Nevada Legislature makes small progress on budget gap

CARSON CITY — Lawmakers made incremental progress Wednesday on plugging a $1.2 billion pandemic-created state budget hole but concluded Day 8 of their special session leaving one of the heaviest lifts still on the table — a proposed half-billion dollar slashing of state agency budgets.

Both houses approved an amended Senate Bill 3, a tax overhaul measure that shifts funds to the state general fund, while earlier in the day an Assembly hearing on Assembly Bill 3, a bill to slash agency funding, gave the public an opportunity to sound off on the proposed cuts. Agencies face a combined $536 million in cuts, and amendments to the bill are expected.

The Senate measure provides for mining and other mineral extraction companies to temporarily prepay their annual taxes. The bill also moves revenue from the tax motorists pay when they register vehicles from the state highway fund to the general fund.

Finally, it provides for a 90-day penalty- and interest-free amnesty period for people late on taxes, fees or assessments, an attempt to get tardy tax filers to pay up.

Gaining ground on budget

Amendments to the bill Wednesday in the Senate and a recalculation of the tax amnesty impact boosted how much money would be added to the general fund to a total of nearly $147 million from $88.4 million.

The amount transferred from the highway fund, about $71.4 million, will be partly offset by $38 million in federal pandemic aid and about $15 million from planned furloughs, a hiring freeze and eliminated projects. Transportation officials have said the reduction in highway funds won’t affect planned projects. The Senate passed the amended bill 19-2, with Republicans Ira Hansen and Joe Hardy voting no. The vote in the Assembly, which finished with the bill just before 10:30 p.m., was 32-10, with both Democrats and Republicans in dissent.

Agency cuts

Lawmakers have been briefed before on the agency cuts bill, so Wednesday’s hearing was primarily an opportunity for public comment. The total proposed cut to agencies, as calculated by legislative budget analysts, is nearly $536 million — a figure slightly higher than the administration’s total. The Assembly took no further action on the measure.

“This is the beginning of the process of hearing that bill,” Speaker Jason Frierson said.

Mining tax

The net proceeds of mining tax is a nearly 150-year-old formula written into the state constitution. Nevada taxes mineral extraction companies at between 2 to 5 percent of their gross, less most operating costs. Net proceeds typically come in around 30 percent of gross and the tax rate varies depending on the ratio of net-to-gross proceeds. State voters in 2014 narrowly rejected a constitutional amendment that would have removed the 5 percent cap and allowed the Legislature to set the rate.

In 2019, total gross proceeds for the Nevada industry were $7.6 billion and net proceeds were $2.3 billion. The net amount was taxed at a rate of 4.9 percent, generating $122.7 million in revenue, half of which went to the state and the other half to counties. That amount paid to the state represents 1.5 percent of the state’s general fund revenue.

Critics of that tax argue Nevada doesn’t get enough revenue from the industry. The 2019 tax collection represents 1.6 percent of the the industry’s total gross proceeds. The industry says it contributes more than that. Factoring in revenue from property, sales and payroll taxes, a report prepared for the Nevada Mining Association put the industry’s total tax burden in 2018 at $279 million. That would equal about 6.7 percent of that year’s general fund revenue.

Contact Capital Bureau reporter Bill Dentzer at bdentzer@reviewjournal.com. Follow @DentzerNews on Twitter. Contact Capital Bureau Chief Colton Lochhead at clochhead@reviewjournal.com. Follow @ColtonLochhead on Twitter.