Tuesday, January 25, 2005
Copyright © Las Vegas Review-Journal

STATE OF THE STATE ADDRESS: Guinn surprises legislators

Governor proposes cutting health care benefits, assisting home purchasers

Nevada Gov. Kenny Guinn delivers his State of the State address while Lt. Gov. Lorraine Hunt and Assembly Speaker Richard Perkins, D-Henderson, listen Monday night at the Legislature in Carson City. Guinn unveiled his $5.7 billion state spending plan. Photo by CATHLEEN ALLISON/SPECIAL TO THE REVIEW-JOURNAL Gov. Kenny Guinn stops to talk with Lt. Gov. Lorraine Hunt and Assembly Speaker Richard Perkins, D-Henderson, after giving the State of the State address Monday night at the Legislature in Carson City. Photo by CATHLEEN ALLISON/SPECIAL TO THE REVIEW-JOURNAL

CARSON CITY -- Gov. Kenny Guinn at first Monday evening seemed to have stolen the thunder of his fourth and final State of the State address.

He made anticipated comments about a massive tax rebate and more funding for mental health and school programs, initiatives he had unveiled or hinted at earlier this month.

Not until he neared the end of his speech did he surprise legislators by proposing they eliminate retirement health care benefits for new state employees and cover land costs for some home buyers.

It came as a surprise to some listeners that the top issue on many minds -- skyrocketing property taxes -- received scant attention.

His 50-minute address to Nevada lawmakers was interrupted frequently, but only for lukewarm applause by the standing-room-only crowd in the state Assembly chambers. Some legislators shook their heads and applauded politely.

With the state enjoying a $320 million surplus and tax revenue expected to increase to $5.7 billion over the next two years, Guinn wants the 2005 Legislature to increase state spending by 19 percent.

"It's his legacy speech -- an expansion of public services for the second straight time at huge rates," said Assembly Minority Leader Lynn Hettrick, R-Gardnerville. "Not all of it is bad, but it's still a tremendous rate of growth."

As expected, Guinn reiterated his well-publicized promise to return $300 million of the surplus by giving residents rebates on the car registration fees they paid last year.

"The Republicans don't think Kenny Guinn is a real Republican, and the Democrats have some reservations about him giving back a lot of money they fought really hard to raise," said Senate Minority Leader Dina Titus, D-Las Vegas. "There weren't really any show-stoppers."

Guinn also asked legislators to put $100 million into a fund to assist failing public schools and to spend $45 million to eliminate the problem of mentally ill people clogging Las Vegas emergency rooms.

He also proposed 2 percent annual raises for teachers and state employees over the next two years.

But Guinn's plan to cut out retirement health benefits for new state employees, particularly when he characterized the state economy as "running on all cylinders," caught many by surprise. The proposal would save the state $500 million over the next 30 years, Guinn said.

"We can no longer expect taxpayers to pay for these benefits," the governor said. "The majority of them can never expect to receive this kind of coverage, no matter if they retire from a public or private employer."

The proposal did not sit well with either Scott MacKenzie, executive director of the State of Nevada Employees Association, or Terry Hickman, president of the Nevada State Education Association.

"We're not going to agree to that," MacKenzie said. "I had a sense that it was coming because it is a national trend. It will hurt our recruiting efforts."

"That is a disincentive to come to Nevada," added Hickman, noting that teachers fall under the state medical benefit plan. "If it includes teachers, we are very concerned."

But Senate Majority Leader Bill Raggio, R-Reno, said health care benefits are skyrocketing, and he will support the plan.

"It is not taking anything away from existing employees," he said. "We know we have a crisis in health care benefits. We cannot continue to subsidize it in the future."

Guinn's surprising housing plan received a better reception.

With housing costs soaring, he proposed the state acquire federal land for housing developments and place the acreage in a permanent state trust. The homes could then be sold without the cost of land included in the purchase price.

Land can be 15 percent to 25 percent of the price of a home, said Lon Deweese, a state Housing Division official.

Private builders would construct as much as 3,000 units of housing per year on this land. People who earn as much as $25,000 a year would be eligible to buy the homes.

Guinn aide Steve Robinson said the governor and the U.S. Bureau of Land Management have been talking about the state acquiring, for little or no money, many parcels of federal land throughout Nevada.

The governor only briefly mentioned the issue that concerns many Nevada homeowners: rising property taxes. And he offered no solution of his own, saying only that he wants lawmakers to work on property tax relief as soon as the Legislature convenes Feb. 7.

Guinn emphasized the need to fund public schools. He proposes putting more than $500 million in additional revenue in public school budgets, including a $100 million for schools that have failed to perform up to federal No Child Left Behind guidelines and state standards. These schools could apply for grants to fund literacy programs, full-day kindergarten, the hiring of bilingual teachers, staff development and other programs.

"I fully expect our schools to be successful with this additional investment of funds and a strong system of accountability," Guinn said. "I am asking your support in establishing pay for performance salary incentives for the schools that are in trouble."

Lawmakers took issue with several of the governors' proposals.

Assembly Ways and Means Committee Chairman Morse Arberry, D-Las Vegas, was dismayed that Guinn proposed only a 2 percent annual raise for teachers and state employees, while pushing for cuts in retirement health benefits.

"It has to be higher," Arberry said. "How do you tell somebody, 'I'm going to give you 2 (percent) and then suck out future health insurance?' "

Assemblywoman Chris Giunchigliani, D-Las Vegas, said the raises "wouldn't even keep pace with inflation."

Of his plan to rebate $300 million in surplus tax funds, Guinn said: "While it's worthy of debate, perhaps, I will tell you you'll get no argument from the voters I've spoken to, except for how soon they'll get it."

But Titus questioned the equity of Guinn's rebate plan.

"The person with a Hummer and a sailboat gets the most money ($300), but the poor family driving an old car and sending their kids to college gets $50," she said.

Review-Journal staff writers Erin Neff and Sean Whaley contributed to this report.