In his State of the State address, Republican Governor Brian Sandoval promised bold action for Nevada’s struggling education system and outdated tax structure:
“We live in a state that is transforming before our eyes – with 21st Century companies, jobs and technologies that place us at the forefront of innovation and the new economy. Yet we still operate with decades-old funding systems and an education structure that will eventually grind us to an inevitable halt.”
Nevada’s revenue problem can feel like that big car repair hanging over your head. There may be some tweaks that keep it running from point A to B, but, eventually, you’ll need to replace the transmission.
So how much of a repair is Sandoval proposing?
“We hope the conversation on tax reform is broader than what was presented in the governor’s speech, but we appreciate him starting the conversation.”
That’s Tray Abney with the Reno Sparks Chamber of Commerce. Like many, he believes the state’s tax system needs a major overhaul. But given what’s on the table—hundreds of millions of dollars into education—he’s not sure that an overhaul is part of the governor’s plan.
One of Sandoval’s ideas that has business owners concerned, even before the session begins, is the possibility of a new tax.
“We haven’t been briefed. We haven’t been given the details. It’s our understanding that it is going to be based on the gross receipts of a business and that there will be different rates depending on what industry your business happens to fall in.”
Specifically, the governor’s plan would restructure the yearly business license fee, which is currently $200. Sandoval hopes to adjust that so businesses pay more or less depending on their size. Some observers, like Abney, speculate that could be based on total revenue, or gross receipts, which sounds somewhat like the recently failed margins tax.
Abney says the chambers of commerce in Reno and Vegas, as well as the major trade organizations in the state, were not aware of this idea beforehand.
Jim Wheeler, who’s a Republican assemblyman from Gardnerville and the majority whip, says he was “a little surprised by it, too.”
Wheeler believes the governor is right to make education a major priority, “but, as a businessman, you always look at how do we streamline and how do we get more efficiency. That’s what you look at first. You don’t look at how do we pour more money into a problem that we’ve been pouring money into for years.”
And the governor’s budget does ask for more than a billion dollars in new and extended taxes—most of that would go to education. While some GOP lawmakers, like Senate Majority Leader Michael Roberson are getting behind the governor, Wheeler says he and others in the assembly are not, at least yet.
“Right now, what I’m seeing is that the votes are not there to pass the graduated business license fee.”
For Wheeler, voting for a new tax is the last resort.
Another factor complicating all this is the unrest within the GOP Assembly Caucus, ever since the governor asked Assemblyman Ira Hansen of Sparks to step down as Assembly Speaker. Some lawmakers who were part of that leadership team aren’t necessarily on the governor’s side anymore.
And then, there are the Democrats.
Senate Minority Leader Aaron Ford from Vegas says his party will be carefully vetting Sandoval’s plan, as well as proposing their own.
“I really appreciated hearing a lot of Democratic priorities mentioned in the governor’s speech.”
Those include full-day kindergarten, pre-k initiatives and breakfast in schools. Ford says Democrats, who the governor will need to get tax reform passed, also hope to change taxes like those on property and luxury goods. But a deal could be in jeopardy if the GOP tries to weaken collective bargaining and PERS—the retirement program for state workers—or pursue other hard line, conservative goals.
Again, Senate Minority Leader Aaron Ford:
“Although the politics have changed a bit, the priorities of the Democratic party have not. And we will make certain those types of items are properly defended. It goes beyond PERS and collective bargaining. It goes to social issues, constitutional issues like voting rights.”
Asked if those could be deal breakers, Ford says, “In a word, yes.”
Carole Vilardo of the Nevada Taxpayer's Association has been covering the legislature since the '70s. Her organization hasn’t yet taken a stance on the governor’s proposal. She also believes the entire system needs fixing, but thinks there may be a reason the governor emphasized a new tax, instead.
“I am second-guessing that the reason he came up with a different structure is that he’d be looking to somehow earmark that for the programs he wanted. And obviously it’s much easier to take one pot of money, particularly one that’s not being used, a new source, and earmark it.”
Whatever the governor’s calculations, he did make clear that Nevada’s current revenue structure must be modernized. Now everyone is waiting to see just what that will look like.