Assemblyman says state could float $2 billion bond to cover shortfall

CARSON CITY — A Las Vegas assemblyman suggested today that the Legislature float a bond to cover its perceived shortfall of nearly $2 billion.

“We are in a panic,” Democratic Assemblyman Harry Mortenson said during a joint Senate-Assembly taxation committees hearing. “Could you not float a bond and use future revenue to pay off the bond?”

Mortenson said the Legislature could impose an unspecified new tax and use its proceeds to pay off the bond over time.

Gov. Jim Gibbons proposed two-year state general fund spending of $6.17 billion, but estimated the state would have to spend $8 billion to keep services at the level approved by the Legislature in 2007.

But veteran lobbyist Marvin Leavitt, a former Las Vegas finance director who represents Henderson and Las Vegas, called Mortenson’s suggestion “bad fiscal policy.”

He said bond purchasers would request an unusually high interest rate if payments were based on a new tax source. If the bond were based on the general obligation of the state, then it might be more favorably received, but he still would oppose it.

“I would never float a bond to pay for operating costs of the state,” Leavitt said.

Assembly Taxation Chairwoman Kathy McCain, D-Las Vegas, also expressed concern about using a bond to cover state expenses.

“It would be like a credit card you are paying back over 10 years,” McClain said.

But during the one-day special session in December, legislators agreed to incur $190 million in debt by taking a loan from a local government investment pool and by floating a $30 million bond to cover current budget shortages.

Guy Rocha, who has since retired as state archivist, uncovered evidence in November that state government regularly went into debt in the late 1800s to cover its expenses, some legislators had been under the impression they could not use loans to cover revenue shortfalls.

Legislative leaders have set out a plan to first review budgets and determine in April whether tax increases are necessary.

During the hearing today, Taxation members asked veteran lobbyists such as Nevada Taxpayers Association President Carole Vilardo and Leavitt for suggestions on dealing with the current budget problem.

“People will support tax increases they don’t have to pay,” said Vilardo, noting the public approval in November of an advisory question to increase the room tax rate by 3 percentage points in Clark County.

Vilardo suggested legislators consider a use tax, similar to a sales tax, on complimentary meals offered by casinos, companies and other businesses.

She also said that depending on what Congress does, Nevada and other states likely someday will levy sales taxes on most Internet sales.

Much of the meeting dealt wit the history of tax changes in Nevada.

“If you don’t know your history, you don’t know where to go from here,” McClain said. “Who would have thought our gaming mecca was not recession-proof?”

 

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.

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