MINUTES OF THE Meeting
of the
ASSEMBLY Committee on Taxation
Seventy-First Session
March 29, 2001
The Committee on Taxationwas called to order at 1:34 p.m., on Thursday, March 29, 2001. Chairman David Goldwater presided in Room 3142 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. David Goldwater, Chairman
Mr. Roy Neighbors, Vice Chairman
Mr. Bernie Anderson
Mr. Greg Brower
Mr. David Brown
Mrs. Vivian Freeman
Mr. John Marvel
Mr. Harry Mortenson
Mr. David Parks
Ms. Sandra Tiffany
COMMITTEE MEMBERS ABSENT:
Mr. Morse Arberry
Mr. Bob Price
GUEST LEGISLATORS PRESENT:
Assemblyman David Humke, District 26
Assemblyman Wendell P. Williams, District 6
Assemblyman Bob Beers, District 4
STAFF MEMBERS PRESENT:
Ted Zuend, Fiscal Analyst
Kathryn Ely, Recording Secretary
OTHERS PRESENT:
Deborah K. Cahill, Lobbyist, Nevada State Education Association (NSEA)
Rose McKinney-James, Legislative Representative, Clark County School District
Marvin Leavitt, Lobbyist, City of Las Vegas
Stephen P. Houchens, Deputy City Manager, City of Las Vegas
Mark Vincent, Director of Finance, City of Las Vegas
Michael Alastuey, Assistant County Manager, Clark County
George Stevens, Director of Finance, Clark County
Carole Vilardo, Executive Director, Nevada Taxpayers Association
Thomas Grady, Executive Director, Nevada League of Cities and Municipalities
Michele Fletcher Richardson, Assistant City Manager, City of North Las Vegas
Danny Lee, Lobbyist, Nevada Library Association
John E. Sherman, Director of Finance, Washoe County
Robert S. Hadfield, Executive Director, Nevada Association of Counties (NACO)
Kurt Segler, Lobbyist, City of Henderson
Steven M. Hanson, Finance Director, City of Henderson
K. Neena Laxalt, Lobbyist, City of Sparks
Raymond (Rusty) McAllister, Lobbyist, Professional Firefighters of Nevada
Stan Olsen, Lobbyist, Las Vegas Metropolitan Police Department
Thomas Beatty, Executive Director, Nevada Service Employees Union SEIU Local 1107
Douglas Thunder, Deputy Superintendent, Administrative and Fiscal Services, Nevada Department of Education
Thomas B. Ciesynski, CPA, Chief Accountant, Washoe County School District
Mr. Goldwater convened the meeting of the Assembly Committee on Taxation and opened the hearing on A.B. 457. Exhibit C is a bill explanation provided by Fiscal Analyst Ted Zuend.
Assembly Bill 457: Revises provisions governing distribution of basic vehicle privilege tax revenue to increase amount allocated for educational purposes. (BDR 43-1152)
Mr. Goldwater explained he was a primary cosponsor of the bill and passed the gavel to Vice Chairman Roy Neighbors.
Mr. Beers, Assembly District 4, presented A.B. 457. Exhibit D is a copy of his PowerPoint presentation. Mr. Beers explained he had investigated the distribution system of the motor vehicle privilege tax and found it very complicated. The combined total revenue to local governments from the privilege tax was a little more than needed to fund a 4 percent raise for school personnel. The worst impact to local government would be a 2.5 percent per- year reduction in their general fund monies. Mr. Beers said the reduction in local services to police and fire had been “duly heard and responsibly rejected.”
Mr. Beers then walked the committee through his PowerPoint presentation. He noted that A.B. 457 was a bipartisan measure cosponsored by Mr. Goldwater. The bill distributed a portion of the state motor vehicle privilege tax to Nevada schools via the Distributive School Account (DSA). The revenue was currently going to local governments. If redistributed to the schools, there would be sufficient revenue to fund a 2.5 percent cost-of-living adjustment for school personnel in each of the next two years of the biennium, with money remaining to fund recruitment incentives for new teachers.
Mr. Beers explained the privilege tax was shared among most local government entities in the area where the funds were raised. The tax was a percentage of value tax assessed on the value of a motor vehicle and declined yearly as the vehicle depreciated. Clark County and Washoe County had a 5 percent tax assessed against the annually depreciated value; that represented a 4 percent state-imposed tax and an optional 1 percent adopted county levy. A.B. 457 dealt only with the 4 percent state proceeds.
Continuing, Mr. Beers explained in FY 2000 statewide revenue from privilege tax totaled $164.4 million. Citing examples, Mr. Beers said of the $110 million received in revenue for Clark County, $51 million flowed to the school district and $59 million flowed to local governments. In Washoe County, of the $27.2 million in revenue, $11.3 million went to the school district and $15.9 million to local governments. He noted he only included the larger counties in the analysis; however, the significant issue was the percent of the ratio. He acknowledged FY 2000 was the latest year where actual numbers were available.
