EDITORIAL: Legislature beats expectations by passing budget

If the Nevada Legislature went into special session early this morning — as of this page’s deadline last night, overtime appeared unlikely — it wasn’t because of tax increases.

That so many lobbyists had cleared their June calendars in anticipation of at least one special session was a testament to the tenuous nature of the tax policy negotiations that have consumed Carson City since January. For months, it really wasn’t a question of whether the Legislature would balance a two-year operating budget by Monday’s constitutionally required midnight adjournment, but how many weeks of work lawmakers would need to finish the job after adjournment.

Instead, Gov. Brian Sandoval’s roughly $7.3 billion budget was balanced and tied up with hours to spare. The deal happened because the Republican governor didn’t stop negotiating with members of his own party, which controlled both houses of the Legislature, until they came up with a package of tax increases that could pass with the constitution’s required two-thirds support.

Gov. Sandoval was always more committed to his budget and the new and expanded education initiatives it contains than he was to its funding mechanism. A handful of Republicans wouldn’t support any kind of tax increase, but they were the only lawmakers with entrenched positions. Everyone else kept working at finding common ground, even when it appeared there might not be any.

The tax increases passed by the Assembly on Sunday and the Senate on Monday were quite different from the tax plan proposed by Gov. Sandoval in his State of the State address. The Republican originally wanted to fund new education spending largely through a tiered business license fee based on a company’s gross receipts. Once it was clear that plan wouldn’t pass the Assembly, a new plan was introduced: a flat, slightly higher business license fee, an increase in the business payroll tax and a new “commerce tax” based on a company’s annual gross receipts beyond $3.5 million.

This weekend, that plan was amended again to keep the state’s business license fee at a flat $200 instead of increasing it to $300 (while increasing the fee for corporations to $500) and raising the commerce tax exemption to $4 million. The payroll tax increase remained. Cigarette taxes would rise. And higher sales and vehicle registration tax rates that would have expired June 30 would be made permanent. The new protections for small businesses were enough to get the plan to the governor’s desk.

Another important reason the tax plan had the support of the majority of Republican lawmakers, including some who previously said they wouldn’t vote for tax increases: ambitious education reforms. Nevada will have universal full-day kindergarten and expanded support for students who aren’t proficient in English; within a few years, students will not be promoted past the third grade if they can’t read at grade level; and next year, Nevada will have the country’s strongest school choice program. Gov. Sandoval’s plan was never about pouring more money into a broken education system. It was about reinventing that system and targeting new spending where it could do the most good.

Nevada has been spared a prolonged budget battle and the alarmist politics and uncertainty that inevitably result. That alone means the 2015 Legislature exceeded expectations.