Court’s ‘game changer’ puts taxes on the table

CARSON CITY -- We're "about to find out if we have a statesman for a governor."

That's how one Republican lobbyist described the situation here Thursday after a Nevada Supreme Court ruling threw the state's budget into uncertainty.

The unanimous ruling, which held the Legislature violated the state constitution in 2010 when it swept $62 million from the Clean Water Coalition into the state's general fund, could have far-reaching implications. If it's improper to convert the coalition's money into general tax dollars, what about some of the other tax shifts contemplated by Gov. Brian Sandoval's budget?

Sandoval said in a statement Thursday that he was "re-working" the budget in light of the court's ruling. But a key aide to the governor acknowledged the ruling was a "game changer."

"We'll have to look at the sunsets," the aide said. "The Supreme Court has completely changed the rules. You can't gamble with the state budget."

In addition to the unforeseen ruling, Sandoval has plenty other reasons for embracing the sunsets. Among them:

• It's impossible to build a budget based on revenue that's been called into question by the court ruling. If shifting property tax from certain counties, or swiping school district bond reserves is later found to be unconstitutional, the resulting chaos would be devastating, especially since the state is now on notice the funds may not be available.

• He can note that a recovery is already under way in Nevada, even though the sunset taxes are already in place. Extending them -- earning the state about $700 million in the two-year budget -- would obviously not skew that recovery.

• He can point to a skein of business leaders who lined up to testify at the Assembly Ways & Means Committee on Wednesday who said they supported extending the sunsets.

"We would just as soon not get a tax cut," said Billy Vassiliadis, representing the Nevada Resort Association. "It's just not necessary to give us a tax cut."

There are hurdles, as always.

First, Sandoval will have to get over his own oft-repeated promise that he'd never sign off on taxes, including an extension of the sunsets. His promise contained no exemptions for events such as Thursday's court ruling.

Second, Sandoval has to persuade equally intransigent Republicans in the Legislature to agree to extend the sunsets. It's likely several Republicans -- most of whom have pledged to stand with the governor -- will come along if Sandoval gives them permission and political cover. (That's true even though every member of the Senate Republican Caucus signed a letter Tuesday pledging to oppose all taxes, including sunsets.)

Sadly, the court ruling won't spark the kind of dialogue the state has gone out of its way to avoid for more than 40 years. No one will stand up and say the exotic budget-balancing methods of the kind the Supreme Court indicted Thursday are utterly inadequate to run a state in the 21st century, and that a modern tax system must be adopted. It won't bridge the gap between the no-tax caucus and the status-quo caucus.

As the justices remarked in their ruling, "political differences that might make it difficult to agree on a generally applicable law to address the state's budget crisis do not create 'special circumstances' that would permit a [constitutionally prohibited] local or special law to address a concern that affects the entire state."

It would be nice if that kind of dialogue happened, but it won't.

The most we can hope for is a dose of pragmatism, some swallowing of pride, and a quick fix that will last another two years, when we'll do it all over again.

Steve Sebelius is a Las Vegas Review-Journal columnist and author of the blog SlashPolitics.com. Follow him on Twitter at www.Twitter.com/SteveSebelius or reach him at (702) 387-5276 or ssebelius@ reviewjournal.com.