Mr. Beers said the legislation proposed a two-year phased-in approach so that in the first year of the biennium 50 percent of the proceeds from the motor vehicle privilege tax would go to the school district and the remaining 50 percent would be redirected to the school districts during the second year of the biennium. The complete “taking” of the revenue would, therefore, occur over two years.
In explaining how the revenue would be spent, Mr. Beers said the first year of the biennium would see a 2 percent raise for school personnel. The remainder of the revenue was unspecified; it would be spent at the discretion of school districts. He recommended, however, that funds be used for cash incentives to recruit new teachers. The same utilization plan was set up for the second year.
Mr. Beers referred to page 12 of Exhibit D, which illustrated the annual impact on some of the larger cities and counties. The chart designated the percentage of general fund monies lost to the counties and the amount of property tax increase needed to recover the loss of funds. Mr. Beers said he was not advocating a property tax increase; he felt through careful analysis of its operations, local governments could identify areas such as duplicate services and realize significant savings. He also believed local governments would make up, if not exceed, the lost revenue through the impacts of growth and inflation on existing tax flows. Should the local entities be unable to find savings, the annual property tax increase rate would have to be applied. He noted for every 10-cent increase in property tax, an owner of a $100,000 home would pay approximately $35 per year.
Mr. Marvel asked if Elko County was included in the analysis. Mr. Beers said it was not. Mr. Marvel responded that Elko County’s population was in excess of 40,000. Mr. Beers stated as the bill was written, Elko would be a part of the contributing source with the vehicle privilege tax.
Mr. Beers pointed out page 13 of Exhibit D illustrated the two-year cumulative total dollar effect to local entities. Referencing page 14 of Exhibit D that illustrated actual local government revenues from FY 1997 to FY 2000, he noted the larger local governments (Carson City, Clark County, Elko County, Washoe County, and the city of Las Vegas) had enjoyed a surplus in actual revenue received beyond their budget projections. Mr. Beers queried to whom that money belonged. That, he emphasized, was the question the committee had to answer.
Mr. Beers concluded his testimony by enumerating options available to affected entities. Local governments had time to adjust their budgets for the coming biennium since the state budget would not be voted on until a month before the start of the biennium. The loss of the privilege tax revenue could be offset by gains in property and sales tax, which would be accrued to local government by virtue of population growth and inflation. Finally, local governments had the ability to raise property tax if other savings could not be found.
Vice Chairman Neighbors said many counties were already at the $3.64 property tax cap. He asked how they could raise the tax. Mr. Beers responded the bill only applied to the five largest counties, none of which were up against the limit. Mr. Marvel commented the city of Carlin in Elko County was now at the $3.64 maximum. If Elko County adjusted its rate, the city of Carlin would be over the cap. Mr. Beers felt taking Elko County out of the bill would be an appropriate amendment.
Mr. Goldwater, Assembly District 10, testified in support of A.B. 457. When Mr. Beers first approached him to cosponsor the measure, he felt it was a “good new idea.” Mr. Goldwater admitted, however, he had been “shocked and surprised, both good and bad, at the reaction to simply introducing a new idea.” Although he and Mr. Beers came from different political backgrounds, they had arrived at the same place. Mr. Goldwater felt government should give everyone an equal opportunity to succeed; and there was no greater embodiment of that ideal than education and the welfare of the children. Education was a priority in Nevada and the state needed to apply government resources to education without looking at political jurisdictions, boundaries, and rights over revenue.
Mr. Goldwater noted the legislature and other interest groups had debated tax policy and education funding and offered up ideas, but the resounding response to any proposals had been “no.” A.B. 457 was never intended to “take police off the street or one less fireman out of the firehouse.” Public safety was the number one priority, with children and education along side that priority. If a 2.5 percent revenue cut adversely affected police and fire, the legislature needed to look into that from an audit standpoint. He cautioned the committee local entities would testify against the measure and point out the negative impacts on local services, yet no efforts or resources had gone into proposing new ideas to educate the children or properly pay teachers. Mr. Goldwater concluded his remarks saying A.B. 457 had renewed his commitment to public service and to bringing good ideas outside the bounds of jurisdiction and political lines. There were no other larger priorities than children, education and public safety.
Vice Chairman Neighbors commented all committee members were concerned with education. Children totaled 25 percent of the population but 100 percent of the future. Mr. Marvel asked how much of the revenue would go “into the classroom itself.” Mr. Beers replied the numbers “hovered” around 2 to 2.5 percent. Two percent represented the proposed cost-of-living adjustment; 2.5 percent was the maximum annual impact on the local entities. Mr. Beers said 100 percent of the revenue would go to the classrooms in the form of new teachers and the cost-of-living adjustment for existing teachers: that was what he considered “classroom resources.” Mr. Beers continued, there was another proposal “on the table” for a 5 percent one-time bonus, which, he declared, the teachers did not want. That money could go to textbooks and other school supplies and materials. Mr. Marvel stated he wanted a guarantee that the students received the tools they needed in order to learn. Mr. Beers responded he thought the consensus was not to go into the second year of the biennium without having at least a cost-of-living adjustment for teachers in the state budget.
