Mining possible vein for state revenue

CARSON CITY -- On the eve of a legislative special session, Democratic and key Republican lawmakers focused on the mining industry as the biggest potential source of new revenue, up to $100 million, that could help close Nevada's budget gap and reduce cuts to education and health and human services.

The gaming industry also is a prime target for raising money, perhaps up to $64 million over two years, said legislators who Monday participated in closed-door Democratic and Republican meetings in which the outlines of any potential deal were discussed.

Assembly Majority Leader John Oceguera, D-Las Vegas, said the mining and gaming industries always have "come to the table" during budget crunches and have agreed to help close shortfalls, sometimes by pre-paying taxes as needed.

Now, with a two-year recession strangling the Nevada budget, a majority of lawmakers agree that those two major industries will have to be tapped, the only question is for exactly how much.

"There is no deal yet," Oceguera said Monday. "Gaming wants to see the big picture before agreeing to anything."

The goal of the special session, which starts today , is to make up an $887 million budget shortfall in the state's two-year general fund budget of $6.9 billion through June 30, 2011. The shortfall is the result of an expected 20 percent drop in tax revenues. The session, called by Gov. Jim Gibbons, is necessary because the Nevada Constitution calls for a balanced budget.

Legislative sources indicate that Democratic Senate and Assembly leaders are expected to accept more than half of the Republican governor's proposed cuts that would reduce nearly all state agency budgets by 10 percent, but Democrats are resisting proposed cuts of some $200 million in education and health and human services.

So, Democrats must find new revenue beyond Gibbons' ideas, some of which they have rejected.

Democrats have criticized the governor's proposal to hire a company, InsureNet, to use cameras to catch uninsured motorists, which could gain up to $30 million in revenues. Critics have raised concerns about both drivers' privacy and the company, which has not yet done work for any government .

"Some of these ideas I think are wacky, like the insurance net. I just can't see putting cameras on every street corner," said Assembly Speaker Barbara Buckley, D-Las Vegas, during a three-hour Interim Finance Committee meeting that resulted in no agreements.

But Democrats weren't publicly offering many specific proposals Monday for increasing revenue or cutting spending. And the only public discussion often dissolved into bickering.

At one point in the Interim Finance Committee hearing, Robin Reedy, the governor's chief of staff, said legislators should stop hammering the administration about whether Gibbons' proposed mining tax deduction was really a tax increase.

They know where the governor stands, Reedy said. He will not approve tax or fee increases unless they are supported by the affected industry.

"You are not going to tell me what kind of questions to ask," said an angry Senate Minority Leader Bill Raggio, R-Reno.

"I wasn't looking at you," Reedy said.

Behind the scenes, both political parties were trying to agree on a plan and keep the special session short. The session is expected to cost $100,000 the first day and $50,000 for each day after. The longest special session was 27 days in 2003. The shortest special session lasted a couple of hours in 1989.

In one sign of bipartisanship, Buckley met privately Monday with Raggio and Sen. Randolph Townsend, R-Reno.

Raggio and Townsend are two senior Republicans who seem most open to tapping mining and gaming for a fresh revenue stream. They also are two potential key votes that could make any final legislative plan veto-proof if they join the 12 Democrats in the Senate in supporting a budget plan that Gibbons doesn't like.

In the Assembly, Democrats outnumber Republican 28-14. It takes a two-thirds vote in both houses to override any veto.

Townsend said he agrees with Gibbons' proposal to get more revenue from mining by reducing tax deductions for the industry, which now is taxed at a rate of 5 percent of net proceeds. The governor has suggested limits to deductions that would result in $50 million in new revenue, but Democrats are looking for up to $100 million.

"Let's put it this way: We're not spending a lot of time negotiating," Townsend said of talks with the mining industry. "We know what we need, and we think that after, I don't know, a great many years, 50 or 100, perhaps now is the best time for them to pay what we think is a substantially closer number to a fair share."

Townsend said he thinks the gaming industry should contribute more revenue also, but perhaps not as much as some lawmakers have suggested because Nevada casinos lost $6.8 billion last year.

"There may be some additional fees, but I don't think it will be at the level it is being talked about right now," Townsend said.

Some lawmakers have suggested that the gaming industry pay fees to cover the costs the state spends on regulating them.

Gaming Control Board costs are about $32 million a year, and so the industry could pay up to $64 million to the general fund over two years if the idea were adopted during the special session.

The mining industry is a fatter target. During 2008, the Nevada mining industry saw record high revenues of $6.1 billion, according to the Nevada Division of Minerals, and paid $35 million in taxes. That was when the price of gold, which accounted for nearly $5 billion of that revenue, was an average $872 per ounce.

On Monday, gold was $1,112 per ounce. Revenue figures for 2009 aren't yet available.

Now, the state expects $55 million in taxes from the mining industry for the two-year fiscal period ending June 30, 2010.

Townsend said the meeting with Buckley was an indication of the "creative juices flowing now" as lawmakers try to fix the budget.

"We do work together. We do put things on the table, off the table," he said. "Time has a way of moving it along when you are up against a wall. This has been substantially harder than I think a lot of people thought it would be. This is very laborious ... very painful."

Raggio said he's "cautiously optimistic" lawmakers can agree on a budget plan fairly quickly, "but we're not together yet."

Pete Ernaut, a lobbyist for the Nevada Mining Association and the Nevada Resort Association, said both industries are willing to work with lawmakers to come up with new revenue. But he said it's not in the long-term interest of the state to tap too deeply into mining and gaming coffers without working for a fairer overall tax base.

"This seems like a disproportional ask from a relatively small industry," Ernaut said of efforts to squeeze $50 million to $100 million from the mining industry, which has 14,000 workers in Nevada. "The mining industry has a long history of paying its fair share."

As lawmakers arrived in Carson City on Monday for meetings before the special session, Gibbons was traveling back from a National Governors Association meeting in Washington, D.C.

In a news release, Gibbons announced he had found $35 million in additional money from Medicaid that will remove the need to force teachers to take a 1.75 percent salary cut next school year. Democrats attacked the proposal, saying it didn't go far enough.

Senate Majority Leader Steven Horsford, D-Las Vegas, said that the now $176 million in cuts that Gibbons proposes for public education are too high and that the Legislature will come up with its own revenue plan.

"Whether he is part of it or not, the Legislature will have a plan," Horsford said. "What Nevadans want is a plan that protects education."

But Horsford would not give a specific figure on how much of a reduction to public education he would accept.

"As little as possible" was all he would say.

He noted that Gibbons vetoed legislative bills a record 48 times during the 2009 session. If necessary, he said lawmakers will develop a plan with enough votes to override his veto during the special session.

Horsford said there are "components" of Gibbons' plan to reduce state spending by $887 million that legislators can accept, but education cuts remain too severe because they could lead to mass layoffs of teachers.

The Nevada State Education Association and its local teacher union affiliates are strong supporters of Democrats.

Horsford said an option would be that legislators approve a budget reduction plan, send it to the governor and then wait to see whether he vetoes it or not.

If he vetoes the plan, then legislators would go back into session and see whether they have the necessary two-thirds vote in each house to override Gibbons' veto.

Legislative Counsel Brenda Erdoes said governors have the constitutional authority to call legislators into special session but cannot order an end to special sessions if they do not like the actions legislators are taking.

Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919. Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861.