CCSD spends $1.1 million on iPads
Alternative headline: Why more money won't fix education in Nevada. Or: Remember when we gave teachers apples, not Apple products?
For three years - seriously, three years - leftists have told us that education in Nevada has been cut to the bone. And they implied that if you didn't want to throw more money into education, you either hated children, wanted Nevada to become Somalia or both.
And now we learn that "cutting to the bone" in government means avoiding even the most obvious pots of pork.
Instead, Contact 13 crunched the numbers and found that the district spent nearly $1.1 million on 1,859 iPads over the last six months.I strongly encourage you to go to the 13 Action News website and watch the full report.
And although there is $136,000 more on school district credit cards for purchases from Apple stores, because the information isn't centralized, the district couldn't tell us exactly what was bought.
"A lot of our iPads are purchased through grant money," Denson explains.
But most of the money, more than $800,000 of it, comes from the school district's general fund. [Emphasis added]
Seriously - $800,000 for iPads? From general fund dollars?
Less than a week after a CCSD trustee was crying while voting for the school district's budget?
I don't know whether leftists in Nevada are purposely dishonest or just embarrassingly ignorant, but this is the kind of story that should remind you not to believe their cries of doom and gloom.
When leftists start complaining about budget reductions, there's just one response - don't be fooled again!
Read moreJoint committee to reduce appropriations
A special joint meeting of the Assembly Ways and Means and Senate Finance Committees is being convened this morning to resolve the differences between revenues and spending bills that have already been passed by the legislative majority. The majority has approved spending that is nearly $1 billion in excess of Governor Brian Sandoval's Executive Budget proposal, which already planned to significantly outspend available revenues.
A detailed analysis of the majority party's additions to the Executive Budget is available here.
The majority has proposed $1.2 billion in new taxes to finance the additional spending they'd like to see, but has been unable to achieve the necessary two-thirds support for those proposals. At this time, it looks like those tax ideas are dead.
We'll see what additional clarity can be gleaned from today's meeting...
Performance-based budgeting becoming possible
The Nevada Policy Researh Institute has been writing for a long time about the failures inherent in Nevada's baseline budgeting process and the need for an immediate shift to the performance-based approach when crafting the state budget.
NPRI's "Better Budgeting for Better Results" study was instrumental in raising the issue's profile at the outset of the 2011 legislative session and, soon after, Gov. Brian Sandoval's administration produced the first official performance-based budgeting document in state history.
Yesterday, the legislature passed AB248 which would require performance-based budgeting for all future budget cycles. This change will be a huge victory for Nevadans who wish to see their tax dollars used in the most cost-effective manner possible.
Congratulations to the Nevada Legislature for its bipartisan support of a very sound policy change! Now, if only the same could be said for meaningful education reform...
Watching the Clark County school board's budget deception move through the news cycle
Yesterday, I detailed a major part of the liberals' playbook - inflate spending cuts by either assuming massive spending increases or overstating the scope of the cuts.
The most recent example is the budget the Clark County school board approved Wednesday, which the board claimed had a $407 million shortfall and would lead to 1,800 job cuts.
What the board didn't include in its budget was an additional $159 million that it had available, but chose - chose! - to exclude. While I'm all for fiscal prudence and have no doubt there's more than $159 million in waste in CCSD, not including this $159 million in funding allowed the school board to tout this 1,800 job-cut figure.
And why would the school board want to emphasize job cuts? To stoke public outrage over the "devastating cuts" to education, which it hopes will lead to greater funding from the Legislature.
Example one: today's Las Vegas Sun editorial.
The Republican governor has taken a hard-line position on the budget and taxes - his way or no way - and that could make for a long summer. ...Ironically enough, the sub-headline of the editorial is "Sandoval won't let the facts get in the way of implementing his ideology."
The tough stance may work well with the far right of the Republican Party, but it won't work well with most voters. People want solutions, not ideological platitudes. The state is facing a budget shortfall of more than $2 billion, and Sandoval's plan would let taxes expire and then gut state spending and services. Doing so will have serious consequences on Nevada for years to come. ...
[For example, t]he Clark County School District approved a plan Wednesday that would cut $407 million in the upcoming fiscal year. It includes laying off 1,834 employees and slashing spending on textbooks and supplies. There could be an additional 1,000 people laid off if district unions don't make further concessions, school officials said. Regardless of what happens, larger class sizes and fewer opportunities for students will result. ...
Unfortunately, Sandoval doesn't seem to care. This really isn't about budgets, it's about policy. Republicans don't want to waste the budget crisis to advance their agenda of gutting government.