Mrs. Freeman complimented Mr. Beers on his presentation and said the goals of the bill were “admirable.” She queried if “A.B. 457 would put the legislature at war with local governments.” Mr. Goldwater responded that elected officials should want to provide the services constituents deserved. That was an essential role of government. Where jurisdictions crossed, he found discussions turned adversarial over “mine versus yours.” The legislature could offer ideas for debate, while making a conciliatory offering to local governments to work together. The objective was to work with local governments to provide educational services and ensure public safety issues were addressed. He emphasized both the Nevada Legislature and local officials served the same constituents.
Mrs. Freeman asked if the instrument to raise property tax was within A.B. 457. She pointed out it was politically difficult to do that at the local level and queried what incentive was being offered local governments to give them the “political will” to raise taxes. Mr. Goldwater responded local governments could look at efficiency measures, such as mentioned by Mr. Beers. If 2.5 percent of the local general fund budget took police officers off the road, he would have serious concerns. There was no intent to affect local governments in that way.
Mrs. Freeman commented during the Seventieth Legislative Session she and Assemblyman Humke proposed a bill that phased in a decrease in the privilege tax in Washoe County. She thought that had been acceptable, but wanted to speak to the local representatives to determine what the impacts would be.
Mr. Beers said that the organizational chart of Nevada government reflected state government was superior to local governments. It was the state’s responsibility to ensure all responsibilities were properly funded, which included schools and local governments. Since statistics indicated local governments were wealthier than the state, he had no “grief” over the proposed adjustment if it meant funding teachers. With 230 registered local government lobbyists versus 63 legislators, he felt it a fair assumption that it had been an adversarial relationship for many years and the legislature had routinely lost.
Mr. Brown agreed the discussion needed new ideas. Addressing page 14 of Exhibit D, which showed the historical revenue surplus for cities and counties, he asked if the cumulative surplus of $115 million related to the privilege tax or the budgets in general. Mr. Beers explained that was all general fund revenue. Mr. Brown asked if there were numbers for Boulder City. Mr. Beers replied he did not have those figures yet; the Legislative Counsel Bureau Fiscal Division was waiting to see if the bill would be “Indefinitely Postponed” before they analyzed the fiscal impacts to the affected entities.
As a final statement, Mr. Beers added that A.B. 457 was “an idea in a playing field remarkably bare of competing ideas.” He was not arguing it was the best solution and, in fact, felt it would be a “shame” if A.B. 457 ended up being the solution. It was, however, the only idea “on the table.”
Ms. Tiffany asked if any one had offered recommendations or amendments. Mr. Beers replied the only amendment entertained was the possibility of exempting Elko County discussed earlier with Mr. Marvel. He did not believe the numbers at stake warranted the scope of the reaction; the concept itself was responsible for the reaction. No one in opposition to A.B. 457 would find any amendments suitable. Ms. Tiffany asked if Governor Guinn had responded to A.B. 457. Mr. Beers replied the Governor was aware of the bill but had not expressed support or opposition.
Chairman Goldwater called for testimony from the bill’s proponents.
Debbie Cahill, Lobbyist for the Nevada State Education Association (NSEA), testified in support of A.B. 457. On behalf of the 23,000 members of the NSEA, she thanked Assemblymen Beers and Goldwater for their attention to the issue. She emphasized there was a crisis in the state and outlined some of the areas of concern.
Ms. Cahill advised the committee that Nevada ranked 39 in the country on per-pupil expenditure, which was $958 below the national average. The “bottom line” for average teacher salary was $2,185 below the national average. Out of 20 large, urban school districts, Clark County ranked 19 with a starting salary of $26,847. Teacher salaries were not competitive; Nevada school districts could not attract and retain teachers. Ms. Cahill noted Clark County in particular had an enormous turnover. The turnover resulted in unqualified teachers, teachers teaching outside their area of expertise, and long-term substitutes teaching in an era where higher academic standards and high-stakes testing were imposed on the school districts.
Ms. Cahill testified teacher salary increases had not been legislatively appropriated for six out of the last ten years. The school districts could not compete with the private sector. Students coming out of college who might consider going into teaching would take a $13,319 pay cut if they chose the teaching profession. The starting teacher salary for a student graduating with a master’s degree was $22,000 below the average private sector salary. The school districts also could not offer “perks.” She pointed out it was common in California to offer full family medical. Many states offered to pay moving expenses as a means of attracting teachers. Some states offered tuition reimbursements and retiree health care insurance. She said since 1995, local city and county government employee salaries had increased by 23.4 percent, while school district personnel had increased by 14.8 percent. The Consumer Price Index during that period was 18 percent.
Ms. Cahill said she wanted to state clearly for the record the NSEA was not hoping to “raid the coffers” so that city and county employees could no longer enjoy their salary levels. There was, however, a crisis in the state and it had to be addressed. A.B. 457 was one idea and the NSEA endorsed the measure. She pointed out in FY 2000 Clark County enjoyed a $120 million general fund balance, so she did not feel the loss of revenue would hurt local governments. It was not a long-term remedy, but NSEA wanted to come out of the Seventy‑First Legislative Session with a cost-of-living increase for its members. She said the legislature had two choices: a tax could be passed during session to make the “pie” bigger; or the pieces could be cut differently. The NSEA would like to get their fair share.
