‘Doing Desperate Things in Desperate Times’

You thought the 2007 legislative session was petty and personal? You say the partisan gamesmanship, overtime drama and back-room tax increases of 2003 can't possibly be repeated? That voters will never endure a more selfish slap from lawmakers than the 1989 veto override to quadruple legislative pensions?

Welcome to the 2009 Legislature, where all bets are off. Where everyone agrees the governor's budget won't stand but no one puts forward proposals of their own. Where the end of many political careers could wipe out those just beginning. Where an unprecedented convergence of political dynamics and economic woes will shape the debates and votes that decide this battered state's future.

"We're doing desperate things in desperate times in desperate ways to respond to a desperate crisis. It's huge," said Assemblyman Joe Hardy, R-Boulder City.

On Monday, lawmakers will begin the process of deciding how to pay to operate the state for two years, knowing that Nevada's ailing economy won't improve soon. No one expects a turnaround before the end of the biennium.

The taxes that fund public schools, higher education, the justice system and welfare programs are expected to bring in about $5.6 billion between July 2009 and June 2011, a net decrease from the current budget. To keep the state on the merry funding path that, during better times, allowed state spending to nearly double this decade, fiscal planners and majority Democrats say at least $8 billion is needed.

Gov. Jim Gibbons has proposed a two-year spending plan of about $6.2 billion that includes a voter-approved hotel room tax increase in Clark and Washoe counties, property tax revenues redirected from those jurisdictions, federal bailout money, 6 percent pay cuts for all state, school and university system employees and steep reductions in subsidies to UNLV and UNR. The governor repeatedly has said he will not support additional tax increases during a recession.

Assembly Democrats have the two-thirds majority needed to pass tax increases and override a Gibbons veto. Democrats need the votes of two Republican senators to achieve that margin in the upper chamber.

"You don't see anyone blindly going for the governor's budget as it is. They know it's unworkable and it's not fair," said Sen. Mike Schneider, D-Las Vegas. "The 6 percent pay cuts are not going to fly."

But the governor's call for alternative plans hasn't been answered. "I have no idea where they will find the revenue to match their rhetoric," Gibbons told the Reno-Sparks Chamber of Commerce on Tuesday.

Considering the constitution requires the Legislature to complete its business exactly four months from today, the road to resolution looks a lot like a wartime supply route -- replete with booby traps and bombed-out bridges. And there's a reason for each and every obstacle.

Term limits

Last year, the Nevada Supreme Court upheld the voter-approved constitutional amendment to limit elected representatives to 12 years in any office. Although many state and county officials were bounced from last year's ballot as a result of the decision, the court affirmed that the term limits clock didn't start ticking for legislators until 1998. As a result, 21 lawmakers -- one-third of the Gang of 63 -- have faced voters for the final time, and 16 are serving in their final regular session.

Free from re-election concerns, those uninterested in other offices have the political freedom to vote however they want -- they know they'll be out of office come 2010 one way or another. Those who have been pushing pet causes for years without success -- both policy and funding changes -- might be willing to strike deals that two years ago would have been political suicide.

"They're not answering to anyone," said Schneider, who won re-election to his final term last year and will return to Carson City in 2011. "They can do anything they want. They can do the right thing, or they can do the wrong thing and ignore their constituents. That's the part that worries me. They don't have to look over their shoulders for someone holding a hammer over them."

The golden ticket of 2010

Nevada Democrats are beside themselves over the timing and severity of this recession. They made huge gains in voter registration and representation at the county, state and federal levels in 2008, but following their base desires to raise taxes to California levels could cost them a far bigger prize: the 2010 elections and the opportunity to redraw legislative and congressional boundaries in their favor in 2011.

This is the big picture for Democrats, the main reason why most majority lawmakers are keeping their taxing intentions secret for now. The thinking goes: raise as few taxes as possible this year, campaign as restrained moderates to pick up more seats in 2010, then jack taxes, pump up the size of government and craft near-permanent majorities.

The golden ticket of redistricting will not be limited to moving Democratic voters into some jurisdictions and moving Republican voters out of others. (It's hard to imagine the Nevada Assembly becoming even more gerrymandered -- Republican districts represent half of Nevada's population, yet the GOP holds only 14 of the lower chamber's 42 seats.) Because of Southern Nevada's population gains this decade, the Assembly and Senate will be reapportioned in 2011, with two or three Northern Nevada Senate districts and three or four Assembly seats shifted to Clark County. All those districts are currently dominated by Republicans, and all could be redrawn to flip to Democrats in the 2012 election.

This inevitability will make Reno-area and rural lawmakers even more desperate this session to preserve whatever policies and funding benefit their constituents.

"Everyone in rural Nevada is concerned they're going to lose representation in the Legislature," said Assemblyman John Carpenter, R-Elko, who is taking part in his final regular session because of term limits. "They're worried it's going to be cut down. Between term limits and reapportionment, overall representation of rural Nevada is going to be diluted beyond this year."

A helping hand from Congress

Democrats don't have to tip their hand on tax increases just yet because they know Congress will come through with some sort of bailout. Gibbons' budget projects only $108 million in "stimulus" funding, but his staff now says the state's share could approach $1.3 billion.

Aides to new Nevada Rep. Dina Titus say that figure includes more than $520 million for public schools and other state services and more than $440 million for Medicaid benefits. It might be just enough to offset the governor's proposed cuts to higher education and state worker salaries -- and save the skin of every politician in Carson City.

Whatever moves the Legislature makes to raise taxes on Nevada consumers, businesses and tourists will depend on how much debt-funded assistance Congress provides and how quickly it clears President Obama's desk. Until that figure is certain, don't expect any proposals from anyone.

