Speaker Oceguera using old data to exaggerate the scope of Nevada's budget problems
In the past few weeks, Assembly Speaker John Oceguera has made presentations in front of the Reno, Las Vegas, North Las Vegas and Henderson city councils. In each appearance he's presented this PowerPoint, which he is using to describe Nevada's fiscal situation.
Unfortunately for anyone interested in having an accurate discussion about Nevada's budget, Speaker Oceguera is using old data to make Nevada's situation seem worse than it is.
His third slide:
His fourth slide (click to enlarge):
In case you can't read the bold print, it says: "States Reporting a Budget Shortfall for Fiscal 2010-2011." Fiscal Year 2011 runs from July 2010 to June 2011. The budget for Fiscal Year 2011 was set two years ago in the 2009 Legislative Session and modified in 2010's Special Session.
In other words, that shortfall is over! Fiscal Year 2011 (and its supposed "budget deficit") has already been taken care of. Instead, Oceguera's using this slide to make the case that Nevada's budget situation is the worst in the country and the state needs a tax increase. His misleading slides and testimony are, unfortunately, making their way into the media:
Oceguera noted that the deficit is 54 percent of Nevada's budget - the largest percentage of any state in the nation. The deficit is estimated at $2.7 billion, Oceguera said.
Completely outdated ... as Oceguera's own slide shows! The 54 percent statistic is also of dubious accuracy, because of the baseline-budgeting process and the denominator used, but that's an entirely different discussion.
What's even more outrageous about this is that NPRI e-mailed Oceguera about this inaccuracy two months ago - and he's still using it.
NPRI's original email (click to enlarge):
Speaker Oceguera responded to that email and even acknowledged that percentages, in this context, are "somewhat irrelevant" and are largely dependent on the chosen denominator.
While I give Oceguera credit for taking the time to engage in a substantive discussion with NPRI, it's distressing that he's now knowingly misleading elected officials, the general public and the media about the size of Nevada's budget deficit using an outdated statistic.
Don't be deceived and manipulated. When politicians - especially those looking to increase taxes - start talking about Nevada's budget deficit, make sure you have the facts handy.
Read moreSandoval: 'We're only going to spend the money we have.'
One of the most important takeaways from Gov. Brian Sandoval's interview on "Face to Face" with Jon Ralston is this comment at 1:30.
(Update: The embedded video is crashing the site. You can view the video here. You may have to scroll through some old episodes. Look for Face to Face block 2 - 01/07)
[Making a pitch to a potential business looking to move to Nevada]
Sandoval: Unlike other states, we're taking the prudent approach, which is we're only going to spend the money that we have.
Our Economic Forum in our state has said we have $5.33 billion to spend. We're going to stick to that. We're not going to tax you.
You're leaving a state that has just increased taxes. You're leaving a state that's been, [where] you've been over-regulated. You should come to the state of Nevada where you will have a stable tax policy, where you'll have a stable business environment...
As part of Gov. Sandoval's commitment to making Nevada more business-friendly, his first executive order was a one-year freeze of new regulations [PDF].
Sandoval's comment on the budget gets right to heart of the tax-and-spend debate. As NPRI has noted previously, controlling taxes means controlling spending, and many of Nevada's current budget problems are the result of the per-capita, inflation-adjusted, 30 percent spending increase the Legislature passed in 2005 (p. 6).
Public comments are no guarantee that Gov. Sandoval will present a $5.33 billion budget or that he'll stick with his no-new-taxes promise, but he's certainly making all the right arguments.
Bolick: NPRI's litigation center can increase freedom in Nevada
Last month, Clint Bolick, the director of the Scharf-Norton Center for Constitutional Litigation with the Goldwater Institute, gave a speech on how NPRI's new Center for Justice and Constitutional Litigation can use Nevada's Constitution to protect liberty.
It's a great speech and includes a lot of great examples of the good they've done in Arizona. In case you missed it, enjoy.
To learn more about NPRI's Center for Justice and Constitutional Litigation, check out its website at http://justice.npri.org/
Does Sen. Lee oppose tax increases?
This is the first time I've seen this statement, and it includes a big "if," but this could be great news for taxpayers and businesses in Nevada.
Sen. John Lee, D-Las Vegas, has signaled he isn't convinced a tax increase is necessary.
"If I was signaling anything ... it would be I'm not for raising taxes," Lee said recently.
Sen. Lee is absolutely right that a tax increase isn't necessary in Nevada. As NPRI has previously noted, a large part of Nevada's current budget difficulties come from the per-capita, inflation-adjusted, 30-percent spending increase that occurred in 2005 (p. 5).
