NPRI statement on budget deal that includes over $600 million in tax increases
NPRI analyst: Taxpayers the big losers in budget agreement
LAS VEGAS - In response to the announcement that Gov. Brian Sandoval and Democratic legislative leaders have reached an agreement on the state's budget that includes over $600 million in tax increases, Geoffrey Lawrence, the deputy director of policy at the Nevada Policy Research Institute, released the following comments:
Taxpayers are the biggest losers in the deal announced today by Gov. Brian Sandoval, Speaker John Oceguera and Sen. Majority Leader Steven Horsford. As a result of this agreement and Sandoval's breaking of his no-new-tax pledge, Nevada's businesses and families will see their sales and business taxes increase.Lawrence acknowledged that eliminating the Modified Business Tax on the first $250,000 of salaries will benefit businesses, but also noted that the very need for that change highlights the inherent problems with the MBT, which penalizes employers for hiring workers.
At a time when Nevada's effective unemployment rate lingers near 24 percent, this tax increase will lead to lower wages, more unemployment and higher consumer prices. Lifting the sunsets also underscores the dangers of a "temporary tax hike" - when government agencies use one-time revenues to fund ongoing operations, they become dependent on those revenues and the "temporary" taxes rarely expire.
With the sunset date being pushed to 2013, Nevada's citizens will now have to wait at least two more years for their politicians to keep their word.
Beyond its immediate and detrimental impact on taxpaying Nevada families, today's agreement is strange from a policy standpoint. As recently as one month ago, Gov. Sandoval was advocating for a spending plan of $5.8 billion. After $440 million in new money became available in early May - following the Economic Forum's meeting and the announcement of higher federal Medicaid match rates - Governor Sandoval used that new money to increase his proposed spending to around $6.3 billion. After the Supreme Court's ruling called into question $657 million of his funding, the governor became unwilling to consider a spending plan similar to the one he was trumpeting just last month.As part of the budget deal, Democrats in the Legislature agreed to pass several reforms, including education changes. Lawrence said the reforms are beneficial, but they represent only a small step forward.
Ironically, Democratic leaders in the legislature said today that the agreement "responsibly funds education" even though the spending plan remains virtually unchanged from the plan they were condemning a week ago. Prior to the Supreme Court ruling, Democratic leaders called the governor's funding proposals "unacceptable." The only thing that has changed is the funding source - not the total level of funding. This suggests that levying tax increases was an end in itself for the majority party - and not increasing funding for education or health and human services.
The reforms - especially those to revise teacher tenure policies and make it easier to identify and retain highly effective teachers, while dismissing those who perform poorly - are meritorious on their own and should not have had to be conditioned on $600 million in higher taxes. It's as if lawmakers are saying they only care about decent education for children if they can be paid for it.Lawrence also noted that before the session began, NPRI identified billions in potential savings through specific reforms in the areas of K-12 and higher education, Medicaid, public safety and labor reform. These recommendations would have provided more than enough savings to offset any impacts from the court's ruling, said Lawrence.
Also, the package of education reforms included in this agreement falls far short of the aggressive agenda of proven reforms announced by Sandoval in January. There is no movement toward school choice, it will take at least three years to remove ineffective teachers and social promotion will remain in place. Nor does this package include any reforms that would bring long-term cost-savings to even approach the additional taxes that will be imposed.
Read moreIs a budget deal close? Update: Deal reached, hold onto your wallets
Update: Both Gov. Brian Sandoval and Sen. Majority Leader Steven Horsford have tweeted that a deal has been reached. Announcement coming at 2 pm. Head over to TweetNevada.com to follow the real time conversation and be sure to follow NPRI on Twitter at @NevadaPolicyRI.
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So reports KSNV:
Sources in Carson City tell News 3 the deal was made Wednesday morning and is expected to go public sometime after 1 p.m.Stay tuned or follow us on Twitter @NevadaPolicyRI for updates.
