers, and a combined $29 million to increase the number of graduate students at Nevada higher learning institutions and increased faculty and student capacity at the Kirk Kerkorian School of Medicine at UNLV.

On top of that, Lombardo plans to allocate $5 million to research changes in the state’s higher education funding formula.

“The governor has prioritized equity and fully funding the weights that are in the pupil-centered funding plan,” Kieckhefer said. “And those multipliers are for students who are English-language learners and students who are at-risk.”

But Lombardo also alluded to the funding being contingent on results in the future.

“Along with this funding, I expect results,” Lombardo said. “I won’t accept a lack of funding as an excuse for underperformance. I’ll be working with the state superintendent to ensure our systems of accountability and transparency are robust and enforced. And if we don’t begin seeing results, I’ll be standing here in two years calling for systematic changes to the governance and leadership in K-12 education.”

In a statement, the Clark County Education Association responded positively to Lombardo's promises to invest more in education, especially the plan to raise per-pupil funding, which "provides for our base per pupil funding levels as well as the additional weight values for some of our most at-risk students" and "has been a long time coming."

The association was also supportive of investments to make "our schools, our campuses, and our buses safe for our educators and students by passing new legislation that addresses school safety."

The Nevada State Education Association, however, was critical of Lombardo's claims to support teachers with higher wages.

“Tonight, we heard no bold proposals to fix the ongoing crisis in our schools," the association stated in an email. "Instead, Governor Lombardo dusted off a failed voucher scheme that will do nothing to improve the quality of education in Nevada. Transferring more public tax dollars to private schools is the wrong answer."

Breaks for businesses, consumers

In a bid to offset costs caused by record inflation seen across the U.S. over the past year, Lombardo is proposing a one-year pause to the state’s gas tax, which would have to be voted on by the Legislature and would save consumers more than $250 million over the life of the moratorium.

To offset that cost, the state would backfill that with $250 million in an immediate one-time payment, Lombardo said. That would further allow the state to continue contributing to funds to maintain and build highways, he added.

“Using our budget surplus to provide tax relief won’t negatively affect our fuel tax-funded road and construction program or impair bonds,” Lombardo said.

Another new proposal would increase the state commerce tax threshold by 50% from $4 million to $6 million annually, easing the burden of regulatory filings for some small businesses with gross revenue below that $6 million. That’s on top of a proposed 15% cut to the state’s tax rates for businesses, which would lower the tax rate to 1.17%.

“These tax reductions ensure that rising prices don’t create increased burdens for Nevada businesses,” Lombardo said.

Lombardo also announced that he would join Tesla CEO Elon Musk today in Northern Nevada to unveil a $3.5 billion manufacturing facility to build all-electric semi-trucks.

“Economic development matters,” Lombardo said. “I’m proud to declare that Nevada is back open for business, effective immediately.”

State investments

Lombardo also proposed to increase the cap of the total money spent from the general budget to the state’s “rainy day” fund from 20% to 30% as well as making a one-time deposit of $626 million to be split between the rainy day fund and a new sub-account Lombardo called the Nevada Way fund.

The Nevada Way fund would set aside about $313 million for “critical infrastructure projects and other needs of the state” that can be leveraged for outside investments, Kieckhefer said. It’s unclear what scale of project the fund could be used for, but Kieckhefer told reporters it likely wouldn’t be used to build a stadium to lure the Oakland A’s, who are mulling a move to Southern Nevada.

The Nevada Way fund would be overseen by the governor, as well as a bipartisan commission of legislators, Lombardo said.

“As I said before, fiscal responsibility is the backbone of my budget,” Lombardo said. “The Nevada Way fund simply reaffirms that we never stop dreaming and that we are fully prepared to act on those times when market opportunity and new capital merge.”

The budget also called for three new state office buildings to be built: at the site of the old Kinkead building in Carson City, a new state office building off of Sahara Road in Las Vegas, along with plans to build a new building and remodel an existing one at the Grant Sawyer complex in Las Vegas.

Lombardo also voiced plans for a new DMV office in Southern Nevada, a new veterans center in North Las Vegas, and the construction of two forensic hospitals across the valley: one of which would be built inside the Las Vegas city jail and the other from the “ground up” at a site yet to be determined.

“The need for forensic mental health services is also critical,” Lombardo said. “It’s an area that has been neglected.”

Physician and dentists’ offices, as well as nursing homes, are expected to receive a 5% rate increase through Medicaid, Lombardo said, and foster care facilities are set to receive a 25% rate increase. Rate increases are also expected for individuals with disabilities and those in Nevada’s Early Intervention Services.

In a bid to retain state workers, Lombardo also approved an 8% raise for all state employees this fiscal year, and an additional 4% raise next year. He also proposed annual retention bonuses of $2,000 for all employees, to be paid quarterly beginning at the end of March.

That will be a first step in a wider effort to retain state workers as they get ready to resume in-person work after almost three years of remote work, Lombardo said. He signed an executive order this month requiring all state employees to return to in-office work by July 1.

“The sole purpose of state government is to serve the people of Nevada,” Lombardo said. “But this can’t be done effectively when we have a state job vacancy rate above 20%, a remote and disconnected workforce and outdated computer systems. … The truth is we ask our state employees to do their jobs, but we’re not paying fair wages for a fair day’s work. They deserve better.”

In his rebuttal, Democratic state Rep. Steve Yeager responded that Lombardo's proposals didn't go far enough in supporting struggling Nevadans.

“We were disappointed that Gov. Lombardo did not lay out a plan to address the skyrocketing rents or the looming eviction crisis that will force many Nevadans to move in with family members with friends, or worse yet, to the streets,” Yeager said.

“The Nevada Way isn’t to turn a blind eye to these problems, but to get to work on solving them.”

Other highlights

• Lombardo is proposing to give schools five years to improve literacy scores, saying students won’t advance beyond the third grade until their reading level is proficient.

• The administration will seek to repeal Assembly Bill 168, known more formally as a “restorative justice” law that was passed in 2019. This will give schools the authority to permanently expel disruptive or violent students.

• Lombardo will also pursue criminal justice reform, including lowering thresholds for felony theft, domestic battery by strangulation and reducing weights for drug possession and trafficking charges.

• In addition to a raise for state workers, Lombardo is proposing for all public safety employees a “two grade” pay increase.

• Calls to eliminate universal mail balloting and ballot harvesting, and also reform the state’s election calendar to stop counting mail ballots received after Election Day. That’s contrary to the current law, which allows the state to process ballots that are postmarked by Election Day.

• Lombardo said his administration would work with the Gaming Control Board to lower the required approval needed to put new gaming products in casinos, as well as work to repeal Senate Bill 4, which was passed in 2020 and imposed daily cleaning and time-off requirements in hotels, rules he said are “no longer relevant.”

• Lombardo said he would also issue an executive order directing electric utilities within the state to develop electricity-harvesting methods and promote energy independence from California.

Democratic Secretary of State Cisco Aguilar responded strongly to Lombardo's stated plans on changes to voting, which have been a common target for Republicans across the country since the 2020 election, asserting that "Nevada already has some of the most secure and accessible elections in the country."

He also decried Lombardo's calls to end the program that in past elections sent mail-in ballots to every Nevada resident, saying that "the 2022 election proved that universal mail ballots work for Nevadans across party and partisan lines."

"Last November proved that Nevada voters have faith in our elections, and my office is working hard to keep that faith," Aguilar said.