MINUTES OF THE meeting
of the
ASSEMBLY SELECT Committee on State Revenue and Education Funding
Nineteenth Special Session
June 7, 2003
The Select Committee on State Revenue and Education Fundingwas called to order at 9:00 a.m., on Saturday, June 7, 2003. Chairman Morse Arberry Jr. presided in Room 4100 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry Jr., Chairman
Mr. David Parks, Vice Chairman
Mr. Bernie Anderson
Mr. Walter Andonov
Mrs. Sharron Angle
Mr. David Brown
Mrs. Vonne Chowning
Mrs. Dawn Gibbons
Ms. Chris Giunchigliani
Mr. Tom Grady
Mr. Josh Griffin
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. John Marvel
Ms. Kathy McClain
Mr. Bob McCleary
Mr. Harry Mortenson
Mr. Richard Perkins
Ms. Peggy Pierce
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Ted Zuend, Deputy Fiscal Analyst
Susan Cherpeski, Recording Secretary
OTHERS PRESENT:
None
Chairman Arberry called the Committee to order and advised that Vice Chairman Parks would act as the Chair during the initial portion of the hearing.
Assembly Bill 1: Makes various changes concerning state financial administration. (BDR 32-12)
Senate Bill 2: Apportions State Distributive School Account in State General Fund for 2003-2005 biennium (BDR 34-9)
Vice Chairman Parks explained that the Committee had been presented with three segments of the proposed tax bill: (1) live entertainment; (2) passive revenue generators; and (3) boxing. The Committee had subsequently been informed that the boxing segment was incorrect and would require revision; Vice Chairman Parks also noted that the boxing portion had been a “trailer” attached to the passive revenue generator segment. Following the hearing on June 6, 2003, Vice Chairman Parks noted that there had been additional changes made to the live entertainment segment and he presumed that the Committee would soon be in receipt of documentation pertaining to those changes.
Vice Chairman Parks indicated that he would open discussion regarding the aforementioned segments. Since segment 3, boxing, was scheduled for revision it could be set aside and the Committee could proceed with discussion of segment 2, passive revenue generators.
According to Vice Chairman Parks, the Committee had, to a great extent, dealt with the need for the Nevada Tax Commission to adopt the regulations that would be required regarding the changes; the other areas extensively discussed were the electronic submission of forms and documents, as well as the electronic transfer of funding. The area that had not been extensively discussed by the Committee was the issue of grants, and the fact that Nevada did not receive a reasonable allocation of federal grant funding. Vice Chairman Parks noted that area had been discussed during meetings of the various Subcommittees of the Assembly Committee on Ways and Means when budgets had been reviewed.
Vice Chairman Parks informed the Committee that segment 2, passive revenue generators, created the Office of Federal Grants Acquisition, and he would like input from Committee members regarding that office. Vice Chairman Parks indicated it was difficult for the state to determine what level of grant funding was being received by the various political subdivisions, and he believed one of the activities that would be undertaken by the Office of Federal Grants Acquisition would be creation of some type of tracking system that would track the various grants from federal sources to local governmental entities.
Assemblywoman Giunchigliani asked how the Office of Federal Grants Acquisition had been created, as it had not been addressed during session budget hearings.
Assemblyman Anderson stated that it appeared the money would be generated from 7 percent of the first $1 million, and 1 percent of the second $1 million, of the total gross receipts from sales and lease of broadcasting, television, and motion picture rights.
Ms. Giunchigliani asked why a new office had been created, which would also require staff, when a hearing had never been held regarding that office; her recommendation would be elimination of the proposed Office of Federal Grants Acquisition. She also pointed out that the Committee had not voted on the creation of that office at its meeting on June 6, 2003, and she would ask the Legal Division of the Legislative Counsel Bureau (LCB) to provide an explanation regarding the language surrounding the creation of the proposed office.
Vice Chairman Parks commented that he had talked with Brenda Erdoes, Legislative Counsel, and she had asked whether the language should remain in the segment for discussion purposes. Vice Chairman Parks believed it was an area that should receive further discussion, however, he had not requested the original language that created the Office of Federal Grants Acquisition. He would voice support for the concept, as it was impossible to determine which entities had applied for federal grants throughout the state.
Ms. Giunchigliani concurred with Vice Chairman Parks regarding the concept, however, believed it should have been discussed during regular session via budget hearings, particularly since it would create a completely new office or department. She pointed out that the Committee should be extremely careful that it remained within the intent of the Special Session in order to alleviate the possibility of individual requests being added to proposed legislation. Ms. Giunchigliani did not believe creation of the Office of Federal Grants Acquisition was appropriate at the present time.
