Worth the price?
2011 Legislature raised taxes, allowed minor reforms
- Friday, July 22, 2011
From a policy standpoint, Nevada's 76th Legislative Session produced a smattering of successes and failures. Lawmakers passed reforms addressing the state's faltering K-12 education system and collective bargaining statutes, although the reforms fell far short of what is needed.
Legislators ignored other areas in desperate need of redress — including unfunded pension liabilities, higher education finance and the SAGE Commission recommendations. Instead, lawmakers focused almost singularly on the state budget.
Public revenues are a reflection of private-sector economic growth, and just as Nevada's private economy has been hammered while markets correct for years of policy failings from the Federal Reserve and Congress, state finances have remained a mess. After peaking in 2007, state General Fund revenues have been projected to decline for four consecutive years.
In 2009, lawmakers elected to avoid restructuring state finances as private businesses would, deciding it would be easier to levy a two-year tax increase and continue increasing spending. In 2011, lawmakers extended the bulk of that tax increase for another two years — an 11.5 percent total increase in the state tax burden — even though the Nevada Policy Research Institute had explained and laid out billions in potential savings before the session began.
Sure, a May 26 Supreme Court decision blew a hole in Governor Brian Sandoval's budget proposal by declaring the funding sources for $481 million invalid under the state's constitution. The resulting atmosphere of urgency prompted Sandoval and some legislative Republicans to collaborate with Democratic lawmakers and extend $625 million in expiring taxes.
However, in the weeks prior to the Court's decision, Sandoval had added spending of $440 million to his budget proposal. Higher revenue projections from the state's Economic Forum and higher federal match rates for the state's Medicaid program indicated that more money would be available. Hence, notwithstanding the Court decision, sufficient revenue existed for a spending plan close to that originally proposed by Sandoval. Indeed, the most curious aspect of the 76th Session was Sandoval's sudden unwillingness — with less than two weeks before session adjournment — to support the very spending level that he himself had proposed.
As quid pro quo for their reversal on taxes, Sandoval and cooperating Republican lawmakers got the following reforms:
- In times of severe fiscal stress, local governments will now be able to re-open contract negotiations.
- Management employees can no longer collectively bargain — even though the definition of "management employee" is so narrow it applies to practically no one.
- Legislation now makes student performance a component of teacher evaluations and layoff decisions.
- A new performance pay program rewards highly effective teachers.
- It will now take three years for teachers to attain tenure.
Certainly, these reforms will help, but they are only a beginning.
Time will tell if they are worth the $625 million Nevada families will pay in higher taxes.