You know, "facts" like CCSD is going to have 1,800 job cuts next year, because it won't spend the $159 million available to it. "Facts" like Nevada has a $2 billion-plus budget deficit, when general fund spending is going to go from $6.4 billion to $6.1 billion under Sandoval's plan and Nevada is going to collect $5.8 billion in general fund revenues.
Example two: the news stories from My News 3, 8 News Now and 13 Action News, which all reported on the $400 million budget cuts and 1,800 layoffs. While the stories mentioned that the budget numbers aren't final, the 13 Action News report, for instance, is entitled, "Trustee in tears while passing school districts final budget." There's little doubt what the takeaway is from that story.
(I assume Fox 5 had a story on the school district budget as well, but I couldn't find it on its site.)
It's a lot easier to generate outrage when you're distorting reality - and Nevada's leftists have done plenty of distorting during this session.
What Nevada's intellectually honest citizens, media members and lawmakers need to do is keep their guard up.
Don't be fooled again.
How the Clark County school board is inflating its budget hole
It's amazing how simple - and deceptive - the big-government playbook is.
Want to increase state spending? Claim the state has a $3 billion deficit and don't tell anyone that this figure assumes a $2 billion spending increase.
Want to increase K-12 education funding? Claim the governor's budget cuts education funding by $1.1 billion, even though Nevada will be spending only $49 million - or $45 per student - less through the Distributive School Account than it did in the last two years.
The Clark County school board is following the misleading practices of leftist legislators.
Last night the Clark County school board approved its tentative budget, while claiming that it has a $407 million shortfall.
Chief Financial Officer Jeff Weiler declined to discuss hypothetical situations after the School Board reluctantly and "under protest" passed a final budget for 2011-12 that includes a $407 million funding shortfall and requires 1,800 job cuts.Except that the school district is going to have $159 million it didn't include in its "tentative" budget.
Because of improving economic conditions, district officials anticipate having an additional $69 million in state funding for next year.The article also reports that the district is counting on $167 million in union concessions or it will have to lay off 2,500 more employees. If that number is accurate, that's an average salary-and-benefits package of $66,800.
That money was not formally included in the budget, because the numbers are still being verified.
The district's budget also assumes it will not take $90 million from the debt service fund to pay for operational expenses as Gov. Brian Sandoval has recommended.
If you multiple $66,800 by the 1,800 jobs that would be cut under the district's tentative budget, the result is $120 million.
Remember that $159 million school district officials aren't telling you about? It could be used to eliminate any jobs cuts (although letting bad teachers go would actually improve student achievement).
But being honest wouldn't generate outrage. Being honest wouldn't scare teachers, parents and students.
Cynical officials hope that fear turns into cries of outrage - even if those fears are based on falsehoods.
Don't be fooled again.
New Tax Foundation report: 'No sensible case' for margins tax
The Tax Foundation released a new report today on the margins tax, and the report clearly lays out the harmful impacts a margins tax would have in Nevada. Replacing the modified business tax with a margins tax (an amendment to SB491) is one part of legislative Democrats $1.2 billion tax increase plan, which would be the largest tax increase in Nevada's history.
While you really should read the entire report, which is only 11 pages, here are some highlights. I also presented these comments to the Senate Revenue Committe today.
First, instituting a Texas-style margins tax would drop Nevada's business tax climate ranking from 4th to 11th and from 1st to 45th in the Corporate Income Tax Sub-Index Rank. At a time when Nevada's private sector unemployment rate is over 13 percent and its real unemployment rate is around 24 percent, this tax would make Nevada less attractive to potential employers.
Second, as is clearly stated on page nine of the report, a margins tax is a modified version of a gross receipts tax.
Third, gross receipts and margin taxes both introduce significant economic distortions, ie... they impact some businesses much more than other ones. Some states have tried to limit these impacts by either varying rates for different industries or modifying the base, like the margins tax would do. These changes cannot limit the structural problems inherent in these types of taxes.
From the Tax Foundation:
All gross receipts taxes feature tax pyramiding, which distorts and interferes with business investment decisions.Fourth, the margins tax in Texas has basically been a disaster.