Assemblyman Griffin indicated that many of the budgets heard by the Assembly Committee on Ways and Means, Subcommittee on General Government, had requested positions specifically for grant writing, while others had already included such positions. He realized that the intention of the proposed office would be coordination of those efforts, however, it was his recollection that many of the agencies had indicated that certain employees would be assigned the duties of grant writing. Mr. Griffin believed that a certain level of coordination might have already been accomplished during budget hearings.
Assemblywoman Giunchigliani pointed out that grant writing had been instituted within various departments several years ago, and she did not recall a request during the 2003 Legislative Session for creation of an additional office. Ms. Giunchigliani voiced discomfort with the concept being initiated via the proposed tax package, particularly since the proposed office had not been created at the request of the Committee.
Assemblywoman Leslie concurred with Ms. Giunchigliani, and noted that within the budget for the Department of Human Resources, the Subcommittee on Human Resources had consolidated many issues within the Grants Management Unit. She wondered whether the proposed Office of Federal Grants Acquisition was in response to the fact that Nevada ranked 50th in the nation regarding receipt of federal grant funding. Ms. Leslie advised that a central clearinghouse, through which entities were supposed to funnel grant requests, had existed in the state for quite some time, and she did not believe it was accurate to indicate that there was no tracking of grant awards. Her concern, from a budgetary standpoint, was the source of the funding for the new director position within the Governor’s Office, which had not been discussed during session budget hearings before the Assembly Committee on Ways and Means and its various subcommittees.
Assemblywoman Chowning concurred with prior comments, and noted that concern had been voiced during past sessions that Nevada was not receiving a fair share of federal grant funds. She indicated that Mr. Griffin’s recollection was correct, and each and every one of the budgets heard by the Subcommittee on General Government had addressed grant writing. The Boxing Commission budget, which was one of the sources of funding for the proposed office, had not included the proposed office and, therefore, the concept had not been discussed. According to Mrs. Chowning, there was additional language in the bill pertaining to public works projects, which had not been discussed during previous budget hearings, and would also be of concern to her. Mrs. Chowning pointed out that it appeared the requested funding had not been discussed with the entities whose budgets would be affected by the proposal.
Vice Chairman Parks stated that the Legal Division of the Legislative Counsel Bureau ((LCB) had indicated that the proposed office was a recommendation from the Governor’s Task Force on Tax Policy in Nevada, created by A.C.R. 1 of the 17th Special Session.
Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, LCB, advised the Committee that the language pertaining to boxing was an attempt to equalize the payment requirements of the proposed 10 percent live entertainment tax. He was unsure whether the language regarding boxing was linked to funding for the proposed Office of Federal Grants Acquisition, however, did not believe so. Mr. Stevens pointed out that it did not appear that there was any funding source for the proposed position and office that would be located within the Governor’s Office, which was funded via the General Fund.
Assemblywoman Giunchigliani stated that the Committee had made recommendations regarding boxing and the live entertainment tax at its meeting on June 6, 2003. She concurred that the language regarding boxing pertained to the equalization issue. Ms. Giunchigliani noted if, at some point, the Committee voted regarding language that would be included in the final draft of the bill, she would request that a motion be made to remove the language regarding the Office of Federal Grants Acquisition. While she appreciated that the office was recommended by the Governor’s Task Force, a public hearing had never been held and no information had been presented to the 2003 Legislature.
Assemblywoman McClain asked about the language which referenced public contractors, public jobs, and construction. Vice Chairman Parks stated that he could not answer that inquiry and he would also question that language. He indicated that staff would research the language for the Committee.
Vice Chairman Parks inquired whether there were further questions regarding segment 2, passive revenue generators.
Assemblyman Mortensen asked whether the Vice Chairman would accept comments on the proposed amendments to the live entertainment tax. Vice Chairman Parks explained that the Committee had not yet addressed that aspect, and would deal with each segment independently.
Vice Chairman Parks advised the Committee that he was in receipt of an e-mail from Kimberly Morgan, Chief Deputy Legislative Counsel, Legislative Counsel Bureau (LCB), which indicated that six additional segments of the bill were ready for Committee review. Those segments included:
Vice Chairman Parks indicated that the language referenced Nevada Revised Statutes (NRS), Chapter 218. He assured the Committee that clarification would be forthcoming.
Mr. Stevens advised that NRS 218.53883 referenced the existing committee that reviewed local government revenue issues, and the language would be an expansion of the duties of that committee to include distribution as well.
Assemblyman Brown referenced the proposed amendment to NRS Chapter 338 regarding public works projects, which proposed to add the requirement for sales and use tax on equipment, materials, and supplies. He asked whether those areas were currently being taxed. Vice Chairman Parks identified the language as a reporting data collection responsibility.
