Friday, July 11, 2003
Copyright © Las Vegas Review-Journal

CONSTITUTIONAL RULING: Court paves way for new taxes

Justices: Need to fund schools takes priority

Nevada Supreme Court Chief Justice Deborah Agosti, left, announces the court's 6-1 ruling Thursday ordering the state Legislature to quickly pass a balanced budget. Justice Robert Rose is at right. Photo by Amy Beth Bennett. Senate Majority Leader Bill Raggio, R-Reno, left, and Sen. Dennis Nolan, R-Las Vegas, discuss the decision handed down by the Nevada Supreme Court on Thursday. The court ordered the Nevada Legislature to work quickly to resolve the current tax and spending impasse. Photo by Amy Beth Bennett. Click image for enlargement.

CARSON CITY -- In a stunning decision Thursday, the Nevada Supreme Court ruled 6-1 that the Legislature needs only a simple majority to pass record tax increases to balance the state budget and fund education.

The decision sets aside the state constitutional amendment requiring at least two-thirds support of lawmakers to pass tax increases. The justices ruled that the need to fund public schools, another constitutional requirement, took precedence over the need to approve tax increases by a two-thirds supermajority.

The ruling paves the way for a quick resolution to a months-long tax and budget impasse.

"It was a bold move by the Supreme Court," said Senate Minority Leader Dina Titus, D-Las Vegas. "They made history. National history."

Lawmakers failed to pass a balanced budget for 2003-05 during the regular session that ended June 2. The $1.65 billion public schools spending plan was the final piece of the budget before lawmakers, but they needed to pass more than $860 million in tax increases to support it. Unable to pass the schools budget without first passing the tax increases, a minority of lawmakers held out for cuts to already approved spending, hoping to reduce the record boost in state levies.

Their shield was the required two-thirds supermajority. The resulting stalemate persisted through two special legislative sessions and into the start of the new fiscal year on July 1.

Gov. Kenny Guinn subsequently asked the Supreme Court to intervene, saying the Legislature had violated its constitutional duty to pass a balanced budget by the start of the fiscal year.

Those monitoring Thursday's decision were shocked because Guinn did not ask for a ruling on the two-thirds requirement. It was raised in a "friend of the court" brief filed by the state teachers union in support of Guinn's position.

The 15 Assembly Republicans who have voted as a bloc against record tax increases have lost their leverage because of the Supreme Court opinion.

"I am stunned, to say the least," said Assemblyman Bob Beers, R-Las Vegas. "We lose. Now we are not part of the compromise."

Guinn praised the decision in a prepared statement.

"I look forward to being presented a final bill to fund education and a compromise package that raises the necessary revenue to balance the budget," Guinn said. "Nevada's parents, teachers and future generations of leaders deserve no less."

Guinn would not answer questions, deferring to Attorney General Brian Sandoval.

Sandoval said any appeals to the federal court system likely won't succeed. The Nevada Supreme Court is typically viewed as the final arbiter in questions involving the state constitution, he said.

"Everyone is going to have a different opinion on this," he said. "We just asked the court to require the Legislature to balance the budget and fund education."

In the 16-page majority opinion written by Chief Justice Deborah Agosti, the court said: "If the procedural two-thirds revenue vote requirement in effect denies the public its expectation of access to public education, then the two-thirds requirement must yield to the specific substantive educational right."

The court directed the Legislature to convene as quickly as possible "under simple majority rule."

The Legislature is expected to convene Monday at noon to finish its work.

"I was very surprised," said Assembly Majority Leader Barbara Buckley, D-Las Vegas. "Stunned is a good word."

Buckley said lawmakers will meet today to try to forge a tax compromise so the full Legislature can quickly pass the plan Monday. Assembly Democrats will continue to seek some form of a broad-based business tax as part of the compromise with the Republican-controlled Senate, she said.

Senate Majority Leader Bill Raggio, R-Reno, said the opinion was unexpected, but he will continue to try to meet the concerns of all lawmakers, including those in the minority.

"I've been optimistic before," he said. "I don't think anything is guaranteed."

If the two houses cannot come to an agreement beforehand, each will pass its own tax bill and work out differences in a conference committee.

"I don't look at this as anybody winning or losing," Raggio said.

The Legislature needs to raise about $860 million in new taxes to fund the budget as it has been tentatively agreed upon by a majority of lawmakers. Most of the budget has taken effect already. Only the public schools budget remains unapproved.

The Senate tax plan includes as its centerpiece a tax based on the wages of employees. Democrats oppose the plan and favor a broad-based business tax, but have proposed a combination of both types of levies as a compromise.

"I anticipate working out one common plan so we can meet to approve it in the shortest time possible," Buckley said.

U.S. Rep. Jim Gibbons, R-Nev., the author of the initiative petition that put the two-thirds requirement for tax increases in the state constitution, expressed outrage at the decision.

"Today, the Nevada Supreme Court wilfully ignored the wishes of more than 70 percent of Nevadans who twice voted in favor of requiring a two-thirds majority to pass a tax increase," Gibbons said in a prepared statement. "The court failed to protect the will of the people of Nevada and has denigrated our state's constitution and political process."

The only member of the court to dissent -- but only partially -- was Justice Bill Maupin, who said he would have given lawmakers until July 28 to reach a consensus before ordering intervention.

"What is evident is that our schools must, as a matter of constitutional law, be funded on or before Aug. 1," he said.

Titus said she opposed court intervention, fearing a precedent that would erode the separation of powers between the three branches of government.

"But since they did rule, I'm glad about the way they did it," she said. "It is a great victory for schoolchildren."

Titus noted that the ruling was not partisan, because Maupin, a Democrat, dissented and Justice Mark Gibbons, the lone Republican on the seven-member court, joined with the majority.

Beers said the court's decision would anger a lot of voters.

"It seems the sentiment of the people who voted for the Gibbons Tax Restraint Initiative was discarded," he said. "It's quite shocking."

Terry Hickman, president of the Nevada State Education Association, said the ruling means public schools will be able to hire teachers and get back to the business of educating children.

"Maybe now the Legislature can get down to the business that they were sent here to do," he said. "That's to fund education, come up with a tax package, and let's put the kids in school."

Jon Sasser, an advocate for Nevada residents who use the state's social service programs, said the ruling is a victory for his clients.

"We've been worried of course, that this bloc of 15 was going to hold out and ask that the budgets be reopened," he said. "It's a big relief."

Dan Burdish, a Las Vegas businessman and chairman of a group called Nevadans for Tax Restraint, said a recall effort aimed at the six justices who in effect repealed the two-thirds requirement is being considered.

"They have essentially told the citizens, `We don't care what you think, we're going to do this,' " he said. "It is just astounding."

Carole Vilardo, president of the Nevada Taxpayers Association, said she was shocked at the ruling.

"John Q. Public and the small business community are appalled," she said. "The precedent this sets is absolutely terrible."

The decision means tax increases of more than $860 million to fund education and the rest of the two-year, $4.9 billion state budget are more likely than ever, Vilardo said.

A legal challenge is unlikely. Only the Legislature has the right to appeal, she said.

The court removed the names of individual lawmakers in its ruling, meaning legislative leaders would have to endorse an appeal.

Las Vegas Chamber of Commerce lobbyist Sam McMullen said the voters who supported the two-thirds requirement are going to question the court ruling.

"We didn't think that was the correct interpretation," he said. "As it stands, it clearly changes the dynamic for tax votes."