(Michael Chamberlain/Nevada Business Coalition) – Both the Assembly and Senate worked over the weekend, including negotiations on the budget. Governor Sandoval met with Democratic leadership to attempt to reach an agreement on the next biennium budget in the wake of Thursday’s Supreme Court ruling.
Last Thursday, the Nevada Supreme Court ruled the state government could not take $62 million from the Clean Water Coalition that had been raised through special assessments to build a wastewater pipeline to Lake Mead. When the project was canceled in 2009, the Legislature took the money and dumped it into the general fund.
The ruling could have broader implications beyond the fund it specifically applied to. It appeared initially as though the governor’s office believed it blew a hole as large as $656 million in the proposed budget. That is what the administration calculated as the amount of money from funds belonging to cities and counties that was swept into the general fund.
First press reports, quoting sources within the administration, indicated Governor Sandoval may have been willing to completely capitulate on the taxes scheduled to sunset at the end of June. Some declared the budget battle over, believing the governor was prepared to agree to extending the sunsets while getting nothing in return – no agreement from Democrats on government reforms.
Whether those reports were inaccurate or whether the governor reconsidered that position or whether the emails and phone calls his office received had an impact, by Friday morning it was clear those initial reports were no longer true. Sandoval was not simply going to agree to extend all the sunsets and was not going to give up any more than he absolutely had to. Furthermore, whatever he did give up was not going to be for free.
Governor Sandoval asked Attorney General Catherine Cortez-Masto to request a clarification of the opinion from the Supreme Court to determine which of the funds the state could legitimately use and which it could not, a task the AG refused to do. So it was left to the governor’s office to determine where in the range of $62 million to $656 million the actual hole in budget is. Anything less than the entire $656 million is bound to result in lawsuits from whichever entities will have their money swept into the general fund. Some will have a much better chance than others of prevailing in court.
Negotiations with the leadership of the Democratic majorities in the Senate and Assembly went on throughout the weekend. Governor Sandoval appears prepared to agree to extend some of the sunsets in return for certain reforms, including public employee collective bargaining, Public Employee Retirement System/Public Employee Benefit System (PERS/PEBS), education, prevailing wage laws and construction defect litigation.
The two sides differ on the amount of additional revenue that will be needed – the Democrats, of course, want all of the sunsets extended, maybe even permanently, while the Sandoval administration reportedly believes the number is about $300 million less and wants any extensions to sunset in 2013. It is likely that removing the sunsets altogether and making these tax increases permanent would not gain the approval of a sufficient number of Republican legislators to pass, even with the governor’s blessing.
Democrats also are pushing for the state to confiscate unclaimed slot winnings from casinos. But the biggest sticking point appears to be construction defect litigation reform.
Republicans appear adamant about including CD reform. Minority Leader Pete Goicoechea termed it a “hill to die for.” Media reports invariably report the fact that 3 new Republicans in the Assembly are contractors whose businesses have been sued and thus have a direct interest in that legislation. However, when discussing collective bargaining reform they invariably fail to mention the far greater number of Democrats who are public employees, including Assembly Speaker John Oceguera, and thus have a direct interest in that legislation.
The clock is ticking and a deal must be reached soon to avoid a special session. The Nevada Supreme Court ruling issued Thursday changed the nature of the game. While we can certainly hope and are still pushing for no tax increases, it is unlikely that the session will end without at least some of the taxes scheduled to sunset next month being extended until June 2013. There is a chance that meaningful reform may be achieved in return. Until the final form of a deal is revealed we can’t be certain whether that reform will be worth the price.
(Michael Chamberlain is Executive Director of Nevada Business Coalition.)