Assemblywoman Giunchigliani referenced the electronic submission of passive revenue and noted that it would not necessarily be a money generator, but would make the process easier for businesses. Vice Chairman Parks noted that while it would not be a direct revenue generator, it would certainly contribute to cost avoidance on the part of the Department of Taxation and other state agencies that were held responsible for the collection of revenue.
Assemblyman Anderson asked for clarification regarding the number of segments of the tax bill before the Committee for consideration. Vice Chairman Parks replied that he had enumerated the six additional segments received by the Committee (Exhibits C through H). There were a total of eight segments for consideration: the aforementioned six additional segments, along with passive revenue generators and live entertainment. Vice Chairman Parks noted that the boxing segment was undergoing revision.
Ms. Giunchigliani advised that the language regarding boxing had been included with the passive revenue generators. Vice Chairman Parks believed the language regarding boxing had not been separated when the segment regarding passive revenue generators was sent to the Committee for review. He assured the Committee that there would be separate language regarding boxing, in addition to the language which had been presented at the June 6, 2003, meeting. Vice Chairman Parks emphasized that boxing should be considered with the live entertainment segment.
Vice Chairman Parks opened discussion on the live entertainment segment.
Assemblyman Mortenson referenced earlier discussion surrounding inclusion of the enormous, burgeoning industry in the southern area of the state, which consisted of clubs that offered “lap dancing” and “strip shows.” It was Mr. Mortenson’s understanding that a very large portion of the money that funded those businesses was realized from gratuities to the lap dancers, with a large portion of that money reverting to the “house.” The language proposed in the amendment stipulated that a business entity which collected any money paid for live entertainment was liable for the tax, excluding tips to entertainers. Mr. Mortenson wondered if the wording should be changed to indicate that a business entity which collected any amount paid for live entertainment, including any portion of a gratuity reimbursed to the business by an entertainer, was liable for the tax. Mr. Mortenson further explained that if a dancer was required to rebate a portion of the gratuity to the house, the house would then be liable for that tax. Currently, stated Mr. Mortenson, the house received a portion of the gratuity from the entertainer which was not taxed.
Assemblyman Marvel asked how that stipulation would be policed. Mr. Mortenson conceded that it would be extremely difficult to police, however, perhaps some pressure could be brought to bear on the businesses if the amount from gratuities was not reported.
Assemblywoman Giunchigliani stated she appreciated Mr. Mortenson’s concern, and believed the language should be finessed in order to ensure that businesses were taxed rather than performers. She also wanted to guard against taxing such live entertainment as piano players, who were often offered a gratuity. Ms. Giunchigliani opined that the language should remain clear and after it was determined how the process worked, perhaps the issue could be reviewed during the upcoming session. Mainly, taxing the gross or the net profits of the businesses would help because those businesses only paid a local business license fee at the present time. Ms. Giunchigliani believed that would be a huge step in the right direction.
Vice Chairman Parks commented that the Committee was currently reviewing individual sections, which did not necessarily represent the latest update with the rates, as those would change. The language was simply a document up for discussion and the Legal Division of the LCB had advised that the sections were provided for the Committee’s review. Vice Chairman Parks noted that the Legal Division hoped to have a full draft of the bill to the Committee as soon as possible.
Chairman Arberry asked for a short recess and Vice Chairman Parks declared the Committee in recess.
Vice Chairman Parks called the meeting back to order at 10:37 a.m.
Vice Chairman Parks stated that the Committee would continue its review to discover areas of concern in the various segments of the tax bill. Vice Chairman Parks stated that he had reviewed the live entertainment segment and noted that there were a few sections that were undergoing revision.
Vice Chairman Parks opened discussion on the restricted slot fee segment, Exhibit C, and noted that the exhibit incorporated the requested changes, such as a 33 percent increase from $61 to $81 for licensing fees for businesses with not more than five slot machines. Ms. Giunchigliani asked whether that represented the requested 33 percent increase. Vice Chairman Parks replied that was correct, and the figure would equate to a 33 percent increase in both years of the biennium.
Assemblyman Mortenson asked whether slot route operators would also be subjected to the income tax, as well as the 33 percent tax, or would those operators be excluded from the net profits tax.
Ted Zuend, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau (LCB), explained that under the provisions of the Assembly bill, slot route operators would be subject to the net profits tax without any special treatment. It was his understanding that the Senate bill added a provision that would allow those operators to deduct from state taxable income the taxes paid under the new legislation, which had already been deducted at the federal level. Mr. Zuend indicated that would provide two deductions for the same amount of money. Mr. Mortenson asked whether the Committee would review both the Senate and Assembly versions of the tax bill, and Mr. Zuend replied in the affirmative. Mr. Mortenson stated that it would not appear to be feasible to “hit” operators with both the net profits tax and the 33 percent increase in licensing fees.
