Enabling Nevada’s boom-bust cycle

Victor Joecks

Speaker Buckley has talked for months about how Nevada's government suffers from a boom-bust cycle. She says the boom-bust cycle is caused by flaws in Nevada's tax structure. Since 43 other states are facing budget deficits this biennium, however, the more likely cause is Nevada politicians' unquenchable thirst for increasing government spending at a rate that exceeds the growth of population and inflation.

Here's a simple explanation of the term "boom-bust cycle." In good economic times, state revenues and thus state spending levels increase at a rate that isn't sustainable during bad times. When the economy slows down, less tax money is collected and Nevada's politicians can't fund state programs at the promised levels without raising taxes. Politicians subsequently declare a "crisis" and claim that the solution is tax increases rather than a decrease in funding for programs that they admit grew too fast during the boom times.

Families and businesses experience boom-bust cycles all the time. The only difference is that they can't simply take money from other people to subsidize their undisciplined spending habits. Government, however, can—and regularly does.

Last week gave us a prime example of how our governmental boom-bust cycle plays out.

First, Gov. Gibbons announced that he has concerns about accepting $77 million in federal stimulus funds for unemployment, because the program would not sunset after the money runs out. This would leave the state on the hook for future costs.

So the "boom" is the $77 million that comes from the feds, and the "bust" is the guaranteed result once the money stops coming in. The governor's reservations are well placed.

Speaker Buckley, however, has helped craft Assembly Bill 469, which would make the changes necessary to get the unemployment money.

"Why wouldn't we want to get $77 million if it pays for itself for years, it gets the stimulus in the economy and we get relief for the unemployed?" Buckley asked last Wednesday.

Well, if Buckley abided by the principles she has spent the last few months telling Nevadans she holds, she'd be able to answer her own question.

Buckley justifies the bill by saying that a future legislature could reevaluate the extended benefit in a future legislative session. But that type of let-someone-in-the-future-deal-with-it leadership is exactly what Buckley has spent the last few months complaining about on her speaking tour across Nevada:

"Buckley said in her address that the overhaul is necessary to break Nevada of its ‘boom and bust' cycle that includes draconian budget cuts such as the ones made during the special session."

During her speaking tour, Buckley used a Power Point presentation to emphasize the changes she wanted to see in Nevada:

I Believe We Must Re-Design The Financial Underpinnings Of State Government

  • Spending: prioritize goals for government services in a long-term plan, allocate spending according to these priorities, and only pass budgets that are consistent with the plan.
  • Revenue: Re-evaluate revenue for adequacy to fund priority services and to ensure fairness, stability, and transparency.
  • Stability: we must stop boom-or-bust cycles by creating a budget reserve account large enough to allow us to maintain a consistent level of priority services, regardless of any rise or fall in state revenue. (Emphasis added)

Buckley's bill, which would accept a federal mandate without a future funding source, violates all three of these statements. It also violates the principles she put forward in the presentation:

Governing Principles that must guide the State Legislature in achieving the mission:

  • Fairness
  • Stability
  • Accountability
  • Transparency (emphasis added)

Resorting to populist rhetoric, Buckley last week said, "I don't believe the governor will veto the bill. It would be a slap in the face to anyone who is unemployed, and right now that is 1 out of 10 Nevadans."

Unfortunately, by engaging in the same behavior she's spent months lambasting other politicians for practicing, Buckley is face-slapping her own professed principles and anyone naïve enough to have believed she truly held them.

Victor Joecks is the deputy communications director at the Nevada Policy Research Institute.