Sandoval: Pass education tax plan or see 20 percent cut in state budget

Gov. Brian Sandoval warned Friday that if Nevada lawmakers don’t extend sun-setting taxes and approve new tax revenue the state could face across-the-board budget cuts as deep as 20 percent, damaging an already dismal education system.

“If you’re not going to continue the sunsets and you’re not going to do what I’m proposing, it will be devastating,” Sandoval told the Review-Journal editorial board as he made the case for his $1.15 billion plan to extend taxes and raise business license fees. “It will devastate the university system. It will devastate K-through-12.”

Just days before Monday’s open of the biennial Nevada Legislature session, Sandoval said he’s been meeting with leaders of various businesses — the fuel industry and insurance companies were mentioned — who oppose his tax plan, although they agree with his goal to boost education spending, improving quality at all levels to meet the needs of a modern workforce.

The governor said he’s also meeting with leaders in the Senate and the Assembly, now both controlled by majority Republicans, to begin selling his plan for a graduated business license fee that would raise $438 million over the next two years for education reforms.

Businesses would pay from $400 to $4.3 million annually for a license, depending on a companies’ gross receipts. The scheme is attracting critics who suggest it’s too close to failed plans to tax gross receipts in 2003 and last year’s voter-rejected business margins tax.

Sandoval said he’s well aware of the opposition and he welcomes a healthy debate on any proposal put forward during the session, from a corporate income tax to a tax on services to doubling the payroll tax, or Modified Business Tax, which four out of five Nevada businesses don’t pay.

“All of them agree that we need to fund education,” Sandoval said of the business community. “What the disagreement is, is how we’re going to do it. None of these (tax and revenue raising) plans is going to be perfect.”

Sandoval’s plan, he argued, “is the broadest. It is the fairest. And it is the simplest” because none of Nevada’s 330,000 or so companies are exempt, it’s easy to collect and a business license fee, now $200 a year, is already in place.

“There may be different iterations of this,” Sandoval said of his tax plan, adding that someone suggested to him “just double the MBT and we’ll be done in 48 hours.” Others have suggested extending the sales tax to services and allow businesses “to just pass it on” to consumers. He said the state wouldn’t be able to implement such a complicated service tax plan to raise revenue in the coming two years, however, which is why he suggested studying it first.

Sandoval, a moderate Republican, said his meetings with business people as well as lawmakers from both the Democratic and Republican parties have been positive, though conservative GOP Assembly members already oppose tax increases — the governor’s or any others.

“I think there’s general consensus the business community wants to do more for education,” Sandoval said, then joked. “Now we’ll see who runs for the hills. I’m not.”

Any tax must be approved by a two-thirds super-majority in the Legislature and Sandoval suggested he may be able to achieve that with a coalition of Democrats, moderate Republicans and conservative GOP lawmakers who can be convinced that more money for education won’t be wasted in light of improved accountability and other reforms.

“For the most part, the super-majority of the Legislature knows that this is a generational opportunity to make a difference,” Sandoval said. “And there are some who will just say ‘no.’”

Asked if he was surprised that the heaviest criticism is coming from his own party, Sandoval said, “I knew there was going to be criticism, but I have to do what’s right for the state.

“I don’t know what that means for me two years from now, four years from now,” he added. “I have to do what I think in my heart is best for the state of Nevada and that’s what we’re going to do.”

The governor said he isn’t thinking about political considerations, but is focused on ensuring he leaves the state in better shape than when he took office in 2011. During his first term, he said, he wasn’t in a position to offer bold proposals because he had to cut the budget to make ends meet in a recession economy. Then, Nevada’s unemployment rate was about 14 percent. Now, it’s dropped to 6.8 percent, and the economy is slowing recovering.

“I have to embrace the moment,” Sandoval said. “We’ve done the cuts. I’ve done the consolidations. We’ve done the sweeps (of funds to find revenue). I’ve done all that. I did make up my mind that I’m not going to move backwards anymore. And I also made up my mind I’m not going to put a future governor through this.”

“Somebody has to take this on,” the governor added. “I’m the governor. I have to lead and I will lead. I’m going to defend this,” he said of his tax plan. “If there are other good ideas out there, I’m going to listen.”

Sandoval was asked if he is prepared to give up some of his proposals in exchange for support for his overall plan. The governor said he’s “not going to pit kids against kids” or show his cards early in the game, although such deal-making is almost always necessary in the legislative process.

“I’d be like the Seahawks showing their playbook to the Patriots” before the Superbowl, the governor said with a smile.

Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919. Find her on Twitter: @lmyerslvrj