"Why in the world would you do anything to cut programs or raise taxes if the federal government is going to bail us out?" Hardy said. "There's no reason to start swimming. You just tread water until the life preserver is thrown."

Rush job

The Nevada Constitution requires the Legislature to wrap up its business in 120 days -- lawmakers must adjourn at 1 a.m. June 2. It's a target they routinely fail to hit, even under far less urgent circumstances.

However, if tax increases are part of the Legislature's budget solution, the schedule becomes even more condensed, leaving lawmakers with perhaps 10 fewer days to reach an agreement. Here's why:

Gibbons has said he won't support tax increases. Lawmakers must assume he'll veto any budget that includes tax increases beyond the hotel room levy. The governor has five days to issue a veto during any regular session, but if the veto is exercised after adjournment, the Legislature's override vote is delayed until the opening of the next regular session.

If lawmakers want to impose their will this year, they must pass tax increases at least six working days before adjournment. Legislative Counsel Bureau Director Lorne Malkiewich said Assembly and Senate leaders would have to pass tax increases by May 22, the Friday before the Memorial Day holiday, to safely guarantee an override vote before adjournment.

But drafting legislation to raise taxes takes days of work. Revenue projections must be generated by computer models. And if those increases include all-new taxes, lawmakers must account for support in the way of new workers and policies. A deal would have to be in place as early as May 18 to make it law under the wire.

Considering the Economic Forum -- the nonpartisan body that provides binding revenue projections to the Legislature -- won't issue its final numbers until May 1, that leaves lawmakers with about two weeks to settle on how much money they want to spend and how they'll reach their mark. If they can't, they risk putting themselves in a special session under an agenda dictated by Gibbons.

The risk to all of Nevada, then, is a rush job where no one proposes specific tax increases until the 11th hour. The transparent, deliberative process promised by Assembly Speaker Barbara Buckley, D-Las Vegas, and Senate Majority Leader Steven Horsford, D-Las Vegas, would be eschewed in favor of closed-door deal-making focused solely on the perceived needs of tax consumers, not the suffering of the state's commerce.

Even if Buckley and Horsford can present a "revenue plan" by mid-April, as they pledged to do Thursday, that still leaves little time to line up support from Senate Republicans and hear the concerns of voters and businesses.

Will Raggio roll over?

The fact that state Sen. Bill Raggio's title changed from majority leader to minority leader after November's election matters little. When Democrats decide to introduce legislation to increase taxes this year, the Reno Republican once again will have a huge say in the agenda. Two Republicans would have to side with the 12 Senate Democrats to pass tax increases that could survive a Gibbons veto.

The question is whether Raggio, Nevada's longest-serving senator, will roll over so Democrats can laud him as a "bipartisan statesman," or whether he'll demand reforms to unsustainable state institutions in exchange for his vote. It's worth noting that Raggio, who survived a primary challenge last summer only by bending over backward to reassure conservatives he wouldn't support tax increases, championed the 2003 tax hikes as a final fix for state finances -- and that he has faced voters for the final time because of term limits.

The best and most obvious deal Senate Republicans could make in exchange for supporting limited tax increases would be taming the unfunded liabilities of Nevada's public employee retirement benefits. The state has promised more than $10 billion worth of pension payments and retirement health care subsidies that it can't possibly pay for. If lawmakers think Nevada has budget problems now, they won't want to be around when that bill comes due.

Gibbons' bipartisan Spending and Government Efficiency Commission has recommended a number of reforms, including ending the health care subsidy for all workers who retire after July 1, forcing Medicare-eligible retirees off the plan, establishing a minimum age for pension distributions and requiring more years of service to the state to receive maximum pension benefits.

It makes far more sense to phase out the pension and eliminate future taxpayer exposure by moving future state hires onto a defined-contribution, 401(k)-style plan, but Democrats won't go that far.

In fact, they're already pooh-poohing the possibility of major policy changes this year, saying the demands of redoing the budget will consume all their time.

"This is the kind of thing you create a commission for, to look at the long-range view," said Assemblyman Tick Segerblom, D-Las Vegas. "This kind of change, I don't want to do it with a gun to my head."

But that same gun is already pointed at taxpayers, who have seen their retirement savings decimated but are still on the hook for generous, guaranteed benefits that have disappeared from the private sector.

"This is the perfect time to reform them," said Assembly Minority Leader Heidi Gansert, R-Reno. "Part of making sure the government is better off in the long run is reforming them right now. Bringing their costs down can get the state back on track sooner."

Which way might Raggio go? He didn't respond to messages seeking comment.

'Blood in the streets'

But the most powerful dynamic shaping the 2009 Legislature is the frightening weakness of the economy. Nevada once had the highest rate of job growth and the lowest rate of unemployment in the nation. In June 2005, the jobless rate was 4 percent. Now Nevada has the fifth-highest unemployment rate in the country at 9.1 percent, and lawmakers were informed Wednesday that the number likely would peak at 11.4 percent by early 2010. Clark County's rate could top out even higher -- this year.

"The number of unemployed workers just coming through the union halls, it's devastating," Schneider said.

Even the most economically illiterate lawmakers know that seizing more wealth from the private sector will delay the recovery needed to return tax collections to normal levels.

"If the economy hasn't even hit bottom, we don't want to put ourselves in a deeper recession," Hardy said.

But even that won't deter some lawmakers from believing that things won't get better until government has more money to spend.

"I worry less about having a business-friendly tax climate than I worry about having all the educational and cultural amenities that we need," Segerblom said.

Perhaps the most believable prediction for the session comes from Schneider:

"We'll pass the largest cuts we've ever seen, we'll pass the largest tax increases we've ever seen, and there will be blood in the streets when we leave."

Glenn Cook (gcook@reviewjournal.com) is a Review-Journal editorial writer.