As Gov. Brian Sandoval has reversed his promise not to raise taxes, the budget deal will likely contain several hundred million dollars of tax increases and, according to the Review-Journal, spend around $6.5 billion to $6.8 billion, which would be an increase from the current biennium's $6.4 billion in general fund spending.
Education reform bills a nice start but don't get your hopes up
Las Vegas Weekly writer slams watering down Nevada's high school exit exam
Last week I wrote about AB456, a bill the Legislature passed to dumb down Nevada's high school graduation exam. AB456 is currently on Gov. Sandoval's desk awaiting his signature or veto.
I came across this piece by Steve Friess in the Las Vegas Weekly on AB456 and how academically unprepared Nevada's students currently are.
For one miserable semester in 2004, I tried to teach journalism at UNLV, except that almost every student was so functionally illiterate I actually taught remedial English. On election night that year, each student received unique orders to chat up a certain demographic or to ask about certain topics at political gatherings. The girl assigned to ask foreign policy questions rendered a story that included this "word": Alkita.Read the rest of his column to learn what "Alkita" meant and enjoy his hard-hitting take down of watering down Nevada's high school diplomas.
Will the Legislature stop the CCEA from blocking Jones' school-reform plan?
Yesterday, I wrote about Superintendent Dwight Jones' awesome-sounding plans for education reform in CCSD. Last night at the school board meeting, Jones unveiled more of his plans, and they sound ... even more awesome.
Teachers' pay would be tied to performance, private charter schools could take over ineffective public schools and principals would gain power under a Clark County School District re¬organization blueprint unveiled Thursday by Superintendent Dwight Jones.Take a moment and read the Review-Journal's whole article, because this plan sounds like a great chance to introduce reforms that would lead to better teachers and greater student achievement.
So who could be opposed to substantial reforms that would benefit Nevada's students? The teacher union.
Ruben Murillo, president of the Clark County Education Association, which represents district teachers, noted that many of Jones' proposals would "require union action."Murillo's objections are ridiculous. Consider this statement - "It's a traditional way of paying teachers so it's fair and equitable." Really, that's your argument? We've been doing it for a long time, so it's fair? It's fair that we reward teachers for seniority and degrees instead of how good a teacher they are?
"I know a lot of our teachers would be very opposed" to replacing the salary schedule, Murillo said. "It's a traditional way of paying teachers so it's fair and equitable."
Murillo said he would have to speak with Jones about the proposals. Formal talks on a new labor agreement have not begun because the union and the district are waiting for lawmakers to pass a state budget, he said.
It's not fair for the super-talented young teacher who doesn't get rewarded for how good he or she is. It's not fair to our kids who are struck in classrooms with bad teachers. And it's not fair to taxpayers who are paying more for two factors that have little to no relationship to teacher quality.
Of course, Murillo's statements tell you all you need to know about the CCEA and its priorities - make sure all teachers get paid the same regardless of ability and only give raises for things unrelated to how effective a teacher is.
The real question is: Why is the CCEA, which along with the NSEA has been doing its best to kill or water down education reforms at the Legislature, allowed to block meaningful reform?
Amazingly enough, the CCEA is only in a position to block these reforms because of power they are given by the Nevada Legislature in NRS 288.
Why is it so hard to remove a teacher who's not teaching and replace that teacher with one who is?Aside from copying the reforms passed by Florida, the best thing the Legislature could do to increase student achievement is to repeal NRS 288 and give Jones a clear shot at implementing the awesome-sounding reforms he's proposing.
In Nevada, it's because Chapter 288 of the Nevada Revised Statutes compels school districts to negotiate long, difficult and costly step-by-step procedures that district administrators must follow to terminate a teacher. Moreover, NRS 288 requires that school districts must collectively bargain with teacher unions on a whole shopping list of "subjects" - making contract agreements between school districts and teacher unions into cumbersome obstacles to any school district effort to improve students.
For example, NRS 288 mandates that school districts bargain "total hours of work required," "policies for assignment of teachers," "materials for the classroom," "procedures for reduction in workforce," and "discharge and disciplinary procedures," to mention but five of some 28 compulsory subjects.
