Put Your Thinking Caps on, Nevada: Budget Woes Are Back

Gold is down, pay is low—here’s the lowdown

Illustration by Jon Estrada

Illustration by Jon Estrada

The Nevada Economic Forum—a Legislature-appointed group of five experts in all things fiscal—recently met to figure out the state’s budget. It rapidly became clear that there’s a whole lot to figure out:

➜ A decline in gold prices means that mining-tax revenue this fiscal year, expected to be $93 million, will instead be only about $20 million. So state officials will have to make cuts or find new revenues. In other words, they will make cuts due to the Wizard of Oz problem: Republican legislators don’t have the heart to raise taxes, their Democratic counterparts don’t have the courage, and neither side has the brains.

The exception to this legislative allergy might be an increased rate for mining firms. While the industry seems to have enough money to pour into campaigns, it’s a mostly rural enterprise in a state where well over 90 percent of the population lives in urbanized areas. Nevadans long have expressed a willingness to have higher taxes as long as they don’t have to pay another dime for them. For instance, they’ve generally had no issue with higher gaming or room taxes, since tourists pay for most of those.

Mining has also made itself an easy political target for taxation. The Economic Forum’s Matt Maddox told KLAS-TV Channel 8 that “the costs the mining companies deduct are continuing to go up regardless of revenues.” That statement could be of use during the campaign to raise mining taxes. It could even force Governor Brian Sandoval, during his re-election campaign, to say whether he would support tax increases. But of course that would require the Democrats to field an opponent who could ask the question.

➜ The unemployment rate will continue to drop with the creation of more full-time jobs. But wages are down 7.3 percent since 2007, statewide taxable sales recently haven’t risen significantly and tourists spend less per person than they did before the Great Recession. On a related note, 500,000 Nevadans signed up for Medicaid, double the state’s projection, and this eventually will cost the state an estimated $300 million to $400 million that it doesn’t have.

Medicaid serves low-income individuals and families—not the indigent or unemployed, but the needy. With wages and income still down, even the employed will remain needy. Their spending will stagnate because they have to watch their p’s and q’s—pennies and quarters. That’s especially true of lower-paid state employees who will continue to lose salary to furloughs, and casino employees who depend on the tips that won’t be extravagant as tourists mind their own budgets. As state officials made clear, the problem is low pay.

➜ Low pay is inseparable from poor education and training. Even when gold is booming and creating well-paying jobs, Nevada hasn’t put a strong emphasis on training for the mining industry. Gaming also has a need for well-educated workers—someone has to know how to make those machines work—but the state hasn’t taken financial steps to encourage educational institutions to cater to that need. In general, despite plenty of talk, the state has not committed itself to improving in the areas that matter to businesses—either the ones that are already here, or those that might consider moving here.

➜ It’s hard to run a budget when you’re always guessing how much money you’ve got. When the Legislature created the Economic Forum in 1993, Nevada was booming—just that year, the Luxor, Treasure Island and MGM Grand opened and prospered. But it seemed in every even-numbered year, then-Governor Bob Miller had to cut the budget because lawmakers always anticipated more revenue than the state received.

The revenue-anticipation problem goes back a long way. In 1981, to avert passage of a constitutional amendment that would hamstring them, lawmakers and Governor Robert List cut property taxes and raised sales taxes. This made the state more dependent on projections and economic rises and falls. You could even argue that the problem goes all the way back to 1864, when the Nevada Constitution’s authors set up biennial sessions. It’s hard for a state to solve its problems when its representatives meet for a few months every other year. Out of 50 states, 46 now have annual legislative sessions.

In other words, Nevada continues to support a rickety state government, built on Band-Aids and fervent prayers that its experts will be able to project correctly. And if the prayers aren’t answered, the solution always seems to be the same: Just cut services, even as the need for those services grows. And while some Nevadans talk, most show no signs of doing anything about it.

Michael Green is a professor of history at the College of Southern Nevada.

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