Room tax OK’d, but Gibbons won’t sign

CARSON CITY -- A room tax increase that could bring in $233 million over the next two years was approved by the state Senate on Tuesday, but it will go forward without Gov. Jim Gibbons' signature.

Gibbons announced his decision not to sign the bill soon after the state Senate voted 16-5 to increase the room tax rate by 3 percentage points.

Under state law, governors have five days to sign or veto bills sent to their desk during legislative sessions. If they do nothing, the bills automatically go into effect.

"It would violate his principles by signing a tax increase," said Daniel Burns, the governor's communications director. "He won't veto it. He will abide by the decision of the people."

Following an hour-long debate, all 12 Senate Democrats and four of the nine Republicans supported the tax increase petition that was circulated last fall by the Nevada State Education Association. The increase would be implemented July 1.

The Assembly backed the tax 35-7 on Feb. 24 with all 28 Democrats and seven of the 14 Republicans voting in favor.

Although an ardent foe of tax increases, Gibbons has stated for months that he would not oppose the petition because voters in Clark and Washoe counties had approved it as an advisory question on the November election ballot.

Gibbons even included revenue from the tax increase in the proposed $6.17 billion two-year general fund budget he released to the Legislature in January.

Because Gibbons put the money in his budget, it had been assumed the governor would sign the tax increase. But he took the unusual route Tuesday of letting it go into effect by doing nothing.

Senate Majority Leader Steven Horsford, D-Las Vegas, in a statement released late Tuesday called Gibbons' move an act of "cowardice."

"After including the voter approved Room Tax Initiative in his budget, he has taken the easy way out by choosing to take no stance on the initiative," the statement read.

Gibbons' analysts had calculated the tax would bring in $292 million over two years. But the state economy has continued to decline and legislative fiscal analysts said Monday the tax may bring in even less than the $233 million they estimated two weeks ago.

Under terms of the petition, room tax rates in Clark and Washoe counties can be increased by as much as 3 percentage points, but cannot top a 13 percent tax rate.

Most hotels in Clark County now charge patrons a 9 percent or 10 percent tax rate. But in Washoe County, only hotels in incorporated areas now charge less than 13 percent. As a result, almost 99 percent of the tax revenue will be raised in Clark County.

That did not escape Sen. John Lee, D-Las Vegas. He said he will introduce a bill to require hotels and motels in the remaining 15 counties to increase their room tax rates by 3 percentage points.

Lee estimated his proposal would bring in an additional $5 million in room taxes.

"It is my desire that everyone in the state contribute equally," he said.

Most of the Republican objections to the tax increase dealt with how the teachers union had usurped the normal process of raising taxes by using a petition that circumvented legislators' decisions on whether to increase or reject tax increases.

Sen. Maurice Washington, R-Sparks, said the union used "mob rule" to secure a tax increase through a petition since it had not been able to secure one from the Legislature in past sessions.

"They went to the people, hijacked the process and tied our hands," he said.

The group last fall collected 130,000 signatures from residents in a move to change state law and implement the tax increase.

Under the constitution, legislators had until Friday to act upon the petition. If they did nothing or rejected it, it would be placed before voters as a ballot item during the November 2010 general election.

Horsford said he did not like the idea of implementing tax increases through initiative petitions.

But, he added: "I care more about the children of this state. They are entitled to a quality education."

Under terms of the petition, tax revenue raised between July 1, 2009, and June 30, 2011, can be used for any purpose. Starting on July 1, 2011, the money can only be used for programs to improve student achievement and pay higher salaries to teachers.

But Horsford said he has secured a legislative counsel opinion that says lawmakers can amend that language in 2011. He intends to require that some funds be spent on textbooks and school supplies.

Senate Minority Leader Bill Raggio, R-Reno, pointed out that if the Senate had not approved the increase, then members would have just created another $233 million hole in Gibbons' budget.

"My concern is the survival of this state. My first responsibility isn't to my party, but as an American to my state," he said.

Terry Hickman, executive director of the teachers union, said following the vote that the petition did not circumvent the legislative process.

"It may have not been the normal legislative process, but it was a different legislative process," Hickman said. "It required a two-thirds vote of the Senate and a two-thirds vote of the Assembly. If legislators could not vote, then I would agree it circumvented the legislative process."

Hickman called the vote a "win for Nevada and not just for education."

Although the money will benefit teachers and students in starting 2011, he noted that funds now can help legislators deal with the lack of revenue.

"We are very aware this state is in a fiscal crisis," Hickman added. "Now they can put it where they want."

Washington was joined in his vote against the tax increase by senators Mark Amodei, R-Carson City, Barbara Cegavske and Warren Hardy, both R-Las Vegas, and Mike McGinness, R-Fallon.

Contact Review-Journal Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.