Assemblyman Hettrick indicated that it was his understanding that the way the Senate had passed the gaming portion of the bill was with taxable gaming revenue exempted in total. Regarding the slot tax, Mr. Hettrick understood that entities would be given a credit for the tax paid on the gaming portion, which appeared to be two different issues. Mr. Hettrick concurred with Mr. Mortenson that the group which had volunteered to take the largest single increase should not be “hit” twice and required to also pay a tax on net profits, with the only credit being the tax paid on gaming, particularly when “big gaming” would “walk” with a complete exemption from net profits from the gaming portion of the revenue.
Mr. Zuend explained that the Senate had adopted the same plan as the Assembly in terms of non-restricted licensees. For example, a slot route operator who actually licensed the machines that were in non-restricted locations would be treated comparably in that regard, however, for the portion attributable to restricted licensees, it would allow them a second deduction rather than a proration of the income.
Mr. Hettrick believed that the tax should be equal. He did not have a problem with the gaming industry, as it paid its fair share. Mr. Hettrick stated the issue was that the tax should be equal.
Vice Chairman Parks recognized Assemblywoman Chowning.
Mrs. Chowning stated that in Section 108 (Exhibit C), the exemption applied to direct sellers per NRS 612.144.
Mr. Zuend explained that the section would also exempt a sole proprietor without employees, and he believed that exemption would remain, even though that particular language was not included in the section. The original statute regarding the fee currently exempted sole proprietors, and Mr. Zuend noted that the proposed repeal of that exemption had been eliminated from the bill. Indeed, he believed the sole proprietor without employees would not be subject to the fee, along with the specific exemption to clarify that the direct sellers were exempt from the fee.
Vice Chairman Parks opened discussion on the gaming license fee segment, Exhibit D, and explained that the changes were that for the first year the rate would be 6.5 percent and for the second year the rate would increase to 6.75 percent. With no questions forthcoming from Committee members regarding that segment, Vice Chairman Parks opened discussion on the cigarette tax segment, Exhibit E.
According to Vice Chairman Parks, the tax on cigarettes was changed to 50 mills per cigarette (Exhibit E), with 45 mills per cigarette being the state portion of the tax. Assemblyman Anderson asked why the increase would not go into effect immediately in order to realize an immediate source of revenue for the state.
Mr. Zuend explained that the Assembly version of the bill would increase the tax at the beginning of the fiscal year, however, the Senate version contained a two-tiered increase that would realize the same rate over a two-year period. Mr. Zuend advised that Exhibit E proposed an immediate increase to 50 mills, with the state portion being 45 mills, which accounted for the fact that local government received 5 mills of the tax.
Vice Chairman Parks opened discussion on the liquor tax segment, Exhibit F. He noted that the changes made to the section were as previously discussed by the Committee and accounted for a 50 percent increase. With no questions from the Committee regarding that segment, Vice Chairman Parks opened discussion on the tax collection allowances segment, Exhibit G.
Mr. Zuend stated that the first tax collection allowance would eliminate the liquor tax allowance in Section 116, and Section 119 contained the proposal to allow the purchaser of cigarettes a discount of 0.5 percent against the amount of excise tax otherwise due for the services. Continuing his explanation, Mr. Zuend stated that Sections 122 and 123 referenced the elimination of the other tobacco allowances. According to Mr. Zuend, in Section 197, NRS 372.370 repealed the allowance under the state sales and use tax; NRS 374.375 repealed the allowance under the local school support tax; the repeals in Chapter 463 dealt with the eventual elimination of the casino entertainment tax, which would become part of the proposed live entertainment tax.
Vice Chairman Parks opened discussion on the legislative committee segment (Exhibit H), which dealt with the proposed Legislative Committee on Taxation, Public Revenue and Tax Policy. He noted there had been some discussion regarding the proposed committee during regular meetings of the Assembly Committee on Taxation.
Mr. Zuend explained that the proposed committee was similar to the aforementioned Governor’s Task Force on Tax Policy in Nevada, however, it would be entirely composed of legislative members, as outlined in Section 142, which delineated the membership. Per Mr. Zuend, the parameters of the proposed committee were outlined in Section 144, and included review and study of the taxes, implementation of the taxes, the impact of the taxes, and other issues related to tax policy in Nevada. Mr. Zuend pointed out that the Legislative Counsel Bureau (LCB) would be assigned to assist in the legislative process. An appropriation of $125,000 per fiscal year was proposed in Section 199 for consultant contracts.