(The red line shows how much Nevada's budget would have been if it increased only by the rate of population growth and inflation since 1994)
Raising taxes instead of bringing Nevada's spending in-line with historical levels would simply create a bigger boom-and-bust cycle in the future.
Decreasing a subsidy is not a tax increase
Nevada's higher education officials either don't understand the difference between decreasing a subsidy and a tax increase or they're conflating the two terms for political purposes.
You decide.
Gov. Brian Sandoval's guiding philosophy in building a state budget has been his promise not to raise taxes or fees.
In this economy, he argues, businesses and families just can't afford to pay more to fund their government. Except, that is, for students.
Sandoval this week suggested to higher education officials that they could "significantly" increase tuition to colleges and universities to offset his proposed cuts in state funding, according to higher education officials.
They were unhappy, wondering why they appeared to be exempt from Sandoval's viewpoint on the budget and economy.
"The statement that Nevada can't afford higher taxes, but (higher education) can afford higher fees is hard to understand," said Gregory Brown, a professor at UNLV and vice president of the Nevada Faculty Alliance. "It runs counter to principles he seems committed to."
It's not the first inconsistency in Sandoval's ideology, which he has embraced with surprising gusto since entering the race for governor in September 2009.
The difference between a tax or fee and tuition should be obvious, but in case it's not, let's review how a tax works, using the sales tax as an example.
If you purchase a product for $10 and the government charges you an 8 percent sales tax (80 cents), your total bill is $10.80. If the government increased the sales tax to 9 percent, you'd pay 90 cents to the government and your total would be $10.90. What you buy is your purchase. The tax is simply an additional cost.
Let's review how higher education works. Nevada state government gives the Nevada System of Higher Education hundreds of millions of dollars a year. For the sake of discussion let's say $500 million (although University Ron Knecht has noted that the current government subsidy to NSHE is substantially higher).
This $500 million a year allows the NSHE to charge its students less than it would if the government wasn't giving it taxpayer dollars. If Nevada decides to "only" give the NSHE $250 million a year, Nevada's colleges and universities will either have to cut back (employees' salaries or programs), raise tuition or increase their private fundraising (or some combination of all three).
If the NSHE decides to increase tuition, that's not a tax increase. Tuition is the cost of the service a student purchasese. Claiming that a tuition increase is a tax increase would be like a saying it's a tax increase if McDonalds raised the price of Big Macs. The price of the product shouldn't be confused with taxes.
Don't be fooled or manipulated by this type of rhetorical game. Decreasing or even eliminating the subsidy given to the NSHE isn't a tax or fee increase and would be entirely consistent with Gov. Sandoval's commitment not to raise taxes or fees.
'Structurally Unbalanced': The good and bad of the new Brookings report
Yesterday, Brookings Mountain West released a report on Nevada's budget situation. The report, Structurally Unbalanced, analyzed the structural and cyclical deficits of Nevada, California, Arizona and Colorado.
The report deserves and time-premitting will get a full response next week from NPRI, because it will be used to try and justify raising taxes in 2011. While I don't have time for a full rebuttal right now, I wanted to address some of the report's main elements very briefly.
While there are some very good elements in the report (a validation of TABOR in Colorado, calls for a rainy-day fund and greater budget transparency and an acknowledgement of the burden Obamacare will place on Nevada), one of its main contentions - that Nevada needs a gross receipts tax - is a terrible idea.
The Tax Foundation reports, "Gross receipts taxes suffer from severe flaws that are well documented in the economic literature, and rank among the most economically harmful tax structures available to lawmakers." [Emphasis added]
Additionally, the report's assertion that Nevada's budget can't be balanced with cuts alone is a generally unsupported assumption and ignores the massive increase in inflation-adjusted, per-capita spending that took place in 2005 (p 6) and is a major factor in Nevada's current budget problems.
I was on KNPR yesterday to discuss the report with Matthew Murray, the report's author, Launce Rake, PLAN's communications director, and John Restrepo, a Nevada economist. Needless to say it was an interesting conversation and you can listen to it here (click on the "Download MP3" link underneath the player).
Also, I'm going to be discussing the report tonight on Face to Face with Brookings Mountain West director Dr. Robert Lang, who some may remember chaired the Nevada Vision Stakeholder Group. Be sure to tune in.
Ernaut: $500 - 600 million in duplicate spending in Nevada's budget
The clip is from an interview on Face to Face conducted earlier this week and contains a startling revelation from Gov. Sandoval's close advisor Pete Ernaut about Nevada's budget.