What results are pages and pages of contract provisions that, over years of negotiation cycles, end up damaging student achievement.
NPRI statement on Gov. Sandoval's reported plans to raise taxes
NPRI analyst: Supreme Court ruling not an excuse to raise taxes
LAS VEGAS - The Las Vegas Review-Journal has reported that Gov. Brian Sandoval now supports raising taxes by extending a number of taxes that were scheduled to expire.
After a ruling by the Nevada Supreme Court appeared to leave a hole of up to $430 million in the governor's most recent budget plan, he appears ready to completely repudiate his repeated no-new-tax promise.
In response to that decision, Steven Miller, vice president for policy at the Nevada Policy Research Institute, issued the following comments:
It is quite disappointing to see that after more than 100 days of Gov. Sandoval consistently advocating for the interests of Nevada taxpayers during this legislative session, he reportedly is ready to precipitously abandon his promise not to raise taxes.
Today's Supreme Court ruling was an entirely appropriate rejection of an unconstitutional money grab perpetrated by state legislators in 2010. But while that ruling endangered some similar gimmicks in the Sandoval budget, it was still quite possible to pass a budget near the level the governor had originally proposed.
On May 2, the Economic Forum projected that Nevada would have $330 million more to spend in the next biennium than it had projected in December 2010, when Gov. Sandoval built his original spending plan. Combined with revised Medicaid projections and other monies, Sandoval has already added back $440 million to his original budget proposal.
It would be bizarre if the governor were no longer comfortable with the very amount of spending he was advocating as recently as a month ago.
At a time when Nevada's effective unemployment rate is around 24 percent and private-sector families and businesses have made significant cutbacks, consistently sound policy is not too much to ask of Nevada's government. This is especially true when reports of government waste and inefficiency abound. One example is yesterday's report that the Clark County School District had wasted more than $800,000 of general fund money on iPads. Another was the $22 million pulled out of his hat at a legislative hearing by Nevada System of Higher Education Chancellor Dan Klaich.
An extended higher sales tax component will necessarily result in lowered consumer demand and, hence, fewer revenues for private business. This will lower the demand for labor and result in either more unemployment and suppressed wages. The payroll tax is a direct tax on labor - making it more costly to hire additional workers. These are not the solutions that Nevada needs during this period of economic turmoil.
The Nevada Policy Research Institute has introduced a package of spending reforms that could save as much as $3.5 billion over the next biennium - while maintaining or increasing the quality of services. While the governor did introduce legislation to pursue some of those reforms, he has yet to pursue the most meaningful among them.
If Nevada families are left with these burdensome taxes, it will be because policymakers in Carson City have irresponsibly protected unaccountable and highly-compensated, unionized bureaucracies at the local government level and billions of wasted dollars devoted to the prevailing-wage debacle.
Extending the sun-setting taxes will further hamper Nevada's economic recovery and discourage job creation.
Even Senate Majority Leader Steven Horsford has noted that the modified business tax, for example, "hampers job creation," and doubling it would further hinder Nevada's economic recovery.
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Superintendent Jones' plans for growth model sound awesome
There's a whole lot wrong with the Clark County School District. From a school board that purposely misleads the public on the size of its budget hole, to blowing $1.1 million on iPads while claiming it's been "cut to the bone," to using school children and personnel to call for tax increases, citizens have good reason to be cynical about CCSD.
All that having been said, the plan Superintendent Dwight Jones is going to announce, to measure and reward teachers based on their abilities, sounds awesome.
What Jones will present isn't surprising because he had success in Colorado and is bringing his reform philosophy and methods to Las Vegas. The foundation is what's known as the "growth model."Despite J. Patrick Coolican's attempt to spin this article into a call for increasing education spending, his whole article on the growth model is worth a read.
The growth model focuses on measuring student progress - hence "growth" - rather than mere standardized test scores. ...
The key is measuring student progress over time, which will shine a light on the best teachers. ...
