Sandoval wants to extend temporary tax increases beyond 2013

CARSON CITY — Republican legislative leaders support Gov. Brian Sandoval’s plan announced Tuesday to extend $620 million in temporary taxes, while Democrats say it won’t provide enough money to build a better education system in Nevada.

In a surprise announcement, Sandoval said he intends to keep the sales and business taxes due to expire in July 2013 for at least two more years to avoid cuts to education and social services. He also said he has told state agencies to prepare "flat" budgets, ones without increases or decreases.

If the proposal prevents cuts to education, Sen. Michael Roberson, R-Las Vegas, will support it.

"What the governor is proposing is a flat budget. No one has to pay a dime more," said Roberson, leader of the Senate Republican Caucus.

Yet in his 2010 campaign for governor, Sandoval contended that even extending the temporary tax increases would represent a tax increase, something he opposed.

Roberson took a similar position during the 2011 session when he voted against the compromise between the governor and Democrats that continued the taxes — a 0.35 percentage point increase in the sales tax rate and a near doubling of the payroll tax rate.

Although Sandoval again is breaking his campaign pledge, this time he is doing so with more backing from party leaders such as the conservative Roberson. Democrats are unhappy with the proposal, but only because it rules out other tax hikes to fund education.

Sandoval said that after visiting 200 schools, he changed his thinking about cutting funding for either public schools or higher education, which occurred during the last legislative session. He also will not reduce social service or public safety spending.

"My No. 1 is priority is education," he said. "I will not cut education. Medicaid is increasing dramatically. I will not reduce services to the most vulnerable.

"I am happy to sit down with anybody," he continued. "Get to learn the budget. Higher education, K-12, health and human services and public safety, that is 96 percent of the budget. If you are going to make significant cuts, you have to cut education."

And he refuses to do that again.

"In addition to avoiding further cuts to education, this decision means there will be no need for tax increases in the next session," Sandoval said later in a statement. "Nevadans will pay no more than they are in the current biennium."

If constituents look at what the state spends, they will realize the $6.2 billion budget cannot sustain a $620 million reduction, Sandoval said.

A MIXED REACTION

But Sen. Mo Denis, the leader of the Senate Democrats, said flat spending on education is not "good enough for our kids."

"In order to diversify our economy and attract new businesses and industry to Nevada, we must show them we are serious about investing in a well-educated workforce," said Denis, D-Las Vegas. "We can’t do that if education funding remains stagnant."

Assembly Democratic leader Marcus Conklin added, "The key to prosperity starts with a sound education system."

Although Republicans won’t talk now about increasing education revenue, Conklin, D-Las Vegas, said that "this is the first step in a very lengthy process."

Senate Majority Leader Steven Horsford, D-Las Vegas, was glad to see some Republicans who didn’t support the budget compromise in 2011 now changing their tune. But he added that the Legislature needs to approve a broader-based business tax that reduces the reliance on gaming and mining taxes.

On the other hand, Sen. James Settelmeyer, R-Minden, said that before he votes to continue the temporary taxes, he wants the state to adopt reforms to show citizens that their tax dollars are being spent appropriately. He said he favors legislation to require drug testing of people before they receive Medicaid.

"Before you ask citizens for tax dollars, we have to make sure we do a better job of watching our taxes," added Settelmeyer, a conservative who was the Senate Republican whip last year.

In his comments to reporters, Sandoval said he wanted to end the furloughs that have resulted in state employees receiving pay cuts of either 4.6 percent or 4.8 percent each of the past three years, but that might not be possible because of increases in Medicaid caseloads of 4,000 per month.

The federal Patient Protection and Affordable Care Act, which goes into effect in 2014, also may prevent him from ending furloughs, Sandoval added. The national health care act is expected to add more than $100 million a year to state Medicaid costs. The U.S. Supreme Court soon will review the constitutionality of the act.

Sandoval said his proposals could change depending on improvements in the economy, but he said he wanted to announce his intentions now.

Republican leaders remain hopeful that some budget savings can be found so that a portion of the temporary taxes can be reduced.

"I still think we can look at cost savings," said Assemblyman Pat Hickey, R-Reno, the head of the Assembly Republican Caucus.

Hickey agreed that education should not be cut, but he said the state might request co-pays from people who receive Medicaid, the free health care program for the poor and disabled. Other states have required co-pays, Hickey said.

More than 306,000 people in Nevada receive Medicaid.

NO BARGAINING CHIP

Geoff Lawrence, deputy director of policy for the conservative Nevada Policy Research Institute in Las Vegas, questioned why Sandoval is agreeing now to keep the temporary taxes.

"I would have expected it to be his biggest trading chip next session. I don’t see how he can get other reforms through now," he said.

Lawrence said Democrats last year did not even give a good hearing to the governor’s plan to reform the Public Employees Retirement System.

Vishnu Subramaniam, director of the American Federation of State, County and Municipal Employee Local 4041, contended that state employees no longer can be expected to work harder for less pay and lower benefits.

Subramaniam said that if furloughs for state employees are kept by the Legislature next year, it will be six straight years of reduced wages for them.

"Ultimately we have to take our case to the Nevada public," said Subramaniam, whose AFL-CIO union will be part of labor’s upcoming effort to circulate petitions to increase state taxes.

"We need to make the pie bigger. The state of Nevada is not going to improve without initiatives to increase taxes."

Staff writer Laura Myers contributed to this report. Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.

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