The 77th regular legislative session starts in Carson City on February 4, 2013. What major issues will be coming down the pipeline in 2013? How will issues discussed and laws passed in the upcoming session affect Nevada in the future? What part will a freshman Legislature play and what challenges will lawmakers face?
One of the biggest issues facing every legislature is the budget and the 2013 session will be no exception. The details of the budget Governor Sandoval will present to the Legislature won’t be finalized until after the Economic Forum in December, but the Governor has already indicated he’s against any new taxes. He intends to renew the sunset taxes scheduled to end June 30, 2013; then the question becomes whether the revenue projected by the economic forum will allow for discussion about modifying the sunsets.
“That being said, there will be a number of legislators that will want to expand the budget, and you’ll have a number of enhancements that I expect will lead to the discussion about the tax structure of the state,” said Carole Vilardo, president, Nevada Taxpayers Association. Vilardo has been the state’s foremost authority on tax issues for several years and understands the ins- and outs- of Carson City.
“Obviously revenue always plays a key role, although the economy appears to be headed in the right direction,” said Michael Sullivan, vice president of state government affairs, Porter Gordon Silver Communications. Still, gaming is lagging behind in the state’s recovery, and taxable sales of homes and the like are moving slowly, with the upshot being the flat budget submitted by the Governor in October, with no increases, during a time when there are demands for funding education. “So that certainly will be an interesting process to whether or not with a recession you put more money into education. Where do you find that money? No doubt there will be those discussions,” said Sullivan.
Among other budget considerations are questions as to whether Nevada can afford to expand the Medicaid provisions, and discussions regarding state employee salaries.
“Obviously you can either keep spending into the amounts that you’re showing revenue having been received including the extension of the sunsets, or you can wind up looking to increase the revenue so you can expand the expenditures and that’s where I see one of the biggest issues that will dominate the Legislative session and one we’ll be watching very closely,” said Vilardo.
In addition to traditional education funding comes the question of what the state can afford not to do when it comes to technology requirements for schools.
If schools, particularly those working with English learners, are going to use technology to teach, the technology has to be available, and that’s not traditionally built into the base, said Vilardo. “Interim committees have had discussions about putting in additional funds or changing the formula to address the issue of students who are English learners, but if technology is going to be employed and the schools don’t have enough computers, then there need to be upgrades – and is that something the state can afford not to fund?”
Education reform is expected to be discussed during the session, with a new formula proposed for funding higher education that would allow the University and community colleges system to keep more of the funding they generate themselves. “Ultimately the theory behind that is to get more sustainability into the system. Like anything new, there’s going to be significant debate,” said Alfredo Alonso, principal, Lewis and Roca.
Budget discussions are a given for any session. Vilardo, putting together the NTA newsletter, pulled a series of quotes from newsletters as far back as 1922 that are still appropriate today. From 1995: Policy makers must continue to rethink and restructure government services and their delivery to achieve the highest level of efficiency and quality possible while stabilizing the expenditures of the state.
“The issue is stabilizing expenditures, when we usually talk about stabilizing the revenue,” Vilardo said. “But stabilizing expenditures and being able to show that the level of expenditure you are proposing is something that you’ve looked at to see if you should be able to continue to support for five or six years down the road is what we’re looking at in stabilizing expenditures.”
With new faces in the Legislature, Vilardo expects a push-pull situation between advocates for putting money back into the budget for services and programs cut in 2011 and those who don’t want to see a substantial increase in revenue. Those against budget increases are afraid it will exacerbate the economic situation because funds put into programs in the 77th session may not be sustainable.
Other budget considerations are apt to include frozen or cut back state employee positions and salaries. State employee pay cuts in 2011 were 2.5 percent. Issues realted to state employee salaries are expected to crop up in the next session because state revenue isn’t meeting growth.
“I think it will be a difficult session. Part of that is because we will have a number of new legislators. With term limits creating that vacuum on institutional knowledge, it also created new legislators, and a very steep learning curve as to what the process is,” said Vilardo.
The Nevada Legislature had 22 vacant seats filled in the November election, and 19 filled in the last election, making for a very new legislature.
“Due to term limits and significant turnover, half of the Senate will be new members to that body,” said Greg Ferraro, president and founder, The Ferraro Group. That doesn’t mean everyone will be brand new – five members moved up from the Assembly and one member returns after a break in service – but 10 new faces will fill seats in the 21-seat Senate. Similar turnover will happen in the Assembly, 10 or more new members out of 42.
“We’ve got three or four people between last time and this time who moved from one house to another, so there is some knowledge there, but a brand new legislator has a very steep learning curve for issues they’re going to be dealing with,” said Vilardo.
In addition, some of the major committees will be chaired by freshmen legislators.
“At this moment I can’t think of one committee that will stay the same,” said Sullivan. “All the major committees will have new chairs and that’s very, very important because you have no continuity of leadership.”
There’s only 120 days for new legislators to get up to speed. Six of the incoming senators are former assemblymen or returning to service, but many in the Assembly will be first time public servants, Sullivan said. “For businesses and people it’s a negative, just because the less experience you have, the more it takes to get up to speed. So, in that sense it will probably be an issue, but it might also mean some issues that have not been brought up before will get brought up because those legislators are new.”