"Where are the pockets of excellence? We'll have data in six months. That will draw healthy scrutiny to the system," my source says. Teachers will be evaluated on four levels of competency, pegged to the progress made or not made by students. Schools will be similarly judged.
From there, Jones will look to nourish what's working. A program they call "wikitools" will encourage the best teachers to showcase their techniques to other teachers and then be paid "royalties" for doing so.
In summary, Jones wants to measure teacher ability, reward effective teachers and improve or fire ineffective teachers.
That's a great plan - and a great example of using the money you have more effectively.
Jones' plan still faces significant hurdles - most notably from the teacher union, which is likely to object, like it is doing right now in Carson City, to any process that would help CCSD improve or fire bad teachers - but this plan is reason enough to be cautiously optimistic.
It's now up to Clark County parents and concerned citizens to make sure that the pressure they bring in support of school reform outweighs the considerable power of the Clark County Education Association (and the Nevada State Education Association) to protect bad teachers.
Legislature passes bill watering down high school exit exam
It's always amazed me that Nevada's high school exit exam is given to students during their sophomore year.
If students are expected to pass the high school exit exam after being in high school less than two years, three things come to mind.
One, the test isn't that difficult.
Two, what are students learning for the next two years, if they've passed a high school proficiency exam?
Three, if you can't pass an exam given to sophomores, you shouldn't be getting a high school diploma, which implies four, not two, years of learning.
Given these circumstances, it's unbelievable that some in the Legislature want to dumb down the graduation requirements.
Nevada law currently requires seniors to pass four high-stakes exams to earn a diploma: math, science, reading and writing. ...Sen. Denis' claim notwithstanding, this is all about watering down the test.
Assembly Bill 456, approved Wednesday by the state Senate, would allow certain high school students to receive diplomas even if they fail a portion of the high school proficiency exam.
"This is not about watering down the test," said state Sen. Mo Denis, D-Las Vegas, chairman of the Senate Education Committee.
It's about helping the borderline cases, the students who are just missing the mark on the tests and who would otherwise graduate, Denis explained.
If you can't pass a sophomore-level test in the basic areas of math, science, reading and writing, you have no business graduating from high school, even if your combined average would be a passing grade.
What's tragic here is that the ones who are really hurt by this are Nevada's students. By not being honest with students, you allow them to leave high school thinking they have skills and abilities they don't have. It might stress a student out to have to study, practice and drill to retake a test, but the alternative is a student with significantly fewer skills than are necessary to get a job or succeed in college.
With over 34 percent of Nevada's high school graduates having to take remedial courses in college, Nevada should be raising, not lowering, its academic standards.
Assembly Ways and Means, May 25
For anyone who hasn't heard about it yet, below is my testimony to the Assembly Ways and Means Committee tonight as they met to debate whether to extend the sunsetting taxes from 2009:
My name, for the record, is Geoffrey Lawrence and I am deputy director of policy at the Nevada Policy Research Institute. Thank you, Madame Chair, for the opportunity to testify today.
As I'm sure you're aware, every tax instrument impacts economic behavior in unique ways and these distortions are generally wealth-reducing because they alter human action away from the welfare-maximizing behaviors that occur within open markets. However, since governments are compelled to levy taxes in order to provide for certain "public goods," such as the rule of law, sober consideration should be given to the relative merits and drawbacks of alternative taxing mechanisms.
The Modified Business Tax is ultimately a tax on labor, which artificially increases labor costs - suppressing the demand for labor. As a result, the tax is a negative incentive for employers to retain existing workers or to hire new ones. It also can lead to an over-mechanization of industry, beyond the point of optimal production, because the cost of capital relative to labor is artificially skewed. In economics, there's a very boring-sounding term for this trade-off between hiring workers or investing in machines to do the work called the "marginal rate of substitution." Taxes on labor, as with taxes that specifically target capital, distort this delicate balance and lead to sub-optimal levels of production.