Assemblywoman Giunchigliani suggested that since the language in Section 191 had not been included in any appropriations, that the language be changed to allow the proposed committee to approach the Interim Finance Committee (IFC) to secure funding, once the actual cost for a consultant had been determined. Ms. Giunchigliani noted that would alleviate the necessity to rewrite budgets. She also suggested that there be a sunset provision on the committee so that each session the Legislature could determine whether or not the committee should be continued. Ms. Giunchigliani indicated that Mr. Stevens believed that the contract should be approved by the Board of Examiners; she suggested that the amount of $125,000 be appropriated with the provision that the committee approach the IFC to secure funding.
Assemblywoman Chowning referenced Section 144, which indicated that the committee might review and study, “The specific taxes collected in this state, including, without limitation, taxes on gross receipts, mining, property . . .” and asked whether that was correctly worded.
Mr. Zuend explained that there were taxes on gross receipts in Nevada, and since the language referenced taxes in some form, he believed the language covered all major taxes that were imposed in the state. The only questionable tax would be the business profits tax, which would be included should the Legislature impose that tax.
Mrs. Chowning thanked Mr. Zuend for his explanation, and indicated that she had simply wanted to ensure that the language was correct, depending upon the ultimate decision of the Legislature.
Vice Chairman Parks believed that the operative of Section 144 was “review and study” of the specific taxes collected in the state, including those listed. With no further comments regarding the legislative committee segment, Vice Chairman Parks believed that the Committee had reviewed the segments it had been provided to date.
Vice Chairman Parks recognized Assemblyman Hettrick, who offered the following motion:
ASSEMBLYMAN HETTRICK MOVED TO DO PASS S.B. 2.
ASSEMBLYWOMAN ANGLE SECONDED THE MOTION.
Chairman Arberry did not believe that the Committee was to the point of accepting motions, and asked Mr. Hettrick to consider holding his motion. Mr. Hettrick believed that the Committee could consider a motion. Vice Chairman Parks indicated that the Committee had reviewed all pertinent segments of the tax bill. Chairman Arberry stated it was his understanding that the Committee could not vote on S.B. 2 until the tax bill had been passed.
Assemblywoman Giunchigliani reported that the state was required to implement a balanced budget, and the Committee could not move legislation pertaining to the Distributive School Account (DSA) and Class-Size Reduction (CSR) without first passing the tax bill; to do otherwise would violate The Constitution of the State of Nevada.
Assemblyman Hettrick indicated that he had received an opinion from the Legal Division which indicated that separate legislation could be passed, as long as both were addressed during the same session. Mr. Hettrick reported that he believed the Committee could take action regarding S.B. 2.
Chairman Arberry advised that there was a motion before the Committee and called for a vote.
THE MOTION FAILED. (With Assemblymen Arberry, Anderson, Chowning, Giunchigliani, Leslie, McClain, McCleary, Mortenson, Parks, Perkins, and Pierce voting no).
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Assemblywoman Gibbons stated that it appeared if the Committee passed the education budget, however, did not have sufficient votes to pass the tax bill, education could not be funded, and asked for clarification.
Mr. Stevens explained that currently the existing revenue sources would be collected within the state General Fund. The General Appropriations Act had also been passed, along with the salary bill, and the Authorizations Act. Mr. Stevens indicated that the appropriations that had passed to date had not exceeded the revenues that would be collected, however, if the Distributive School Account (DSA) and Class Size Reduction (CSR) bills were passed, the existing revenue stream could not support the Appropriations and Authorizations Acts, the salary bill, and the CSR and DSA bills. According to Mr. Stevens, unless there were additional revenues provided, there would be insufficient revenue to support that level of appropriation based on existing revenue.
Mrs. Gibbons believed the state was required to fund education first, and asked Mr. Stevens for clarification. Mr. Stevens was not aware of that requirement, and if the Committee wished to secure a legal opinion, the Legal Division would be contacted.
Assemblywoman Angle asked about the priorities for spending. Mr. Stevens indicated that he was unaware of any priorities, unless there were statutory references that could be brought forward by the Legal Division; Mr. Stevens reiterated that he was unaware of any stipulations regarding priorities within the appropriations that had to be approved by the Legislature. There was a guarantee that funding would be provided based on bills passed pertaining to the DSA. Currently, stated Mr. Stevens, based on the actions of the 2003 Legislature, the Appropriations and Authorizations Acts, the salary bill, as well as other minor appropriation bills, had been passed, and the existing revenue stream would fund those bills, however, the existing revenue stream would not support the additional appropriations included in the DSA and CSR bills.