Rose McKinney-James, Legislative Representative, Clark County School District, spoke in support of A.B. 457, and thanked Mr. Beers and Mr. Goldwater for recognizing the severe need. She said legislatures had frequently asked the CCSD to detail what resources it needed. Two weeks ago Clark County School District (CCSD) Superintendent Garcia presented the “Nevada Education Stability Plan” before two assembly committees, which outlined the resources needed and how those resources would be spent. The CCSD had struggled to reach at the least the average national per-pupil cost. The district continued to struggle, but had not been successful. It did not want to look to local governments to secure funds, but there was nothing else “on the table.” Ms. McKinney-James believed all local governments recognized education was essential and recognized the situation the school districts faced.
Ms. McKinney-James concluded stating the issue of educating children had been “studied to death” and yet the resources were still lacking. If A.B. 457 was all that was being offered, the CCSD accepted the offer and supported the legislation.
Chairman Goldwater then asked for testimony from the opponents to A.B. 457.
Marvin Leavitt, Lobbyist representing the city of Las Vegas, testified in opposition to A.B. 457. Mr. Leavitt said the city of Las Vegas had no argument with the need for additional funding for schools and teachers’ salaries. Since the bill provided a means to make up deficient revenue, the city could not argue it would have to reduce services.
Mr. Leavitt noted over the past few years there had been much talk about local governments being in a position of extreme wealth, the state in a position of extreme difficulty, and local entities having “so much money they have a hard time figuring out what to do with it.” The Nevada League of Cities and the Nevada Association of Counties had asked local governments to submit financial information to determine how well those entities were doing on a per-capita basis. Exhibit E is a chart covering the period 1991 to 2000 and detailing information such as revenues, expenditures, ending fund balances, fund balances as a percent of expenditures, and the populations of six counties and nine cities within Nevada. The last column on the chart represented the “compounded growth percentage in per-capita revenue.” He pointed out inflation was not included in the analysis. As an example, the city of Elko had grown in per-capita revenue by six-tenths of one percent over that time period. If inflation had grown at that same percentage rate, Elko would break even on a real per-capita basis. Since inflation was substantially greater, the city of Elko was actually falling behind.
Referencing the chart, Mr. Leavitt said even though Clark County gained large amounts of revenue, when compared to the growth in Clark County at a per- capita basis, the county had actually grown less than other entities. According to the analysis, the state of Nevada fell in the middle of the local governments.
Mr. Leavitt said if the motor vehicle privilege tax was removed from five counties, and the counties levied a property tax to offset the loss in revenue, those five counties would be paying the schoolteacher salary for all Nevada counties. He noted the growth explosion in Clark County had so impacted the freeways around the area that the county commissioners had asked voters to approve substantial additional taxes to pay, on a local basis, for services that normally would have been provided on a statewide basis. A.B. 457 would add additional property taxes to that burden.
Mr. Leavitt offered that a better way to fund education would be to levy a statewide property tax and give those monies to the schools. Under the provisions in A.B. 457, the state took the motor vehicle privilege tax, allocated that revenue to schools, and gave local governments the political responsibility to raise the property tax to support schools. The state had the ability to levy the tax itself. Mr. Leavitt contended A.B. 457 would only provide a two-year solution for salaries; it was not a long-term solution for the schools. Everyone recognized there was a funding problem in the schools; the question was whether A.B. 457 was the proper method to solve that problem.
Mr. Leavitt mentioned a technical matter that could potentially “raise havoc.” There was the “consolidated tax” that was essentially a “pot” into which certain taxes going to local governments were placed and distributed by a formula. In computing the distribution, each year the previous year served as the base, to which was added Consumer Price Index growth; the excess was then distributed differently. Since the motor vehicle privilege tax was part of the “consolidated tax,” removing those funds changed the formula for the tax distribution. Removing it from the pool would eliminate excess over a period of time and could create a problem.
Mr. Leavitt concluded his testimony stating the main problem with A.B. 457 was the taxpayers would have to “foot the bill.” Local governments were at a period where revenues were growing the slowest amount in over a number of years; this year’s estimate in Clark County was 5 percent growth. If 5 percent of the revenue was removed over two years, local governments had no choice but to increase property taxes in order to maintain service levels. He concluded saying most of those taxes would come from Clark County; that was the “rub.”
Mrs. Freeman inquired why Reno was excluded from the chart in Exhibit E. Mr. Leavitt said Reno had not responded. The city had recently lost its finance director and he assumed that was why they had not replied.
Mr. Marvel said if Elko County was removed, that left only four counties to pay the salary increases for the rest of the state. He cautioned that could resurrect the “fair share” argument again.
Mr. Goldwater said Mr. Leavitt’s testimony indicated if local governments lost 2.5 percent of revenue, they would be forced to raise taxes to provide the same level of service. He said the state was engaged in the exact same debate; the question was, who would raise taxes? He asked if there was not 2.5 percent of “belt tightening” that could take place in local governments.
