ABCs of S-P-E-N-D-I-N-G

Legislators taking the wrong approach

By Geoffrey Lawrence
  • Monday, May 18, 2009

Remember playing with blocks as a child?  You had to find the correctly shaped peg to go through the corresponding hole. Most people do this in kindergarten. Our elected officials do it in the Nevada Legislature. 

Policymakers in Carson City have drawn a huge hole and are now confounded about which peg should be used to "plug the hole." This is a puzzle that has perplexed even the most adept legislators. For weeks, the cloak-and-dagger "core group" — composed of a self-proclaimed "elite" group of lawmakers — has met surreptitiously to strategize about which peg should be used. Apparently, the emerging design of their peg entails some state secret with which the public simply could not be trusted.

Finally, Nevadans are starting to get a peak into their secret tax plans and have found that they include: a doubling or tripling of the modified business tax, a hike in state sales taxes, and more than a doubling of cigarette and alcohol taxes. This "peg" would be a surefire way to prevent an economic recovery, as it would impose barriers to recovery on both the supply and demand sides of market transactions. 

The modified business tax is a direct financial penalty that the state imposes on businesses for hiring people or for paying them well. Sales taxes penalize consumers and discourage them from purchasing goods and supporting the livelihood of others. Together, these tax increases would prolong and deepen the state's recession. Yet it would provide a "stimulus" to big government and allow the clandestine "core group" to push its peg through the hole it has drawn.

The governor's office has designed an alternative peg that the governor believes might fit through the hole as well. The governor's metaphorical peg includes a sell-off of the state's tobacco settlement assets, taking loans of questionable constitutional validity and raiding money from other funds. 

Of course, tobacco settlement revenues are used to fund most of the Millennium Scholarship program. At the time of the Millennium Scholarship's creation, policymakers went to great lengths to assure voters that it would be financed entirely through tobacco settlement funds and would not lead to a higher tax burden (a promise that has already been broken once). Selling off the tobacco settlement assets would mean that if the Millennium Scholarship were to continue in existence, it would have to be funded entirely through the state's General Fund — at the direct expense of taxpayers. This would impose a tremendous liability on Nevada taxpayers far into the future. While the plan might make the governor's "peg" fit now, it could impose even more difficult decisions on state policymakers in future legislative sessions.

To be sure, both of the "pegs" — whether designed by the governor's office or by the "core group" — will be badly flawed. For all of our elected officials' efforts and head-scratching, they have simply been unable to pick the right peg to fit through the hole they've drawn.

The reason is that the fundamental question that intelligent individuals should think to ask has not even been posed in Carson City. As lawmakers stand around, boggled by their peg-and-hole quandary, no one has thought to ask, "Wait a minute, why'd we draw a big hole?"

It's not the revenue side. To borrow from a popular slogan, it's the spending, stupid.

Officials in Carson City are unanimously decrying the "budget shortfall." How can you have a shortfall for a budget that hasn't been created? You say projected expenditures will exceed projected revenues? 

Here's a thought: Reduce projected expenditures. 


The Nevada Policy Research Institute has even provided state policymakers with a blueprint for how to do exactly that. "Nevada's Freedom Budget 2009-2011: The Road to Recovery" is a $5.1 billion alternative budget that would fall in line with projected revenues. The Freedom Budget is the result of an extensive, line-by-line analysis and adjustment of the governor's Executive Budget that would fund the state's highest priorities. 

It would restore $176 million to the Nevada System of Higher Education in order to prevent operating reductions at the state's regional colleges. More than $85 million would be restored for the care of the mentally ill, indigents and the severely disabled. Nearly $80 million would be restored to K-12 education for the purchase of learning supplies — a reform that would actually benefit "the children" and not just the teacher union.

Of course, simply erasing the hole penciled by state policymakers would deprive them of their chance to figure out that it's the square peg that goes in the square hole.

In this case, however, it's probably just better to cheat and give them the answers.

Geoffrey Lawrence is a fiscal policy analyst at the Nevada Policy Research Institute.

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