Ernaut: We spend so much money in duplicate areas, because there's pet projects that do virtually the same thing. You know and I know that people are not being truthful, not being truthful, with how much there is in ways of savings and efficiencies.
Ralston: How much is there? Give me an estimate.
Ernaut: I'll bet you right now. I'll bet you right now that if you just went through it with a businessman's mentality of just taking away the duplication and waste, there's a good $500 or $600 million that we just throw away.
His comments come at the 4:38 mark.
Remember this clip the next time you hear someone claim, "But we've cut to the bone." There's plenty to cut and plenty of waste. Ernaut's statement is the perfect example of that.
(h/t Nevada News Bureau)
Breaking: Sen. Bill Raggio retires
Wow. The Review-Journal has the breaking story here. He was the longest serving Senator in Nevada's history.
More later.
Talking taxes III: No new taxes, says Governor ... Andrew Cuomo
So this "no new taxes" position is catching on.
New York's incoming governor, Democrat Andrew Cuomo, says he won't raise taxes even though he will inherit a budget deficit of at least $9 billion when he takes office in January. Ohio Republican Gov.-elect John Kasich is promising to cut taxes, despite a shortfall of about $8 billion. ...
"I think we have to be realistic with the people of South Carolina: This is gonna hurt," said Republican Nikki Haley, South Carolina's incoming governor. She has ruled out raising taxes or increasing fees for such things as hunting, fishing and drivers' licenses. ...
At least nine incoming governors have pledged not to raise taxes to close their states' budget gaps. All but Cuomo are Republicans.
The good news for Nevadans is that governor-elect Brian Sandoval is among the nine.
In Nevada, with a projected deficit of $1.1 billion to $3 billion, incoming Republican Gov. Brian Sandoval is refusing to raise taxes, calling it "the worst thing you could do" during a recession. Nevada leads the nation in home foreclosures and bankruptcies and has the highest employment rate at 14.2 percent.
"Nevada families and businesses are suffering, and our budget cannot worsen the problem," Sandoval said.
Sandoval is exactly right - raising taxes in the middle of a recession is "the worst thing" you could do in terms of the economy.
In fact, Sandoval's so right that two of his biggest rivals on this issue - Sen. Horsford, who's called for a $1.5 billion tax increase, and Sen. Raggio, who's said he'd consider raising taxes in 2011 - have actually agreed with Sandoval.
Both Horsford and Raggio have previously stated that they wouldn't support raising taxes in the middle of a recession, and Nevada is certainly in the midst of a recession.
Although Horsford and Raggio have both gone back on their words, the senators' previous statements should encourage Sandoval and his staff to stick to their guns and continue to remind the public that even Sen. Horsford and Sen. Raggio have acknowledged that the middle of a recession is not the time to raise taxes.
Talking taxes II: Who said this?
Let's play another guessing game: Who said this?
With our citizens facing higher costs, over $4.00 per gallon for fuel and higher costs for food and other necessities, businesses hurting, unemployment rising, this is not the time to talk about raising taxes.
Governor-elect Brian Sandoval? Rory Reid? Someone from the Nevada Policy Research Institute? Chuck Muth? Senate Majority Leader Horsford circa 2008?
No, no, no, no, and no, although each has publicly noted that raising taxes in the middle of a recession isn't a good idea.
So who said the above quote? Former Senate minority leader Bill Raggio, in 2008.
In case Sen. Raggio needs a reminder, Nevada's private sector is still in a recession.
Las Vegas ranked second-to-last among the nation's 100 largest metropolitan areas in making progress toward economic recovery through the third quarter, Brookings Mountain West reported in its December Mountain Monitor.
The severity of the Great Recession has been well documented in Las Vegas through the housing market crash, foreclosure crisis, massive job losses and slowdowns in tourism and gaming.
Nevada also has the nation's highest unemployment rate.
Now, Sen. Raggio already broke his word by voting for the largest tax hikes in Nevada's history two years ago, and this year he's suggesting that those taxes be extended. It should be noted that Sen. Raggio pushed to make the tax hikes in 2009 temporary, which at least ensures that we're going to have this debate again instead of having a tax increase already in place.
Reminding Sen. Raggio of what he said two years ago may not change his mind, but it should remind everyone - citizens, lawmakers and the media - that even those calling for hikes, like Sen. Raggio, recognize the destructive impact of tax increases on the economy.
It should also empower conservatives and libertarians to continue pointing out that tax increases kill jobs and hurt the economy.
If you tell the truth about taxes for enough time, Sen. Raggio might even decide he agrees with you again.
The alternative to raising taxes is cutting spending, and in that area, NPRI has many ideas to offer.