Mr. Leavitt responded that no government was perfect and none had been successful cutting waste down to its lowest level. Referencing the city of Las Vegas, he said the city could lose approximately $18 million in revenue over the next two years, which equated to 5 percent of the budget. If, as estimated, revenues grew at 5 percent, a no-growth situation on revenues was created, particularly in the second year of the biennium. There would still be growth in employee salaries, which made up about 70 percent of the total operating budget. There would have to be some “give” somewhere, which meant either reduced services or increased taxes.
Stephen P. Houchens, Deputy City Manager, city of Las Vegas, testified in opposition to A.B. 457. The city of Las Vegas recognized the importance of education and applauded the state legislature in trying to find ways to solve the problems. City services were also important, and Mr. Houchens listed some of the areas where the city of Las Vegas had worked to maintain services levels.
Mr. Houchens began by stating, “Growth did not necessarily pay for growth.” When growth stopped, the city was left with service demands, which was where the city of Las Vegas now found itself. Addressing the area of public safety, Mr. Hutchins said the number of firefighters per 1,000 population had fallen over the last two years. Last November, the city went to the voters to ask for a tax override to maintain the number of firefighters. That brought the number to 9 firefighters per 1,000 population, which was less than the national standard.
Mr. Houchens said the same situation existed in law enforcement. Four years ago a 28-cent property tax increase was levied because the number of police officers had fallen behind the national standards. Additionally, the city had been struggling to find a mechanism in which to fund the courts. Working with the judges, a court efficiency plan was worked out where fees were increased, but hours were reduced and 30 positions eliminated. Currently, the courts were “breaking even.”
Mr. Houchens said the city of Las Vegas had performed its own “fundamental review” of operations through a consulting firm and identified several millions of dollars in savings, which the city implemented. That allowed, however, for the city to provide the same or equal levels of service while the revenue stream depleted on a per-capita basis in terms of the number of employees per 1,000 population. He concluded testimony by stating the voters in the city of Las Vegas had “stepped up” and supported the concept that the levels of services to the community had to be maintained.
Mark Vincent, Director of Finance, city of Las Vegas, testified in opposition to A.B. 457. Mr. Vincent said his office estimated the cumulative effect of A.B. 457 to be approximately $18 million and would have a significant impact on city services. That revenue loss represented approximately 5.6 percent of the general fund operating budget. He noted the $18 million was twice the size of the municipal court operating costs in the year 2000; approximately 15 percent larger than the operating cost for the detention facility; and approximately 15 percent larger than the public works operating budget for 2000.
Mr. Vincent reiterated the $18 million was a significant portion of the budget. The city had undergone, and continued to undergo, efficiency reviews and identified savings and revenue enhancements. City residents had approved tax overrides that totaled over 37 cents. Property taxes would have to be raised by an additional 20 cents to replace revenue loss. That burden would not only be excessive on residents, but would increase the overlapping operating tax rate to approximately $3.47 of $100 of assessed value, which was 95 percent of the statutory limit of $3.64 and 5 percent over the debt management 90 percent trigger.
As a final comment, Mr. Vincent mentioned that the city of Las Vegas had pledged consolidated tax revenue on $57 million of outstanding debt. Passage of A.B. 457 could impair the city’s contracts with its bondholders. Mr. Goldwater responded that education must be placed among the cities’ priorities as well as public safety and other services offered by the city.
Mr. Mortenson inquired how much was budgeted for some of the larger entities such as the regional transportation board. Mr. Leavitt replied the regional transportation board was funded by gasoline tax that was constitutionally protected for a single use. Mr. Mortenson asked if that was their only funding source. Mr. Leavitt said in 1991 the voters approved several taxes, and regional transportation received portions of sales tax monies from the bus service, along with other monies redirected to regional transportation from projects related to transportation.
Michael Alastuey, Assistant County Manager, Clark County, testified against A.B. 457 stating it would deplete the county budget by $65 million annually. Once fully implemented, that constituted 5 percent of the budget for the affected Clark County entities.
Addressing the impacts to local government budgets, Mr. Alastuey said when entities avoided cuts in critical areas, a 5 percent cut then became a “double digit” cut in the less critical areas. Cities and counties were assigned the responsibility to increase property tax rates or reduce services, but were not allowed an increase to the $3.64 property tax cap. The state set the cap and the local governments had to contend with it. He felt a “particularly challenging” aspect of A.B. 457 was the differential effect in every jurisdiction of the state; there would be different effects to the tax rates throughout the state. He pointed out that tax rates on school property tax or the school sales tax could be quickly adjusted, as the legislature had done in previous years. That, he contended, was the more direct route to raising revenue.
George Stevens, Director of Finance, Clark County, also testified against A.B. 457. He distributed a handout to the committee (Exhibit F) on the fiscal impact of A.B. 457 on Clark County. One of the problems in Clark County was that the revenue growth had softened because of the economy, yet the population growth continued. That limited the ability to expand services as the population increased.
