'State of the State' was short on solutions

Sandoval misses opportunity to make case for fiscal conservatism

What will the policy direction of our state look like over the next few years?

The vision for Nevada laid out by Gov. Brian Sandoval in his most recent State of the State address was decidedly underwhelming. For a state facing major problems — a lingering economic crisis, a failing education system, escalating labor and retirement costs and prospective new liabilities under Obamacare — the governor’s cautious approach itself is alarming, given the real need for aggressive action.

Sandoval continues to show notable reluctance to use his bully pulpit and make the case for realistic solutions to Nevada’s problems. Rather than seek to lead public opinion, he’s been content to simply receive it — playing to the crowd while evading the controversies that accompany substantive, though needed, change.

Sandoval won’t soon be confused with Scott Walker, Mitch Daniels or Bobby Jindal — governors who, despite harsh opposition, have regularly made compelling cases for solutions to genuinely meet their states’ challenges. Sandoval’s speech, rather, offered fiscal conservatives a mixed bag.

Sandoval made it known months in advance that he would again call for an extension of about $620 million in “temporary” taxes that Nevadans were originally promised would expire after 2011. These include statewide increases in sales and payroll taxes and car registration fees. On the brighter side, Sandoval did ask lawmakers to increase the exemption level for the state’s payroll tax from $250,000 to $330,000 in annual payroll so that fewer small firms would have to pay this tax.

While again nominally opposing Obamacare, Sandoval gave his second de facto blessing to the unpopular — and already clearly dysfunctional — law by proposing an expansion of Medicaid eligibility requirements to conform to the law’s specifications. Under the letter of federal law, Obamacare would collapse without the states’ cooperation in establishing health care exchanges and expanding Medicaid. Yet, despite his public pronouncements against the law, it’s actually been Sandoval who has proposed legislation to introduce both changes.

Again, however, Sandoval included a tiny silver lining for fiscal conservatives. Added onto his otherwise troublesome position was a pledge to reverse the Medicaid expansion should the federal match rate change in future years and shift more costs back to the state. Of course, Sandoval is likely to be termed out of office before this occurs.

An important aspect of Medicaid expansion that Sandoval neglected to mention is that it will exacerbate health-care rationing for Nevada’s neediest. That’s because current beneficiaries — mainly children in poverty and the disabled — will now not only face competition for medical services from single, able-bodied, childless adults, but will do so within a shrinking Medicaid-provider network. Medicaid expansion will also encourage these able-bodied adults to opt for more leisure time, rather than increase their income beyond the new Medicaid eligibility limits.

Sandoval did propose to require co-pays of Medicaid patients, as other states have done. A famous longitudinal study by the RAND Corporation showed that, over a 15-year period, copays had no measurable impact on health-care outcomes, but significantly reduced health-care costs by discouraging individuals from seeking superfluous care.

The brightest spot of Sandoval’s speech was his call for greater school choice through a corporate-funded scholarship program. This idea, originally proposed by the Nevada Policy Research Institute in 2010, would offer tax credits to Nevada businesses that provide scholarship money. Sandoval would target this money to low-income families who are statistically more likely to be zoned into failing public schools. Other states have similar programs and courts have consistently held these programs harmless from the constitutional challenges that have plagued voucher systems.

At the same time, however, Sandoval called for using money from his tax-hike extensions to fund a major expansion of full-day kindergarten — even though research has shown that government-funded early education doesn’t produce lasting gains in student achievement. Even if the governor wants to spend more money on education, more effective options are available.

Still, what was perhaps most significant about Sandoval’s speech was what he didn’t say:

• He failed to address the large and growing unfunded liabilities in the state’s Public Employees’ Retirement System.
   
• He neglected to discuss problems with the state’s collective bargaining laws or to propose a payroll protection measure.
   
• He ignored the profound need for reform of prevailing wage and construction defect law.
   
• Despite his calls for “economic development,” he overlooked the need to remove occupational licensing requirements and other unnecessary barriers to entrepreneurship.

In short, he refused to address the state’s most fundamental challenges and to direct the public toward proposed solutions.

There’s still time for Sandoval to walk the walk but, so far, he hasn’t even begun to talk the talk.

Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit http://npri.org.