Sandoval won’t back all tax extensions to solve budget crisis

CARSON CITY -- Gov. Brian Sandoval will not support reauthorizing all of the $679 million in state taxes that expire June 30 as the sole way to solve an unexpected problem in his budget, his senior adviser said Friday.

And the governor wants Democratic legislators to support some of his reform goals for public schools, collective bargaining and other matters before he'll authorize expenditure of the rest of these "sunset" taxes.

In a news conference after a full day of negotiations by Sandoval and legislative leaders, and only one day for state officials to determine the impact of a Nevada Supreme Court ruling, adviser Dale Erquiaga said it would be "detrimental" to Nevada's fragile economic recovery to vote to retain all these taxes.

In particular, he pointed to the modified business or payroll tax. Under this tax, employers pay 1.17 percent of their payroll in business taxes to the state. If the tax expires, that rate would fall to 0.63 percent. Estimates indicate the tax would bring in $346 million.

If this tax is off Sandoval's support list, then only $333 million in tax revenue could be raised from extending the other sunset taxes to fill a hole that the administration estimated at $657 million. Scheduled to end are a 0.35 percentage point increase in the sales tax rate, an increase in business license fees to $200 from $100 a year, and an increased depreciation allowance in car registration fees.

The administration on Friday increased the estimated revenue from the sunset taxes to $679 million from the previous estimate of $626 million.

"We are working for a fair and reasonable solution that will not include new taxes," Erquiaga said. "The Supreme Court, in a dramatic decision, presented us with a math problem. It forced us to work together on a solution."

He added that there are other "options" to raise money under consideration, but would not name them.

SANDOVAL WANTS REFORMS

If Sandoval is to support reauthorizing the sunset taxes, Erquiaga said he will insist legislators approve at least some of the reforms he proposed early this year.

The governor wants to end teacher tenure in public schools, allow vouchers so parents can move their children to other schools, establish letter grades for each school, and end the seniority system where the newest teachers are laid off first. He also wants to reform collective bargaining by public employees.

Assembly Republicans want wholesale changes to collective bargaining, prevailing wage and construction defect laws. So far, they have been rebuffed by their Democratic counterparts. In a recent protest, eight Democrats told 300 union members they never would agree to such changes.

Erquiaga refused to identity what reforms Sandoval wants, saying they will be discussed with legislative leaders this weekend.

Thursday's Nevada Supreme Court decision forced Sandoval to redraw his proposed $6.1 billion budget and reconsider Democratic proposals to extend the sunset taxes despite his "no-new-taxes" pledge.

The court ruled unanimously that then-Gov. Jim Gibbons and the Legislature last year were not permitted by the state constitution to take $62 million in Clark County Clean Water Coalition funds to balance the state's ailing budget. The funds were included in Sandoval's two-year spending plan.

The Sandoval administration fears the decision means the state also is forbidden from taking $657 million in local tax and school district revenue to balance the governor's proposed budget.

COURT CLARIFICATION SOUGHT

Erquiaga said Sandoval asked state Attorney General Catherine Cortez Masto on Friday to file a request for the Supreme Court to clarify whether the decision affects only the Clean Water Coalition funds or all moves by the state to take local and school district funds.

Seeing that the Legislature is scheduled to adjourn June 6, Erquiaga said he hopes the court will give an expedited ruling to the governor.

But a source close to the high court said he has never heard of someone seeking a clarification to determine if a court opinion affects related matters.

He said Sandoval is a former federal judge and lawyer who realizes that every time the Supreme Court makes a decision it affects far more people than those involved in the actual case. The court also would insist on legal briefs, documents and time before justices would complete their review.

He also noted: "They need to go first to district court."

Edie Cartwright, a spokeswoman for Masto, said late Friday that Masto and her staff are reviewing the Clean Water Coalition decision, but had not yet decided whether to ask the court for a clarification. She said the attorney general, if she agrees with Sandoval, could file the clarification electronically at any time.

Sandoval remained cloistered in his Capitol office most of the day Friday, meeting with Masto, legislative leaders from both parties and others.

Senate Majority Leader Steven Horsford, D-Las Vegas, said he and other legislative leaders plan to negotiate with the governor throughout the weekend.

He asked legislators to stay close to Carson City, rather than going home for the Memorial Day weekend, in case they are needed. The Legislature will work today and on Memorial Day, but might take Sunday off.

Besides the $62 million in Clean Water Coalition funds, Sandoval also fears the court decision means he cannot spend the following funds he placed in his budget. The largest segments include:

■ $225 million in room taxes generated in Clark and Washoe counties.

■ $247 million in school construction bond reserves generated in Clark, Washoe and a few other counties. The money would be used to cover school operating costs in those counties.

■ $38.2 million in local property taxes that formerly were used to cover hospital costs of indigents hurt in car accidents.

■ $83 million in Washoe and Clark county property taxes that he wanted to use to cover part of costs of state colleges and universities in those counties.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3801.