Cringing as a strategy

Timid defenders of Nevada business need a new game plan

By Steven Miller
  • Tuesday, March 14, 2006

The Las Vegas Chamber says it is opposing TASC because the proposed constitutional amendment “does nothing” about financial liabilities the state has under its Public Employee Retirement System (PERS) and Public Employee Benefit Program (PEBP).

This is a peculiarly flaccid argument.

It is akin to some father in a high-crime neighborhood arguing that it’s okay to leave the family home unlocked because he’s in hock to a loan shark.

Having been stupid regarding the one doesn’t excuse being stupid regarding the other.

It is absolutely true that Nevada’s unfunded-liabilities problems need to be addressed. But in no way does that mean TASC should not be supported.

What TASC is about is reforming a state tax-and-spending process that has become systematically tilted against Nevada taxpayers. Indeed, the very mess about which the Chamber complains, the state’s unfunded government-employee benefits system, is a good example. Yet it is just one of many such government-created messes. And unless the process itself is reformed, it won’t be the last.

As newspaper headlines remind us every day, the process of governance—especially in Southern Nevada—has become drenched in moral hazard. Thoroughly mediocre individuals operate amid incentive structures that financially reward them for both amorality and robotic conformity. For the bad public policy decisions that they perpetrate, they rarely bear any consequences.

The PERS issue is an example. Government union members dominating successive Nevada legislatures have corruptly bestowed upon themselves and other government union members outrageously generous retirement benefits, while ordering taxpayers to foot the bill. Taxpayers have also been made legally liable for paying even higher retirement benefits than the taxpayer-funded investments may yield. Thus, at last count, the people of Nevada were on the hook for about $5.5 billion more in pension liabilities than the PERS system had available to pay. While PERS liabilities totaled $19.5 billion in 2004, the system only had $14 billion in investments to back those liabilities up.

Also facing unfunded liabilities—estimated at $1.8 to $4.4 billion—is the Nevada Public Employee Benefit Program. Will Rogers suggested it is wise, should you discover you’re down in a hole, to first stop digging. But the state Assembly—denying that any amount of unfunded liability it may impose on Nevada taxpayers constitutes a “hole”—continues to dig. The Assembly Ds made this abundantly clear last year when they killed remedial legislation suggested by Gov. Kenny Guinn.

Most Nevada taxpayers can never expect to receive anything like the rich schedule of retirement health care benefits that the Legislature makes taxpayers fund for state and local government employees. But when Guinn noted this and offered a plan to trim back the retirement health care benefit schedule for future—still unhired—state employees, the Assembly gleefully killed the bill.

Thus, as a practical political matter, no solution to Nevada’s PERS/PEBP problems will ever emerge until the government unions that dominate the Legislature face some new institutional reality that constrains their power.

TASC—which would let taxpayers reject the wasteful new spending schemes that special interests routinely get lawmakers to pass—would constitute precisely such a new reality. With the public playing field thus finally leveled, prospects of government unions finally being amenable to reason will improve dramatically.

So why, really, did the Las Vegas Chamber of Commerce trot out such a peculiarly weak and inept argument? Institutional timidity, is my guess. While the Chamber wanted to position itself with the angels (i.e., taxpayers), it also wanted to duck establishment displeasure. That definitely includes the displeasure of the government officials and government-serving and union-allied corporations that sit on the Chamber’s board.

Unfortunately for the Silver State, however, this is a losing strategy. Just look at the record: In 1991, the Chamber ended up supporting—as the best “realistic” alternative—the business head tax imposed that year. Or take 2003, when the organization successfully pushed—as the best “realistic” alternative to a gross-receipts tax—that session’s new payroll tax. Or take 2005, when the Chamber swallowed the new, higher split-roll property tax on business as the best “realistic” alternative.

To be fair, the Las Vegas Chamber currently has a hard row to hoe. It is a broad organization with a disparate and often conflicting membership.

But the fundamental reality is that Nevada business is steadily, surely losing ground under the Chamber’s chronic efforts to split the difference between members who oppose higher taxes and members who desire them.

Instead of cringing before the latter, the Chamber should jettison them.

Steven Miller is editor of BusinessNevada and policy director for the Nevada Policy Research Institute.

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