Assemblyman Hettrick stated that he had researched the requirements and there was a constitutional requirement to provide education and, beyond that, there was a federal requirement to provide education. He believed education would have to be funded first and passing S.B. 2 would, indeed, fund education.
Assemblyman Perkins advised the Committee that the Legislature had asked its Legal Counsel for an opinion, and the summary of that opinion stated: “It is the opinion of this office that under the provisions of subsection 1 of Section 2 of article 9 of the Nevada Constitution, the Legislature has a constitutional duty to enact legislation that provides for sufficient revenues to pay for all appropriations authorized by the Legislature for each fiscal year.” Assemblyman Perkins stated it was his understanding that the Legislature could not pass the education bills without sufficient funding to cover all appropriations passed by the Legislature. In essence, indicated Assemblyman Perkins, the Committee could not pass S.B. 2 unless the funding was approved simultaneously.
Assemblywoman Angle asked whether the Governor could determine priorities between the appropriations that had been passed. Assemblyman Perkins reiterated that it was his understanding from Legal Counsel that the Committee could not constitutionally pass S.B. 2 without first passing the appropriate funding source.
Mr. Stevens indicated that was also the assumption under which the Fiscal Analysis Division had operated during his tenure, which was in excess of 20 years, that there was a constitutional requirement to pass a balanced budget and the expenditures could not exceed the projected revenues.
Assemblywoman Gibbons stated it was her understanding that if the Governor had not signed the budget, the Legislature could have passed the DSA and the schools would have been funded first. Mr. Stevens explained that no matter what bills had been passed, as long as the available revenue sources had not been exceeded, the bills could be passed in any particular order chosen by the Legislature. According to Mr. Stevens, the current situation was that the Appropriations and Authorizations Acts and salary bills were passed and signed by the Governor. The remaining major bills were the DSA and CSR, which had not been passed.
Chairman Arberry declared the Committee in recess and reconvened the hearing at 6:31 p.m.
Chairman Arberry called the Committee’s attention to the copy of A.B. 1 which had been provided to members, Exhibit I. The bill incorporated the actions delineated by the Committee and approved by Assemblyman Perkins and the Minority Leader. Chairman Arberry emphasized that Committee members had been afforded more than ample opportunity to question all aspects of A.B. 1 and, therefore, the bill should not require additional lengthy discussion; he believed the Committee could arrive at a decision regarding the bill.
Assemblywoman Giunchigliani explained that the language contained in the aforementioned copy of A.B. 1 (Exhibit I) currently before the Committee was the same as that which had been reviewed previously. The language of the bill currently before the Committee included:
· The proposed Legislative Committee, with an added sunset provision
· The tax collection allowances as reviewed by the Committee
· The liquor tax exactly as referred to by the Committee
· The cigarette tax as recommended by the Assembly rather than the Senate
· The gaming license fee with a .75 percent increase during the first year of the biennium and .50 percent during the second year
· The restricted slot fee with 33 percent increase in both years of the biennium
· The tax on live entertainment, which did include escort services
· Passive revenue generators, including removal of the language pertaining to the Office of Federal Grants Acquisition
Ms. Giunchigliani referenced Exhibit J, ”Summary of the Components of BDR 32-12 (A.B. 1),” which had been provided to Committee members. She reviewed the exhibit as follows:
Chairman Arberry advised the Committee that he would accept a motion.
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO DO PASS A.B. 1.
ASSEMBLYWOMAN LESLIE SECONDED THE MOTION.
Assemblywoman Angle stated that she would vote against passage of A.B. 1; her objection was to placing the DSA and CSR within the tax bill. The Committee had attempted to pass the DSA and CSR separately via S.B. 2, which would have afforded education an opportunity to pass budgets by June 9, 2003. Mrs. Angle indicated there was a chance that the DSA and CSR legislation would fail if included within the tax bill; she emphasized that she did not think that children should be held hostage to a tax bill. Mrs. Angle indicated that the Committee should take action separately, as it was unprecedented that the Legislature would put those two provisions together in one bill. She stated such action was unconscionable and reiterated that the DSA and CSR should be passed separately and sent to the Governor, who could then make the decision regarding funding.
Assemblywoman Leslie stated that she would support the motion, and reminded the Committee that the provisions of the Nevada Constitution had been reviewed during the morning session, and it was understood that the Legislature could not pass an unbalanced budget; therefore, the Committee had no choice but to put all three issues together. Ms. Leslie emphasized that persons should not attempt to “hide” behind that issue, as the Nevada Constitution was very clear; a person either stood in support of education and the funding to support it, or was a hypocrite. Ms. Leslie reiterated that she would support the motion.