The Local School Support Tax, as you know, is a tax on consumption. Consumption taxes artificially elevate the final price facing consumers and, therefore, suppress consumer demand for the taxed goods. This means that, while consumer welfare is injured, retailers see fewer revenues as a result of the decline in consumer demand. This fall in business revenue is translated backwards to factor inputs like capital and labor - further exerting downward pressure on wages. As I often say, business is like a jelly doughnut: if you squeeze it, the jelly has to come out somewhere. With regard to consumption taxes, this is generally some combination of higher prices on consumers or reduced wages for workers.
I bring up these points because the adverse impacts of taxation are directly proportional to the size of the tax burden imposed. Since an extension of the Modified Business Tax and Local School Support Tax increases from 2009 would effectively increase the total tax burden beyond what is scheduled to exist, this bill would only magnify the distortions caused by these particular tax instruments.
I have heard a lot about the ability to fund public education today, with the implication that current revenues would be insufficient to accomplish this task. But far more important than how much money is spent, is how well it is spent and the educational system in Nevada is not structured to deliver cost-effective results in terms of student performance.
The body of evidence is immense and irrefutable regarding the effectiveness of specific and substantive educational reforms on improving student performance and, consequently, those students' chance at success in life. These reforms include: alternative teacher certification, open enrollment, evaluating and grading public schools and teachers based on student achievement, and, most importantly, expanding the universe of school choice. School choice does not have to mean vouchers - it can mean the expansion of charter schools, including virtual schools, and a tuition tax credit program along the lines of one modeled by NPRI.
These truths have been known for a long time and, yet, the Nevada Legislature has failed for years to implement meaningful reform in the interest of our children. I apologize for letting emotion enter into my testimony, but I personally find it reprehensible that after years of failing to act in the interest of children, that anyone would now use children as political leverage for raising the tax burden on Nevada's families. If this body was genuine in its concern for educational quality, we would have implemented the reforms I've mentioned years ago.
Thank you.
How raising the 'sunsetting' taxes would kill jobs
Barring any last-minute surprises, the job-killing margins tax is dead.
Barring any last-minute surprises, the revenue-enhancing sales tax on services is dead.
The debate is now over the whether to raise taxes by extending the sunsetting taxes. Those tax increases would include a sales-tax increase and a doubling of both the business license fee and the modified business tax.
While Republicans look increasingly unlikely to give in on raising taxes, it's worth remembering the impact raising these taxes would have on the economy.
As Senate Majority Leader Steven Horsford notes, raising the modified business tax will kill jobs:
For example, the current modified business tax hurts small business and hampers job creation.Doubling the price of business licenses in 2009 had a negative impact on the number of businesses licensed in Nevada.
In fact, recent data from the Secretary of State's office shows that the total number of incorporations filed in Nevada has fallen by 31,760 since the higher licensing fees took effect. This exodus of filers means a loss of direct revenue to the state through the annual $200 business license fee. But it also translates into an untold sum of lost economic activity generated by affluent nonresident business owners who had previously visited the state to hold annual meetings and spend generously on gaming, lodging and retail. The loss of these visits contributes to the state's worsening unemployment figures and prevents the state from collecting gaming, sales and room-tax revenues that would otherwise exist.By increasing the costs of purchases, the sales tax makes goods more expensive. As is shown by a basic understanding of the law of supply and demand, this would decrease supply - and the number of people producing those products.
Lawmakers in the Silver State must realize that not only can taxes distort the economic incentive structure, but that Nevada must compete in a global marketplace to attract investment. States that offer lower-priced and more convenient incorporation filings have a strong advantage in luring nonresident firms to incorporate in their state.
Registered agents in Wyoming, for instance, have developed a website specifically touting the advantages of filing in Wyoming over Nevada. According to the website, "Wyoming charges about 40 percent less than Nevada when setting up any company. There are also no 'hidden fees' to be paid to the state for filing officer lists." The website also boasts faster processing times and the fact that business licenses are not required in Wyoming.
As legislators debate whether or not to raise these taxes, it's important to remember that - at a time when Nevada's actual jobless rate is 23.7 percent - each of these tax increases would kill jobs.