[The Texas margins tax] is collecting far less in revenue than expected, causing significant confusion and compliance costs, resulting in significant litigation and controversy over "cost of goods sold" definitions, and facing calls for substantial overhaul and even repeal.Noted tax academic John Mikesell has referred to the Texas margin tax as a:
[B]adly designed business profits tax...combin[ing] all the problems of minimum income taxation in general - excess compliance and administrative cost, penalization of the unsuccessful business, undesirable incentive impacts, doubtful equity basis - with those of taxation according to gross receipts.To conclude, the problems with the margins tax are separate from the amount of tax dollars the legislature wants Nevada to collect. The margins tax is not good tax policy. To quote the Tax Foundation here:
There is no sensible case for gross receipts taxation, or modified gross receipts taxes such as a Texas-style margin tax. The old turnover taxes - typically adopted as desperation measures in fiscal crisis - were replaced with taxes that created fewer economic problems. Gross receipts taxes do not belong in any program of tax reform.
The structural problems with a margins tax
When it comes to the tax debate in Nevada, there are two questions to consider.
First, what tax instruments, or types of taxes, should Nevada have?
Second, how many tax dollars should the state collect?
For the purposes of this discussion, let's leave aside the second question. This post isn't about if Nevada needs more to take more tax dollars or not. It's about if a margins tax, one of the new taxes Democrats have proposed and also called a gross receipts tax or franchise tax, is a good type of tax instrument to have.
The margin tax that's being proposed would be a .8 percent tax on a company's revenue after a $1 million exemption. The tax would be imposed on a company and applied to the lesser amount of the following:
- 70% of total revenue
- Total revenue less wages and salaries paid
- Total revenue less cost of goods sold
Regardless of how much tax revenue it collects, a margins tax has problems in every single area (analysis adapted from Geoffrey Lawrence's One Sound State):
1. A margins tax is nearly as volatile as a corporate income tax, because the additional financial burden imposed on firms would accelerate business closures. Thus, not only would the state be unable to collect revenue, but the uniquely perverse distortions caused by a margins tax would generate significantly higher unemployment.
2. A margins tax distorts economic behavior because the tax "pyramids" as it is added onto business-to-business transactions. This penalizes the production of complex goods that require multiple stages of production and would limit economic diversification in Nevada.
The higher tax rates that would be assessed against more complex goods would also distort consumer behavior away from optimal consumption patterns by introducing artificially increasing the cost of more complex goods.
3. A margins tax will burden businesses with new accounting measures that will increase compliance costs.
4. A margins tax favors vertical mergers. Because businesses wouldn't pay a tax on supplies it "sold" to itself, a margins tax would accelerate vertical mergers as firms seek to reduce the amount of taxes paid.
While no tax instrument is perfect, there are inherent structural problems with any margins tax.
The economists at the Tax Foundation are quite explicit in their thoughts on any type of gross receipt or margins taxes:
There is no sensible case for gross receipts taxation. The old turnover taxes - typically adopted as desperation measures in fiscal crisis - were replaced with taxes that created fewer economic problems. They do not belong in any program of tax reform.
Senate Revenue, May 17
The following is my testimony today to the Senate Revenue Committee regarding the proposed "business margins tax" and extensions of the 2009 tax hikes:
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.
I'd like to review some of these very briefly.
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'd also like to briefly address the potential adverse impacts of the proposed business margin tax. A major weakness inherent to the proposed margin tax is that the tax is assessed at every stage of production throughout the supply chain. This means that the tax would have "pyramiding" effect, with a disproportionate effective tax rate imposed against complex goods that require multiple stages of production. I fear that this tax proposal would specifically place Nevada at a competitive disadvantage for high-tech industries, such as solar energy development, biotech industries and the like because they require many stages of production. If so, it would work at direct odds with the purported goal of economic diversification.
Finally, I'd like to highlight that the impact of taxation in affecting economic behavior is closer to that of a water facet that is slowly turned on than a waterfall. That is to say that even relatively low tax rates can affect economic behavior because the impact is incremental and doesn't lie behind some threshold tax rate. For every small increase in sales tax rates, for example, there is a growing increment of consumers who choose not to purchase the product being taxed. Similarly, business owners decide to scale back production or labor force by growing increments with each new or higher levy. Economists refer to this as the "marginal" impact of a tax increase or a price change and it means that we should not delude ourselves into thinking that the proposed tax changes would not, in some measure, exacerbate the state's economic woes.
As a side note, I would like to applaud Senator Horsford's motion to use excess revenues to pay down unfunded PERS liabilities and would suggest that similar provisions be applied to all revenue streams.
Thank you for your time and I'm happy to entertain any questions.
Horsford: MBT 'hampers job creation' ... let's double it!
As the details of the Democrats' $1.2 billion tax package, which would be the largest tax increase in Nevada's history, are introduced as part of SB491, it's worth remembering what Senate Majority Leader Steven Horsford wrote in the Las Vegas Sun on Sunday about the Modified Business Tax.
