June 2, 2011 - 1:03 am
CARSON CITY — Politics is often perception. It took a budget-busting Nevada Supreme Court ruling to force Republican Gov. Brian Sandoval to negotiate with Democratic leaders of the Legislature to craft a $6.2 billion general fund budget agreement they announced on Wednesday.
Everybody proclaimed victory, after having shaped the deal during five days of near round-the-clock work and negotiating sessions. Yet, there are some clear winners and losers in the compromise pact.
The deal extended for two years $620 million in taxes that the GOP and Sandoval had blocked to fulfill a campaign pledge not to raise taxes or lift the sunsetting levies. And, it included several education reforms the Democrats and their union backers had long resisted.
Here’s a look at how various people and groups fared.
The new governor came out "smelling like a rose," as one lobbyist put it. The former federal judge and state attorney general took the lead in personally negotiating the deal after determining his budget had a potential $657 million hole thanks to a Supreme Court decision May 26 that the state couldn’t take money from local entities. So the governor broke his pledge to shore up spending and avoid cutting education too deeply.
He was immediately criticized by fiscal conservatives who felt deceived. And he won’t get all Republicans to vote for his budget compromise, yet he looks like a statesman who did the prudent thing.
"The governor is the biggest winner in all of this," said Billy Vassiliadis, a longtime lobbyist for the gaming industry. "He put the deal together. He got both partisan sides to agree. He became personally invested in getting the deal done on time. He showed true leadership."
Senate Majority Leader Steven Horsford and Assembly Speaker John Oceguera, both D-Las Vegas, avoided what could have been a pitiful end to a session in which they had gained no traction for a $1.2 billion tax plan. Making a deal with the governor provided a face-saving opportunity and allowed them to tout saving education from deeper cuts. Few Democrats expressed happiness about the budget deal but were glad to win the tax extensions, said Reno Sen. Sheila Leslie, chairwoman of the Senate Revenue Committee.
"I think it’s the best that we could do," Leslie said.
Senate Minority Leader Mike McGinness, R-Fallon, and Assembly Minority Leader Pete Goicoechea, R-Eureka, managed to keep their caucuses largely in line despite the sudden turn of events. Behind closed doors, GOP lawmakers pushed hard to get major reforms outside of education — in the prevailing wage, collective bargaining and construction defect lawsuits.
And some Republicans groused that Sandoval and the GOP caved in too quickly and should have only subtracted the $62 million water fund from the budget. Yet McGinness and Goicoechea stuck with Sandoval to help seal the deal.
The budget deal is expected to provide $80 million more than originally proposed to public schools, meaning fewer teacher layoffs.
The governor touted education reforms he won: an end to teacher tenure for poorly performing teachers and an end to a seniority system that allowed bad teachers to stay in the classroom while newly hired teachers were laid off. Now, performance and effectiveness must be included in deciding which teachers get laid off.
The deal also allows collective bargaining agreements to be reopened in times of fiscal emergency.
Conservatives weren’t satisfied with the reforms, saying Sandoval didn’t win ending social promotion or a movement toward school choice with a voucher plan to let parents send their children to private schools.
The chancellor of higher education said funding would still be 15 percent less than two years ago, a loss that can be made up in part with a 13 percent increase in tuition. Chancellor Dan Klaich said draconian moves such as closing campuses can be avoided. Significant layoffs can be avoided, and the system won’t have to turn away as many students — perhaps 7,000 instead of the estimated 20,000 figure from the governor’s original spending plan.
The teachers unions were perhaps the biggest losers. They lost on tenure, seniority and collective bargaining. And the budget compromise includes a 2.5 percent salary reduction, plus teachers must contribute 5.3 percent of their salary toward their retirement benefits. Also, employees will pay slightly more than 1 percent of their pay to cover an increase for the Nevada Public Employees Retirement System.
Seven out of 10 Nevada businesses will get a $60 million tax break under the compromise budget deal. Sandoval and lawmakers agreed to end the modified business tax for companies that have a payroll of $250,000 or less each year. On bigger companies, the 1.17 percent tax rate will continue through 2013 as part of the tax extension package.
Sandoval said this means 115,281 Nevada businesses will get a break.
The industry got a break and a new tax hit. Mining claims fees that would have raised $37.4 million were dropped, but Horsford won his bid to tighten up deductions the industry has been taking while paying a net proceeds tax on minerals. The deductions tab: $23.8 million over the next two years, a relatively small price for a gold-rich industry.
Nothing was accomplished to broaden Nevada’s tax base beyond its staple gaming, mining and sales tax to fund the state budget. Democrats proposed about $570 million in two new taxes — a margin tax on businesses and a "transaction" tax on services. The effort died on the vine with zero GOP support.
Sandoval has not proposed any major tax shift, but he said on Wednesday he would consider it during his administration.
"That’s an issue for discussion another day," Sandoval said in response to a reporter’s question about whether he would tackle tax changes. "Certainly I think the structure of our tax system merits review."