Mr. Stevens noted a bill had been introduced to add five additional court judges in Clark County. If that bill was approved, it would necessitate hiring an additional 73 employees to staff the courts, with an ongoing fiscal impact of close to $5 million annually. Clark County also had a 10-year capital plan for the fire department that envisioned adding one fire station each year at an operational cost of $2.5 million. Without adding stations, the overall level of fire service in Clark County would decline. There was also a request from the Sheriff’s Office to add 75 officers and 80 civilian employees to next year’s budget. Due to lack of revenue, that request was scaled back to 50 officers. Additionally, there had been a discussion of adding a new air quality agency, estimated at a minimum of $1.78 million in new funding. Clark County was also in the process of building a new regional justice center, which would have significant ongoing annual operating costs.
Mr. Stevens summarized his testimony stating that $11 million in new operating costs must be identified for next fiscal year; that cost was anticipated to increase by $28 million in FY 2003. The principal concern with A.B. 457 was not so much in the area of cutbacks as being able to sustain growth.
Mr. Goldwater commented it was not the intent of A.B. 457 to reduce services or other important projects on Clark County’s “plate.” Schools and school staff, however, should be a part of that plate. He asked, exclusive of police and fireman, how pay raises were negotiated with employees.
Mr. Houchens responded that all pay raises were determined under the Nevada Revised Statutes (NRS) 288. Mr. Goldwater inquired if he was referring to collective bargaining and asked the amount of the last pay raise for employees. Mr. Houchens responded the last pay raise for service employees was 3.5 percent. Mr. Goldwater asked if Clark County had a bill before the legislature to increase the pay for the county commissioners. Mr. Houchens indicated there was a bill to increase the pay for county elected officials that was a six-year “catch up” bill.
Mr. Houchens continued, the recurring notion that the financial circumstances of local governments and the state were appreciably different did not hold up. The local entities and the state shared the same property tax base, the same sales tax, and the same population growth. The financial circumstances, therefore, were not that dissimilar. Financial statements for last year’s state budget showed a substantial cash balance. In addition, there was the state’s “rainy day” fund. He questioned if anyone suggested using that cash balance in order to answer the “temptation” of making a particular investment without a recurring revenue source. He said no one would ask that of the state; conversely, it must be maintained at the local level as well.
Ms. Tiffany asked Mr. Houchens if there had been a performance audit inside the Clark County School District (CCSD). Mr. Houchens responded during his employment with the school district, a number of studies were conducted for different programs. The CCSD also underwent financial audits and opinions as required by statute. To his knowledge, those opinions had been clean with few qualifications. In terms of an overall review, he would have to defer to CCSD to answer the question.
Carole Vilardo, Executive Director, Nevada Taxpayers Association, testified in opposition of A.B. 457. She said the legislature could not take the vehicle privilege tax away from the cities and counties because it was a part of the consolidated tax distribution revenue (“C” tax) and, as such, there were entities bonded against it. That must be taken into account as a baseline; the money could not be arbitrarily taken away. Many of the affected entities also had redevelopment areas. Any property tax increase raised as an offset would accrue to the redevelopment districts and not help the entity “offset” the reduction.
Ms. Vilardo opined that to earmark a change of any revenue for a specific function would not put the state in a better position than it was now. Education was one need within the overall state needs. She suggested if the bill was amended to “take care of problems,” it should be used for state General Fund. She also questioned if the funds could be taken over a two-year period due to the bonding factor for the local governments. She concluded by stating if there was “excess money” in local governments, the taxpayers contributed it and they should be the ones getting it back.
Mr. Goldwater said he was not an expert on local government, and asked Ms. Vilardo if there was no belt-tightening that could occur without compromising public safety. Ms. Vilardo said she always believed that there was a better solution out there, be it “belt tightening” or other methods.
Ms. Tiffany asked Ms. Vilardo if all the revenue streams were bonded against. Ms. Vilardo replied in the negative. Where there was bonding, such as sales tax, it required a greater coverage because it was a revenue source. It was her belief that the issuance of bonds and the repayment of those bonds was not taken into consideration with A.B. 457 as written. She noted the local governments that testified presented a number of issues for consideration. The city of Henderson had a ballot question on the June ballot that could potentially increase their property tax by 24 cents. She did not know how many other municipalities had ballot questions that could be impacted by A.B. 457.
Ms. Tiffany noted the state of Washington had an initiative petition that repealed the motor privilege tax. She asked how Washington “handled those complications.” Ms. Vilardo answered the Washington voters passed a proposition in 1991 that set an expenditure cap on state and local government; the state had actually been able to return money to the taxpayers.
Thomas Grady, Executive Director of the Nevada League of Cities and Municipalities, testified in opposition to A.B. 457. He noted he had two daughters who were teachers and he understood what they were going through in terms of raising families on a teacher’s salary. He felt that A.B. 457 was a band-aid approach to a poor tax policy. The state needed to look at its overall tax policy. Although the bill only “talked about” 2 percent, there was another bill pending that would take three-quarters of 1 percent of the “centrally assessed” away from the local governments to fund the state General Fund. Local governments paid three-quarters of 1 percent for all sales tax collected to the General Fund of the state. He noted not only was the city of Carlin close to the property tax cap, but so was the city of Wells. Washoe County and Clark County paid the majority of the fund for the “guarantee counties” on sales tax. A.B. 457 would take more money away from the larger counties who were supporting the rural counties. Addressing the issue of helping the schools, Mr. Grady asked what the state could do to assist schools. He suggested school audits be conducted to ensure education funds were being spent properly.