For example, the current modified business tax hurts small business and hampers job creation.As NPRI has been pointing out for years, Horsford's exactly right here. The MBT hampers job creation and, as such, increasing the MBT will lead to fewer jobs.
Unfortunately for individuals in Nevada, which currently has the highest unemployment rate in the nation, Horsford also wants to double the job-hampering MBT. Under current law, the MBT rate will decrease from 1.17 percent to .63 percent when the 2009 tax hikes sunset at the end of June.
Part of Horsford's plan to raise taxes by $1.2 billion is to permanently extend the 2009 tax increases. Now, Horsford and company do want to eventually replace the MBT with a "margins" tax - which is one of the most economically destructive tax instruments available to lawmakers - but the margins tax wouldn't kick in until 2012.
This means that in the short term, Horsford wants to double a tax he admits "hampers job creation."
The $1.1 billion education cut myth
Last year, I wrote a commentary called the $3 billion deficit myth. In it, I described how by assuming a $1.5 billion increase in state spending, many ill-informed individuals were overstating Nevada's budget problems. While many public officials and media members have since gotten Nevada's budget situation right, some lawmakers are still using the same tactics to inflate Nevada's budget difficulties.
Nowhere has this been seen more than in the discussion over Nevada's education budget - especially with the claim that Gov. Sandoval's budget contains a $1.1 billion spending decrease to education.
Ways & Means Committee Chair, Speaker Pro Tempore Debbie Smith released the following statement after Governor Brian Sandoval vetoed A.B. 568, the K-12 education budget:This "cutting $1.1 billion from our public schools" claim is false. You can only manipulate your way to this number if you reverse reductions that have already been made and assume spending increases that don't yet exist.
"While I fully anticipated this veto, I question how the governor plans to champion economic recovery, end social promotion, and improve our graduation rates while cutting $1.1 billion from our public schools. ...
"In his veto statement, the governor mentions only spending the money we have and not allowing for additional funding of education. Let me be clear: A.B. 568 does not contain additional funding, but instead prevents massive cuts to public schools-the largest in our state's history. ...
"We remain firm in our commitment to bring much needed reforms to K-12 and to reject the $1.1 billion cut proposed in the governor's budget.
Here's what's actually happening with Nevada's K-12 education budgets (Pg. 37 on this worksheet):
In Fiscal Year 2010, Nevada spent $2.513 billion through the Distributive School Account (DSA).
In Fiscal Year 2011, Nevada spent $2.504 billion through the DSA.
So Nevada spent a total of $5.017 billion in the last biennium on 849,464 students. That's $5,906 per student per year. (Don't confuse this amount with total education spending, which is $9,885 per student. The DSA, which includes some money from local streams, is just the funding level that state government is responsible for.)
For the next two years, Gov. Sandoval has proposed spending the following:
In Fiscal Year 2012, Nevada would spend $2.345 billion through the DSA.
In Fiscal Year 2013, Nevada would spend $2.220 billion through the DSA, plus $161.6 million for Sandoval's block grant program (details here, pg. 5).
Sandoval also wants to spend $241 million more on K-12 education with the extra money projected by the Economic Forum.
That's a total of $4.968 billion on 847,652.1 students. That's $5,861 per student per year.
So Sandoval's proposal would spend $45 less per student for a total two-year spending reduction of $49 million. In terms of percentages, that's a .76 percent reduction to state support and less than a half a percent reduction to total education spending.
To compare, AB 568, vetoed by Sandoval yesterday, would have increased education spending by $660 million from the governor's recommendations. That would have increased education spending to $5.628 billion, which means that Nevada would spend $6,640 per student per year. That means Nevada would have spent $734 more per student each year.
How can Assemblywoman Smith claim that AB 568 doesn't contain additional spending?
How does a $49 million decrease turn into $1.1 billion?
How does a reduction of less than 1 percent equal "a massive cut" to education?
I think the answer to all those questions rhymes with "Higher, higher ants on tire."
And what's a possible reason for this deception? As reported by Jon Ralston last year, here's what an anonymous businessman said about claiming Nevada has a $3 billion deficit.
But then he [the anonymous businessman] called back almost immediately to make two more points. One was that the budget deficit should be pegged at closer to $3 billion by all the politicians to establish a large enough target for negotiations.Is Nevada's current budget debate about the truth? Or is it about manipulating the truth to increase one side's bargaining power?
For those who repeat the $1.1 billion education cut myth, the answer is clear.
For the majority of Nevada's citizens, the challenge now is not to be fooled again.
