Editorial: Give state revenue windfall back to those who created it

State workers demand higher pay raises. (R-J pix)

Riddle: What is the difference between the Nevada Legislature and a drunken sailor?

Answer: Eventually the drunken sailor sobers up.

The Economic Forum, which is tasked with estimating state general fund revenues so lawmakers can dodge blame for overestimating, has found a few million more coins in between the couch cushions — $96 million more in the coming biennium and a $44 million surplus from the current year for a total of $140 million. So immediately the governor and lawmakers on both sides of the aisle started calculating just how they could spend it. The added funds hike the general fund budget to $8.2 billion over the next two years.

Not one person suggested letting the taxpayers keep some of that windfall to blow on groceries and new shoes for their children.

Gov. Brian Sandoval wants to spend the windfall on education. “I introduced the weighted student funding formula last session, and this additional money provides a unique opportunity to invest directly in students who are economically disadvantaged, English learners, gifted and talented and in special education,” he was quoted by the press as saying.

For all the good that has done over the years. Over the past four decades, according to a Cato Institute analysis, Nevada has increased K-12 public school funding by 80 percent per pupil, adjusted for inflation. During those four decades student test scores have actually fallen slightly.

Democratic Assembly Speaker Jason Frierson and Democratic Senate Majority Leader Aaron Ford said in a joint statement, “While these newly projected revenues will not be enough to fully meet our needs in public education, mental health, job training, and other vital services, we are committed to putting our tax dollars to work for the hardworking Nevadans who still feel left behind.”

How about some concern for the hardworking taxpayers who keep paying more and getting no recognizable return on their investment?

A few days later several dozen state government workers rallied near the legislative building demanding that the $140 million windfall be used to give them higher pay raises. Though the governor has included 2 percent raises in each of the next two years, the workers were demanding 5 percent each year, complaining that wages are so low many state government employees are on public assistance programs. They complained about how workers’ pay was reduced by furloughs during the recession, failing to note that they were paid the same rate of pay for the time they did work.

They also did not talk about how their pay compares to those in the private sector. According to census data maintained by the Department of Employment, Training and Rehabilitation, the weekly wage of a Nevada state government worker in the third quarter of 2016 was $1,093 a week, compared to $922 for a private sector worker in Nevada. Also, the state worker’s pay has increased 21.7 precent since 2012, compared to an increase of 13.1 percent for the private sector.

To add insult to injury, we note that the windfall-inflated $8.2 billion general fund budget is a 12.3 percent increase over the previous biennium’s $7.3 billion spending, while inflation in the past two years amounted to 2.5 percent. And the general fund is only about a third of the total state spending.

Since 2011 the state general fund budget has grown by 32.3 percent, while inflation amounted to 7.9 percent. Since 2001 that budget has grown by 122 percent, compared to 37.5 percent growth in the cost of living.

Meanwhile, the Economic Forum forecasts that the commerce tax passed in 2015 at the urging of Gov. Sandoval will raise less than $200 million in each of the coming years — less the millions the state is spending to create what is basically a Nevada version of the Internal Revenue Service.

The commerce tax is a tax on gross receipts on all businesses grossing more than $4 million a year. It has different tax tables for 27 different industries — ranging from a low of 0.056 percent for mining to a high of 0.362 percent for rail transportation — and there are 67 different tax brackets.

It is costing businesses in the state untold millions to comply with all the paperwork needed to enforce and collect the tax.

Take that $140 million windfall, add a few nips and tucks in the budget, then repeal the commerce tax. That’s the sober thing to do.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

 

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There is plenty of money for Nevada lawmakers to spend and here are places to cut

You could hear the wailing and gnashing of teeth radiating out of Carson City all across the sagebrush-dotted terrain this past week when the Economic Forum forecast that the state would collect a paltry $6.33 billion in general fund revenues in the coming two years. State agencies had given the governor a list of expenditures they think they must have totaling $7.7 billion.

The governor immediately bemoaned the fact the state’s tax structure is inadequate to keep up with the demands of our changing economy and increasing population.

There were murmurs about the need for tax hikes from Democrats and tax reform from Republicans, both meaning more money taken from the citizens and given to the bureaucrats.

So, how bad is it? That $6.33 billion revenue forecast is up from the Economic Forum forecast of $5.8 billion in revenue two years ago. That is a 9 percent increase.

Nevada’s population grew by 2.5 percent from 2011 to 2013. Nationally, inflation has increased since 2012 by 3.4 percent. Social Security beneficiaries are getting only a 3.2 percent increase in monthly checks over this year and next. Thus, 9 percent is enough to cover both population growth and inflation.

It would also be helpful to note that the 2012 forecast was a bit of a lowball and the actual two-year revenue is closer to $6.27 billion. What’re the odds the same thing will happen with this forecast?

The Economic Forum was created by the Legislature in 1993 to keep the governor and lawmakers from making wildly optimistic revenue predictions and then having to scramble to amend for their excessive spending. These early December forecasts are used by the governor to prepare a budget — with or without tax hikes or extensions. On May 1 the Economic Forum will release its final official revenue estimate and that is what the Legislature must use to balance general fund revenues and expenditures for the next two years.

Gov. Brian Sandoval has already told the state agencies to pare back their budget requests.

Meanwhile, everyone is clamoring for more education funding because the state ranks 45th in the nation in K-12 spending.

Where can the state possibly find more money for education without raising taxes?

End the prevailing wage law that basically forces contractors on state and local government projects to pay what amounts to union scale. That’s $1 billion a year right there.

Stop the handouts by the Governor’s Office of Economic Development to attract new companies that just compete with existing firms.

Be less generous with tax breaks. The state allowed $3.7 billion in tax breaks in the past biennium, and that was before the $1.3 billion in tax giveaways for a proposed Tesla Motors battery plant were doled out.

Cut back on Medicaid expansion under ObamaCare. End binding arbitration for public employee unions. Reform overly generous public employee pensions. Slow the growth in public employee salaries, which exceed the national average. Toughen welfare qualification requirements. Cut the number of state occupational license boards. Acquire federal land for state and private use. The Nevada Public Land Management Task Force estimated acquiring 4 million acres of federal land would add $114 million to state coffers, and adding 48 million acres would add $1.5 billion.

But above all, enact regulatory and tax policies that encourage private economic investment and job growth, which will increase wealth, which will increase tax revenues, just as it did back in the boom days before the recession.