Ruling class becoming too big for britches

Geoffrey Lawrence

Critics and big-government advocates have continuously derided Gov. Jim Gibbons' repeated pledge for "no new taxes."  These critics are more concerned with the wealth and size of the ruling government class than they are with the welfare of Nevada families.  They are calling for large tax increases during a deepening recession. 

Critics have claimed that to maintain the same level of government services, general fund revenues must increase from the $5.83 billion collected in the current biennium to $8 billion.  This would mean a 37 percent tax increase.  That increase would come on the heels of the 63 percent tax increase between the 2001-2003 biennium and the current 2007-2009 biennium.  If general fund revenues were to increase to $8 billion for the 2009-2011 biennium, this would represent a 124 percent tax increase in just eight years.

Nevadans deserve better.

General fund appropriations in the 2005-2007 biennium only amounted to $5.80 billion, while the state will collect $5.83 billion in the current biennium, according to the Nevada Economic Forum.  In spite of a 6 percent decline in general fund revenue since the 2005-2007 biennium, revenue levels are still adequate to cover the level of spending that was approved by the 2005 legislature.

So why do critics claim that a new 37 percent tax increase is necessary?  A central impetus has been rising spending on employee raises.  State government is unable to maintain the same level of services for the same cost to taxpayers because of its perpetually rising labor costs.  According to their collective bargaining agreement, state employees are entitled to a 4.5 percent step increase in pay for each of their first 10 years. 

In addition, state employees have been receiving annual cost-of-living adjustments.  In FY2009, state employees are receiving a 4 percent raise in cost-of-living adjustments after having received 2 percent in FY2008.  Apparently, while land sale prices have dropped 74 percent over the past year and rental rates have plummeted, the cost of living for state employees in Nevada has been rising.

Combining the step increases with the cost-of-living adjustments, state employees are getting as much as an 8.5 percent raise this year after receiving a 6.5 percent raise last year.  In other words, raises for the ruling class have been larger at the same time that private families have seen lower incomes and higher unemployment.

Recognizing this trend, Gov. Gibbons has asserted that he may eliminate raises for state employees from next year's budget.  This has prompted the state employees' union and the state teachers' union to threaten lawsuits against the state and the respective school districts for withholding the pay increases to which they claim to be entitled.  Even the state employees' union's executive director has recognized that "the private sector now is laying off people and not giving raises," yet he is pushing to increase the burden on the families of those unemployed workers.

Nevada needs real reform with regard to the funding of state government.  That reform should come on the spending side – not the taxation side.  Increasing the burden on private families and individuals during a recession to indulge state employees with lavish spending on pay raises would be not only inappropriate and harmful, but, strictly speaking, demonic. 

Policymakers in Nevada need to show the courage to take on the ruling class.

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.