Sandoval Errs: Commerce Tax Repeal Will Not Cause Budget Cuts



By Ron Knecht and Geoffrey Lawrence – 10 May 2016

Gov. Brian Sandoval and his allies don’t think voters should have a say on the commerce tax they snuck through in the closing hours of last year’s legislature.

They're entitled to their views. However, they’ve been wildly misrepresenting key facts about the matter and about the actions and words of Ron, who is leading the effort to repeal the tax. Below, we set them and the record straight.

In a prepared statement, Sandoval said: “The millions of dollars the controller would like to take from education will irreversibly and permanently harm children, parents, teachers, classrooms …” He does not cite anything Ron has said or done to support his false and uncivil claim about what the controller would like to do. Why? Because his statement is absolutely false. Ron has said no such thing and has no such desire.

Many Nevadans are working to put on the ballot a referendum on the tax. However, the filings and payments the measure requires in fiscal year 2016-17 from Nevada businesses cannot be affected by a repeal. If Nevadans terminate the tax, they will reduce net state revenues by $60-million beginning in FY2017-18.

However, legislators will meet in 2017 – before FY2017-18 begins – to set a budget for that year, and the state constitution requires them to adopt one that does not exceed projected revenues. No one knows now what revenues will be, but we do know that state total revenues and total spending have each grown by an average of over $400-million per year over the last decade.

Revenues will likely grow faster in coming years, but even at the historic rates, the $60-million reduction due to repealing the tax is a small fraction of the expected revenue growth. So, there will be no cuts. State revenues and spending will both grow if the tax is repealed, but at slightly slower rates than they would if it were not repealed – 4.2 percent instead of 4.7 percent, based on historic growth rates. Historic state K-12 spending has grown 5.0 percent annually.

To put those figures in their essential perspective, note that incomes of Nevada families and businesses have grown only 2.9 percent annually over that time and the overall state economy at 1.9 percent per year. So, state revenues and spending have grown much faster than the abilities of taxpayers to pay them, and the state sector consumes an ever greater share of our economy and lives. Even if the tax is repealed, revenue and spending will still grow much faster than the incomes of Nevadans and their economy.

Sandoval also claims, "Every dollar raised by the commerce tax will improve Nevada's schools." That’s completely false, so he’s either grossly ignorant of how state finances work or cynically trying to mislead people. There is no connection between commerce tax revenues and state K-12 spending. If something had to be cut – and, as noted, no cuts will be required – the governor and legislators would not have to touch education spending. There would be many other options.

He also studiously fails to mention that we presented the legislature an alternative budget that would have funded many of the new educational programs he championed without new taxes. A letter from the legislature's chief legal counsel said our proposal was a workable alternative.

Few people have been more vocal about the need to improve Nevada's schools than we two parents. When Geoff was research director at the Nevada Policy Research Institute, he authored a detailed 33-point plan for improving education to better serve Nevada’s children. And where did Brian Sandoval go to learn about education reform when he first campaigned for governor? That's right: to Geoff’s office. Apparently, he’s forgotten what he learned.

Moreover, essential to ensuring a prosperous future for Nevada’s children is bequeathing to them a legacy of economic growth, opportunity and freedom. Empirical research shows definitively that the continued growth and over-reach of an already bloated public sector has diminished all those prospects and will continue to do so. The policies of Brian Sandoval and the legislature are a major part of this problem in Nevada and thus a major threat to the wellbeing of all our children.

Nevada voters deserve the final say.

Ron Knecht is Nevada Controller. Geoffrey Lawrence is Assistant Controller.