Michele Fletcher Richardson, Assistant City Manager, city of North Las Vegas, said most of the impacts to the city of North Las Vegas had already been addressed by the other cities and counties. She offered several comments on the measure saying she believed society rewarded sportsmanship and not scholarship, which was the message being dictated to the children. The community must look at the value of the person that went into the classroom to educate the children; serious consideration must be given to the ability to pay teachers. As a parent she was concerned how to compensate educators. However, speaking as a public servant, she could not wholeheartedly agree to take money entrusted to the local governments away from those entities when citizens were dependent on those funds to continue a quality of life they had grown accustom to. The city of North Las Vegas was willing to bring ideas to the table and all stakeholders needed to be involved in that discussion. On behalf of the city of North Las Vegas, she offered participation and support in finding solutions.
Danny Lee, Lobbyist, Nevada Library Association, testified in opposition to A.B. 457. He stated that, historically, the first areas to feel cutbacks when revenues decreased were the library districts. Of the five counties that would be impacted, four had county libraries. Citing two examples of the potential impact, he noted Boulder City Library would lose over $70,000 and Henderson Library would lose $225,000. Nothing in A.B. 457 addressed the library districts and any ability to increase their ad valorem taxes to make up the loss. He suggested an amendment to address those concerns.
John E. Sherman, Director of Finance, Washoe County, also testified in opposition to A.B. 457. In November 2000 the taxpayers of Washoe County approved a parks, trails, open space and library bond override for $38 million. The tax to repay that override added to the existing tax rate of Washoe County and produced an overlapping tax rate of $3.47. The county calculated the fiscal impact of the full implementation of A.B. 457 and concluded if property tax was used to make up the revenue, Washoe County could not do it; they would exceed the $3.64 cap.
As a further comment, Mr. Sherman said Washoe County was concerned about the education and welfare of children. The county entered into a cooperative agreement with the school district whereby a number of joint-use libraries were provided. The Parks Department had many afternoon programs for the children; the county provided health and welfare through the Child Protective Service Agency; and the Health Department continued to provide services to the more “vulnerable” citizens of Washoe County.
Robert S. Hadfield, Executive Director, Nevada Association of Counties (NACO), testified against A.B. 457. He referred to Exhibit G, which was a handout that addressed many of the previous comments. Counties were partners with the state of Nevada. They were partners in many services and would always be partners. NACO had continuously offered to open a dialogue with the state to find a better way to provide services.
He said NACO did not have a position on the need or justification for additional school funding. They did, however, feel strongly that A.B. 457 did not contribute to achieving a balanced approach to meeting the needs of the state and local governments, nor did it address the needs to serving Nevada’s exploding population. He referred to the 1988 Urban Institute Study that provided some guidance in looking at the tax system and how to craft solutions to long-term needs to all the governments in Nevada. Mr. Hadfield indicated NACO was willing to participate in any discussions to address the problems in a comprehensive, long-term way to meet all the needs.
Kurt R. Segler, Lobbyist representing the city of Henderson, commended the efforts of Assemblymen Beers and Goldwater to solve the problems of education. The City Council of the city of Henderson had stated as a priority the education of children. Henderson had for many years required developers to set aside large parcels of land to the Clark County School District for schools. The 5 percent equated to a $5.3 million revenue loss to Henderson and would be an impact. Mr. Segler then introduced Steve Hanson, Director of Finance for the city of Henderson, who addressed the fiscal issues.
Mr. Hanson said the city of Henderson shared the same concerns as noted during testimony by the city of Las Vegas and Clark County. The fiscal impact to the city would be approximately $3 million in 2002 and between $5.3 to $6 million the following year. He noted during budget preparation for the 2002 budget, the city of Henderson had 1.1 police officers per 1,000 population; the minimum acceptable standard was 1.5. With the rate of population growth, the 1.1 ratio was falling every year. Last November the voters rejected a 24-cent public safety property tax override.
Mr. Hanson said in preparing Henderson’s operating budget for FY 2002, there was approximately $2.2 million in operating revenue that could be allocated to additional new items in the budget. They were able to add 22 new positions; 18 were public safety officials, 10 of those 18 were actual police officers. Those employees could not have been hired without the $2.2 million, which was less than the $2.9 million they would lose next year with the passage of A.B. 457.
Mr. Hanson also commented on the issue alluded to in Mr. Leavitt’s testimony concerning the actual measurement of the loss of the motor vehicle privilege tax. There were two components in the consolidated tax: the base allocation and the excess allocation. Each allocation had a different percent distribution to the entities and removing those funds changed the formula for the tax distribution. There would be a different calculation in determining the loss to each entity. He cautioned there were a number of smaller issues that would arise as a result of the implementation of A.B. 457. Mr. Hanson said the city of Henderson could not support the bill as currently written.