By the Numbers
As the 2013 Legislature prepares to launch, Democrats hold 27 out of 42 seats in the Assembly. If the November election had given them 28 seats, they’d have had a veto-proof majority. This would have meant that anything they voted for, if it was vetoed by the Governor, that veto could have been overridden by the Democrats. The flip side was also true – if the Republicans had taken 28 seats, their votes would have been veto-proof.
Most people didn’t expect the Democrats would get to 28, though 27 is a tight margin. A veto-proof majority of Democrats would have made for an interesting session, according to Sullivan, who predicted it would have been a more aggressive agenda as far as new taxes on businesses and the like. Despite that, pre-election neither side was looking particularly aggressive about looking for new tax revenues.
Still, the Democratic majority might encourage education and labor groups to push for changes, Sullivan speculated before the election, and those changes would require more funding in the form of taxes, which the Governor will most likely veto. Without the veto-proof Democratic majority, likely such measures will not pass.
Without a Democratic majority of 28 seats, the biggest tax issue facing the Legislature are the sunset taxes, $600 million in business and sales taxes that should expire at the end of June 2013. These taxes include the modified business tax, which has a higher rate for large businesses since the 2011 session, and an increase in sales tax.
Taxes aren’t the only revenue discussions apt to come up. Due to requirements from the Patient Protection and Affordable Care Act, Nevada now has to make internal changes within the state, most likely involving expanding Medicaid to meet requirements of the act. A June 2012 U.S. Supreme Court ruling gave states the right to opt in or opt out of expanding Medicaid eligibility, and decisions on expanding Medicaid won’t be made until after the economic forum.
Back on the Table
Healthcare, education and construction defects are all expected to show up again in 2013.
In the realm of construction defects, the real issues aren’t so much with the builders as with the sub-contractors who end up in court, brought in on a suit even though their work on a project was a small part of the whole and may have had nothing to do with whatever actions or defects incited the suit. Sub-contractors are looking to make it harder for lawyers to sue everyone involved in the project rather than determining which contractors should be named. The issue has been showing up every two years for about a dozen years and looks likely to appear again in 2013.
Then there’s the PERS controversy, the Public Employees’ Retirement System, a constant battle every session, with both Republicans and Democrats pushing for changes in benefits and in workers’ compensation. “PERS Reform is basically underfunded now, those are unfunded mandates and I’m not sure how the Legislature is going to deal with that,” said Alonso.
Funding for education remains a constant in legislative sessions. The teachers initiative, or Education Initiative, with its proposed 2 percent margins tax on businesses making more than $1 million annually was struck down in October by District Judge James Wilson. The Nevada State Education Association met the November 13 deadline to collect 72,234 signatures required to submit the proposal to the Legislature with more than 149,000 signatures, but must win the appeal set for oral arguments before the Nevada Supreme Court December 5 before going on to Carson City in February.
“If it qualifies, and I expect it will qualify, the Legislature has by law its first 40 days to decide to either adopt it or not adopt it or prepare an alternative for it,” said Ferraro. “That obviously is going to be a very serious issue people are going to be paying close attention to.”
But with the Governor set against new taxes, it’s likely the initiative would be vetoed. With the Senate split evenly between Republican- and Democrat- held chairs, the question of whether the initiative will get approval remains up in the air. It’s possible that the Governor could bring competing questions on this issue before legislators.
Another issue the Legislature is expected to face concerns foreclosures in Nevada. “Bills AB 283 and 284 are being litigated,” said Samuel P. McMullen, Sr., partner, Snell & Wilmer. The bills essentially stopped non-judicial foreclosures in Nevada. AB 283 relates to mortgage loans and agents and brokers who work with them. AB 284 was enacted to address a scandal that involved illegal signatures on foreclosure documents. AB 284 requires agents who sign these documents to have personal knowledge of the lender’s authority to foreclose.
Capital projects on the table include the University of Nevada Las Vegas stadium project. The proposal has gotten a lot of attention, Ferraro said, and should go to the Legislature with a proposal to create a tax increment district to fund the project. Last session there was a lot of activity surrounding the proposal but nothing came of it. It’s expected the proposal presented this coming session will be much more specific.
All the Rest
By November there were over 500 bill requests presented to the Legislature, that number is expected to double by February fourth when lawmakers convene in Carson City. Along with budget issues and sunset taxes, education and healthcare, a number of other issues expected to effect Nevadans will be considered.
The 2011 Legislature created the Nevada Governor’s Office of Economic Development, replacing the Nevada Commission on Economic Development. The 2013 session is expected to work toward making certain the state has the necessary tools to compete for the interests of businesses seeking to relocate or expand in Nevada, which goes directly to the issue of employment, according to Ferraro.
Nevada owes the Federal Government somewhere in the neighborhood of $750 million. There’s expected to be discussion during the session as to how best to address that debt.
With Nevada gaming not yet back to 2006 levels, but still recovering, there should be discussion regarding the future of the state with respect to interactive gaming, whether the Federal Government is going to allow online poker and issues as the gaming marketplace faces the realities of interactive play.
“I think it’s a good time in Nevada,” Ferraro said. “I think after all we’ve been through in our state over the last five-plus years, Nevadans have a lot of fighting spirit. They’re resilient. We’ve been through some pretty tough times, I think most Nevadans will come together in Carson City in February and pledge to work together to create new opportunities for businesses to create jobs and continue to pay attention to the important issues of education and healthcare and moving our state forward.”