Assemblyman Hettrick advised the Committee that he was in receipt of a written opinion from Brenda Erdoes, Legislative Counsel, dated June 2, 2003, Exhibit K. He stated he would read the following paragraph into the record to refute a previous incorrect statement:
However, we would note that this provision does not prohibit the Legislature from considering or enacting an appropriations act before considering or enacting other legislation that provides sufficient tax revenue. Rather, the constitutional provision requires only that the Legislature provide for sufficient tax revenue for the appropriations made. This could be accomplished by enacting the legislation providing sufficient tax revenue after having enacted an appropriations act, so long as the legislation providing sufficient tax revenue is enacted by the Legislature during the legislative session.
Mr. Hettrick emphasized that there was no requirement to put the tax bill, the DSA and CSR together, nor was it a requirement of the Nevada Constitution. He indicated that it was disingenuous to imply that such action was being taken because it was required, as it was clearly not required. Mr. Hettrick opined that to take the combined bill to the Floor was simply an effort to make those who disagreed with the budget appear to cast a vote that would be against education. He believed such action was inappropriate and not fair to the public or the children in Nevada. According to Mr. Hettrick, an attempt had been made earlier to vote on the DSA and CSR portion via S.B. 2, however, that motion failed because of the desire to tie the DSA and CSR to the tax bill for political purposes. Mr. Hettrick believed that to make the children of Nevada political pawns in the disagreement over the tax bill was unconscionable, and he vehemently opposed such action.
Assemblyman Andonov stated he would like confirmation that the taxes depicted in Exhibit J would raise the $869 million over the biennium with the given implementation dates, as reviewed by the Committee on June 6, 2003, and if taxes were biannualized, the total would be in the vicinity of $1 billion.
Assemblyman Griffin complimented the Chair of the Assembly Committee on Taxation for the work the Committee had accomplished during the session. The Committee on Taxation had attempted to introduce a broad-based business tax, and had addressed the problems with the gross receipts tax. Mr. Griffin explained that the Committee on Taxation had created a margin cap, had eliminated double taxation by creating deductions, had eliminated pyramiding and cascading, and had devised a very good plan. According to Mr. Griffin, profits included some good elements and took into account the ability to pay, however, he was not sure that the current bill was a compromise, and perhaps was not the best public policy. Mr. Griffin opined that the Legislature should consider some of the elements of double taxation and spread the base somewhat, such as had been done in past proposals. Mr. Griffin reported that he had supported taxes, had supported the budget, and had supported the DSA. He hoped that if A.B. 1 did not pass, the Committee would consider some of the work done by the Assembly Taxation Committee. For that reason, Mr. Griffin informed the Committee that he would oppose the motion currently before it.
Chairman Arberry referred to Mr. Andonov’s previous question and asked Mr. Zuend to reply.
Mr. Zuend explained that the amount to be raised, based on the best estimates that could be provided by staff, would be $866 million for the biennium. Based on the second year total, when the proposal was fully implemented, the total would be slightly over $1 billion.
Assemblywoman Gibbons stated she did not want to belabor the issue, however, emphasized that she was also committed to funding education. Mrs. Gibbons informed the Committee that she had reviewed the Senate proposal dated June 6, 2003, that contained a smaller net profits tax, or 3 percent compared to 5 percent, and the bank franchise fee had been removed from the Senate version. Mrs. Gibbons also noted that the business activity tax was somewhat smaller in the Senate version and, under the current business climate, she believed that would be more helpful to businesses. Mrs. Gibbons informed the Committee that she would support the Senate version.
Assemblyman Marvel advised that he would vote in opposition to A.B. 1. Mr. Marvel stated that it was the first time in his 25 years as a legislator that he had sat and suffered through an attempt to deceive the citizens of the state of Nevada in such a fashion. He believed a more appropriate action would have been the earlier attempt by the Committee to handle each issue separately. Mr. Marvel stated he could not support all issues being included in one bill.
Chairman Arberry referenced the earlier motion by Mr. Hettrick to do pass S.B. 2, which addressed the DSA and CSR. He reiterated that upon passage of such legislation, sufficient revenues were necessary to fund the DSA and CSR. Chairman Arberry stated it was fine to bring up the DSA in support of education, but at the same time, he wondered whether the votes would have been forthcoming when the tax bill that would provide the revenue was acted upon. Chairman Arberry opined that such action would pass the bill related to the DSA and CSR without the required funding.
Mr. Marvel reiterated that he believed the issues should be addressed separately.
Assemblywoman Chowning voiced support of A.B. 1 and would do so with a promise to the children of Nevada. She had campaigned repeatedly on a platform that she would support education, and the current bill represented the seventh time that she had supported class-size reduction. Mrs. Chowning referenced federal legislation that would make it more important than ever that Nevada give its children and teachers the best chance possible. She stated it was disingenuous to her to offer only half of the promise; if the Legislature said it would pass education but did not back up the legislation with the funding package, it would not fulfill its promise. Mrs. Chowning stated that she would support the motion.
Assemblywoman Giunchigliani noted that part of the concern when the current process began was the criticism that people did not have time to read and understand the issues, and yet the Legislature had spent 120 days prior to that time basically reviewing, discussing, and holding open hearings on almost every component currently under consideration by the Committee. Ms. Giunchigliani indicated it was bothersome to her that not one person came to the table during the last four and one-half days and submitted a new idea, a new recommendation, a suggested tax, or a suggested area to cut within K-12. Regardless of the matter, legislators needed to remember that there had been a vote on the Appropriations Act, which could have been stopped at that time in an attempt to reopen the budgets. Ms. Giunchigliani noted that such action had not been taken, therefore, whether they liked it or not, legislators were “boxed in” and had to deal only with the DSA and CSR.
According to Ms. Giunchigliani, all legislators had to have the courage to say either yes or no, but the choice was whether or not to fund education. The Appropriations Act was already funded and already law; education comprised the only two remaining bills. Ms. Giunchigliani explained that rolling the two bills together was unusual, however, there had been no attempt to hide that action.
Ms. Giunchigliani referenced Exhibit K, which stated:
Furthermore, this provision requires that ‘whenever the expenses of any year exceed the income, the Legislature shall provide for levying a tax sufficient, with other sources of income, to pay the deficiency, as well as the estimated expenses of such ensuing year or two years.’ Thus, the plain language of this provision would forbid the Legislature from enacting an appropriation in the absence of sufficient tax revenue. Therefore, based upon the plain language of subsection 1 of Section 2 of Article 9 of the Nevada Constitution, it is the opinion of this office that the Nevada Constitution prohibits the Nevada Legislature from enacting an appropriation for which sufficient tax revenue has not been provided.
According to Ms. Giunchigliani, at the present time, legislators had no other choice, as they had been elected to conduct the people’s business and fund the budget. Compromise was what worked best, and there had been an effort to compromise for the past 124 days. Ms. Giunchigliani stated the bill might pass or it might fail, but at least some legislators had shown leadership and undertaken the job of funding Nevada’s schools and ensuring that the budget was funded.
Ms. Giunchigliani noted the criticism regarding voting on concepts; she applauded both Chairs for ensuring that the Committee discussed all the language that would be contained within the tax bill and the language pertinent to the DSA and CSR, and had brought forth a bill for consideration. Ms. Giunchigliani noted that was unlike action taken by the Senate, where Senators voted on a concept, which was now being awaited in the Assembly by some legislators. According to Ms. Giunchigliani, the house that was currently dealing with the people’s business happened to be the Assembly, and that was where the decision had to be made.
Assemblyman Hettrick stated that the Appropriations Act was passed with more than one-third of the legislators voting against it, but that Act only required a simple majority, and there was no opportunity to stop the Appropriations Act. Mr. Hettrick noted that had it taken a two-thirds majority to pass the Appropriations Act, a special session would not have been necessary, as action would have been taken at that time. He stated legislators could only do what they could, which had been done, and the rules could not be changed. Mr. Hettrick also pointed out that the paragraph within Exhibit K referenced by Ms. Giunchigliani indicated that the Legislature could not adjourn without enacting the revenue, however, that revenue could be enacted separately during the same session. Mr. Hettrick emphasized that there was no language in Exhibit K that indicated the action had to be tied together or in a specific order. Again, Mr. Hettrick opined that the issues could have been handled separately in order to allow people to vote their beliefs rather than make a political statement.
Assemblyman Perkins stated he did not consider the combined bill a political stunt, but rather a policy matter to ensure that those who wanted to support education did so by also supporting the proper funding. He concurred with Mr. Marvel that combining a tax bill with funding for the DSA and CSR had not been done during his tenure, however, the Legislature had never found itself in such a situation in the past. Assemblyman Perkins emphasized that had there been a commitment to vote for a funding package, the two bills would have
been separated, as there would have been no reason to do otherwise, however, that was not the current situation.
Chairman Arberry reminded the Committee that there was a motion before it for consideration and called for a vote.
THE MOTION CARRIED. (Assemblymen Andonov, Angle, Brown, Gibbons, Grady, Griffin, Hettrick, and Marvel voted no.)
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With no further business to come before the Committee, Chairman Arberry adjourned the hearing at 6:55 p.m.
Carol Thomsen
Transcribing Secretary
APPROVED BY:
Assemblyman Morse Arberry Jr., Chairman
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Assemblyman David Parks, Vice Chairman
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