Mr. Goldwater asked Mr. Segler if Henderson negotiated with its employees. Mr. Segler replied that Henderson did negotiate under the collective bargaining agreement. Mr. Goldwater asked if a pay raise had been negotiated for the employees of the city of Henderson, exclusive of police and fire personnel. Mr. Segler replied it was. Mr. Goldwater asked what the percent of increase was. Mr. Hanson replied 3.5 percent. He also submitted a handout for the committee (Exhibit H) on the impacts of A.B. 457 to the city of Henderson.
Chairman Goldwater noted for the record that K. Neena Laxalt had signed-in on behalf of the city of Sparks in opposition to A.B. 457.
Raymond (Rusty) McAllister, Lobbyist, Professional Firefighters of Nevada, testified in opposition to A.B. 457. He said he was confident the intent of A.B. 457 was not to impede public safety and the Professional Firefighters would be available to assist in any way they could.
Stan Olsen, Lobbyist, Las Vegas Metropolitan Police Department, spoke in opposition to A.B. 457. He testified that the Metro Police Department was totally reliant on the funds from the city of Las Vegas and Clark County; any changes to revenue could affect the Metro Police Department’s operations. The Department was about to break ground on two new stations, so they were concerned about the outcome of the measure.
Chairman Goldwater said the whole debate was about “priorities.” Public safety issues were a priority and the legislature would never compromise the health and safety of the electorate.
Thomas Beatty, Executive Director of the Nevada Service Employees Union SEIU Local 1107, represented Clark County public employees and testified in opposition to A.B. 457. The SEIU represented 12,000 employees in southern Nevada, which included 5,000 county employees. Mr. Beatty indicated the SEIU supported teachers in their efforts to achieve pay raises. A.B. 457, however, could create a negative situation whereby union members were pitted against one another. The measure was based on a “flawed perception” that the county had a surplus of funds that could be shifted around to fit other needs. He noted Clark County had initiated a hiring freeze. To make up for staffing deficiencies, mandatory overtime had become the norm. Many employees had been notified they must take overtime as time off since there was no money in the budget to pay for overtime. Employees in the Coroner’s Office had not had a full weekend off in months. Taking a source of revenue from local governments could force services cuts, thus further impacting employees.
Mr. Beatty summarized his remarks by stating the bill, in effect, blamed local governments because over the course of time the state had been unrealistic with respect to its own employees. State employees should enjoy the same rights local government employees possessed and not have pay increases held hostage by the political process. The measure would ultimately threaten government services, social services, and the county hospital.
Douglas Thunder, Deputy Superintendent, Nevada Department of Education, stated he was neutral on A.B. 457. He pointed out that the Governor’s recommended budget projected about $68 million in the first year and $76 million in the second year for motor vehicle privilege tax receipts by the districts. Taking a substantial part of those funds away would create “a hole of that magnitude” in the budget.
Tom Ciesynski, Chief Accountant, Washoe County School District (WCSD), said the WCSD appreciated the work done by Mr. Beers and Mr. Goldwater in bringing forth the idea. Not knowing what the impact would be on other entities, the WCSD was taking a neutral position on A.B. 457. Addressing a question raised about the operational audit of school districts, he noted the WCSD had conducted an operational audit approximately four years ago and found certain areas that the district had addressed.
Ms. Tiffany asked if teachers in the WCSD had received a collective bargaining pay raise over the last two years. Mr. Ciesynski replied in Fiscal Year 2000 employees received a negotiated 2 percent increase, although no pay increase was provided by the legislature. Ms. Tiffany noted Douglas County School District (DCSD) employees had indicated they did not receive a pay raise last year. Mr. Thunder explained there were three school districts that had not settled yet; he was uncertain if DCSD was one of those.
Mr. Marvel asked Mr. Thunder if an analysis had been conducted on actual teacher take-home pay since Nevada did not have a personal income tax. Mr. Thunder responded he did not have that information and was uncertain if there was comparable information from other states. He noted, however, the state had the additional retirement provision, although there may still be employees who were “grandfathered in” in terms of the employer-employee paid retirement. Employees that worked less than full-time were not covered by PERS but received social security.
Ms. Tiffany asked Mr. Thunder if teacher starting salaries differed from county to county for first through fifth year. Mr. Thunder replied each district had its own schedule. The Nevada Department of Education had a report that showed the minimum and maximum starting salaries for each district. He explained one problem with salary issues was the starting salaries reported in the distributive school account was a statewide number; it represented an average of all the people new to the district and could include several years of experience.
Mr. Goldwater asked for further testimony on A.B. 457. There being none, Mr. Goldwater closed the hearing on A.B. 457. There being no further business of the committee, Mr. Goldwater adjourned the meeting at 3:48 p.m.
RESPECTFULLY SUBMITTED:
Mary Drake
Transcribing Secretary
APPROVED BY:
Assemblyman David Goldwater, Chairman
DATE: