After the November 2018 election, Nevada saw a regime change in Carson City. The Silver State has a new governor and legislators, several of whom are inexperienced. This has led to a difficult legislative session which, many have said, has been more contentious than is typical.
“We’re way behind,” explained Senator Keith Pickard, a republican member of the Nevada Senate representing District 20 in Southern Nevada. “In all of my committees combined, we’ve got about 300 bills to hear in the space of two weeks. It’s not going to get done. This has been an outcome of the all the leadership changes and the lack of experience in the majority [party] in the Senate.”
He went on to add that, “he’s hopeful, although that hope is waning, that we’ll see some efforts for bipartisanship in the legislature. So far that’s been missing.”
Regardless of the challenged process of government, many Nevada executives remain hopeful for the future and pleased with the progress that’s been made in recent years.
“The Nevada economy seems to be doing better,” said Rich Bodager, CEO of Desert Radiology. “Everybody that I talk to feels that Nevada is becoming stronger and bringing in a lot more big industry.”
Chris Wilcox, partner at Eide Bailly, concurred adding, “The economy continues to be strong. Our office is growing. It’s probably equal to, or maybe a little stronger, for us than it was a year ago. We do see a little tightening in the economy with some of our clients, so that’s concerning.”
These impressions are reflected in this year’s “Power Poll”, a review of Nevada’s decision makers and their thoughts on a variety of topics. This is the seventeenth iteration for the annual poll which was sent to Nevada professionals earlier this year. While not a scientific poll, this survey compares responses from recent years to current data to provide a snapshot of what executives are thinking.
Respondents represent a good mix of business owners and executives with a 64/36 split, respectively. They also, somewhat, mirror Nevada’s population with the majority of poll participants (74 percent) hailing from Southern Nevada.
Over half of this year’s respondents are with companies that have been doing business in Nevada for 20 years or more. Only 9 percent of those that participated in this year’s poll are with businesses that are less than five years old. While that trend is on par with previous years, as the state’s economic development agencies seek out new opportunities, those numbers are expected to grow.
The State of Growth
According to the United States Census Bureau, Nevada is once again one of the fastest growing states in America. In fact, in terms of percentage, Nevada saw more growth from 2017 to 2018 than any other state. Coming off the heels of a recession that was particularly damaging to the state, executives find that growth encouraging. As population and economic indicators often go hand in hand, the influx of population is being seen by many as another sign that Nevada’s darker economic days are, at least temporarily, in the past.
“We are a thermometer for the next 12 months,” explained Katie Osgood, director and owner of the Brookfield School, a private school in Northern Nevada that has students ranging from pre-school to eighth grade. “People call us when they’re ready, or looking at, moving into the area. We get a forward look toward what is happening with families moving in and out. We’ve had an increase of families moving in for the last six months and it seems to be growing every day.”
“The Nevada economy is better over the last 12 months, especially in Northern Nevada,” added Corrado De Gasperis, executive chairman and CEO of Comstock Mining, Inc.
He went on to add, however, that the tight labor market and the difficulty in finding affordable housing are issues to watch out for. “Outside of those two [issues], it’s really been almost full speed ahead. It seems like those two factors might be pumping the breaks a little bit,” he said.
The majority of poll respondents agree with 71 percent saying that their business is doing better when compared to the same time last year and 80 percent saying the same of the Nevada economy. In addition, when asked to look forward at how their business will fare in the next 12 months, 77 percent expected their bottom line to be better.
Executives were a bit less optimistic when looking at Nevada’s economy with 32 percent indicating that the state would either see no change or would be doing somewhat worse in the coming year. In addition, 16 percent less than the previous year thought the economy would be better in the coming year.
When asked what his crystal ball indicated for the coming year, Senator Pickard said, “It’s pretty cloudy, but I think the next 12 months are going to be impacted by what we’re seeing in Carson City today. We’re seeing the unionization of government, which is going to drive up the cost without producing any improvement in the services provided. We’re going to spend more money to stay where we are.”
He added that, “We seem to have moved from a legislature of experience to a legislature of people without a lot of experience. Who knows what that is going to bring but, at the end of the day, I’m still hopeful.”
Lip-Reading: No New Taxes
Nevada executives almost overwhelmingly think the state is business-friendly. Ninety-three percent of respondents agreed with the state’s business-friendly status which is only slightly less than last year’s 95 percent. However, they also seem to recognize that Nevada’s image as a friend to business could be in jeopardy. Sixty-five percent of respondents said Nevada businesses have too much of a tax burden.
“Nevada has sunshine and a favorable tax climate to draw people to Las Vegas,” said Wilcox. “If you take away the favorable tax climate, I don’t know that sunshine will be enough to get the businesses to come here.”
When asked about some of the specific taxes industries pay, 75 percent of respondents felt that gaming pays its fair share. That number was slightly less when asked about the mining industry with 67 percent indicating they pay their fair share of taxes. However, that percentage rose by 10 percent from last year’s poll.
“They are extracting a non-renewable resource from our state,” explained Wilcox. “When it’s gone, it’s gone. I don’t understand why our legislature has allowed them to pay a tax rate that is among the lowest of any in the country.”
“I think the gaming and the mining industry are paying their fair share of taxes,” countered De Gasperis. “Frankly, the gaming and mining industry are paying more than their fair share of taxes but I think it’s appropriate considering the history and what they’ve been to the state. I certainly don’t think anybody should pay any more taxes.”
A margins tax that was implemented in the 2016 legislative session, the Commerce Tax, is another that executives are somewhat split on. More than half (59 percent) indicated the tax has had a significant impact on business.
“The Commerce Tax, which is the main thing we pay, is a challenge,” said Bodager. “Is it overburdensome? If I’m honest, no. It’s a fair share. It has definitely impacted our ability to grow. From a cash standpoint we’ve had to incur a little bit more debt. But, in the grand scheme of things, it’s a pretty fair tax, at least from our industry. It’s reasonable.”
One thing most executives can agree on is the implementation of a state income tax. Just over 90 percent of respondents indicated they would not be in favor of a state income tax. In fact, many felt that new taxes of any kind were unnecessary.
“I don’t see that our state needs to tax us more when the current tax revenues can cover our income stream,” said Osgood. “It unfairly burdens people.”
“I was against the additional taxations that were put on the economy,” added De Gasperis. “I’m certain they dissuaded businesses and industries from coming to Nevada. I hope that Nevada continues to grow and taxes continue to grow with that organically. Everyone should be fine if we manage it well.”
It’s All About the People
While executives indicated that taxes were a big factor in the attractiveness of Nevada for business, one issue has been looming even larger and could derail economic growth. Workforce development has long been a challenge as the state looks for ways to meet increased demand for qualified employees.
Nearly all of this year’s respondents (97 percent) felt that workforce development is a critical issue for Nevada. This is the second year in a row for workforce to receive such a high ranking.
“That’s very important,” Osgood said of workforce development. “We have a lot of unskilled workers that need to be trained into new industries. Our educational system is trying to [bridge the gaps] but they are always five to eight years behind in building more technical schools.”
Bodager added, “It’s incredibly important. One of the challenges we have is finding and maintaining a workforce that can operate at the level we need, specifically technologists. We’re having to recruit out-of-state to bring them in. We just can’t find them in state.”
“That is how we bring in new business, it’s definitional,” explained Pickard of workforce development.
When asked what their biggest workforce challenges were, 81 percent of respondents said finding qualified employees is the biggest problem. That issue will be compounded moving forward as 64 percent said they also expected to hire this year. An additional 60 percent have been in growth mode for at least the last 12 months.
“We’re thinking longer term,” said De Gasperis. “How do we get the pipeline going into the university [to be] more robust so there’s a higher pool of talent coming out? It may require us to expand our network to universities outside of the state, which we have not done yet. There just may not be sufficiency of capacity and it slows growth.”
Workforce development and finding employees remain significant issues for the state but employers will also need to manage the ones they have. Changes are coming down the pipeline when it comes to pay and benefits, and employers should stay informed. This year, the “Power Poll” asked business leaders if they supported an increase to minimum wage. For the first time in several years, over 50 percent of respondents felt it was time to increase minimum wage. The majority of those (57 percent) felt that an increase to between $10 and $15 an hour was appropriate.
“I think there’s need for a minimum wage increase,” said Bodager. “As an overall economy, it would do better for Nevada to have a higher minimum wage. That doesn’t need to be $15 an hour.”
“I’m concerned that the minimum wage increase our legislature is talking about will do more to put people out of work than it will to help improve the lifestyle of the people that enjoy that benefit,” said Wilcox. “If you think about it, if you raise the minimum wage too high, it becomes cheaper to put a self-checkout kiosk in a grocery store than to hire another clerk to run a cash register.”
His concern is one shared by many. Pickard added that he supports a moderate increase to minimum wage but does see issues at the legislature.
“I can see us going to $10 an hour,” he said. “But, we’re kidding ourselves if we think that’s going to fix anything. I don’t know if it’s true but, the rumor is, [legislators] are talking about making businesses who automate jobs, instead of paying the minimum wage, pay some kind of tax to recover the payroll tax that would have been paid.”
He went on to explain, “Minimum wage was never intended to be a living wage. It was intended to be enough to allow an entry level person to get in and make enough money to survive while they’re gaining some job skills. Unfortunately, there are forces within the country that think we should be paying everyone, regardless of their experience and education. That’s going to undermine what we can do overall.”
Another topic that has been a hot debate in Nevada is the importance of unions in today’s employer/employee relationships. Nearly 65 percent of respondents felt that unions were not necessary for Nevada’s workforce.
“If you’re collaborating, if the system is working the way it should, you’re going to get the right collaboration between the employer and the employees and you’ll get fair wages,” said De Gasperis. “Companies that don’t care about their employees don’t end up surviving or doing very well anyway. It should really be much more collaborative and much more conflict resolution with a win-win environment.”
In Sickness and Health
Healthcare has been an issue for employers in the Silver State for the past several years and, many feel, there’s no easy solution. Executives are most concerned about access to care this year, up significantly from 11 percent in 2018 to 43 percent.
“The cost and, more importantly, access is abominable,” said Pickard. “It’s not because the providers who are here aren’t working hard. I believe they are. We don’t have enough qualified doctors and we make it hard for patients to get the care they need.”
“We can’t seem to recruit or pay the doctors enough to want to come to the state,” added Osgood.
In addition to access issues, Nevada decision makers indicated serious concerns in both the cost and quality of healthcare. Ninety-three percent indicated they are very or somewhat concerned with quality and 97 percent said they are worried about cost.
“As an employer we have continuously seen our health insurance premiums rise,” said Bodager. “I’m worried about the ever increasing cost of my health insurance, and at what point does it become unaffordable?”
“If we don’t figure out a way to solve this issue we are headed to a system where only the wealthy will get the best treatment,” added WIlcox. “We’re not there yet, but I’m concerned about it.”
There are some bright spots on the horizon with healthcare and, much like workforce development, it’s an issue that has received a lot of attention in recent years. Senator Pickard, for example, recently drafted two bills to address healthcare issues. One would create provisional licenses to get doctors to work more quickly and the other relates to prescription medications. In addition, Nevada medical schools are taking the lead to train and recruit new doctors.
“We have good doctors in Nevada,” said WIlcox. “The new medical school will, hopefully, create an environment where some of the best and brightest stay here. That will be instrumental in helping to increase our healthcare system in Nevada.”
Foundation for Success
“Our biggest obstacle to real, significant, economic growth is our education system,” said Pickard. That sentiment is shared by many executives in Nevada with 91 percent of poll-takers ranking education in Nevada at, or below, average.
“We’re still behind the curve when I look at the rest of the country,” said De Gasperis. “We have to do better for K – 12. I really do respect and appreciate Governor Sandoval’s initiatives in that regard, but I think we’re just getting started.”
When asked what would be most important to fix education in the state, at the top of the list was more accountability with just over 50 percent of respondents ranking it as either first or second most important. Second on the list was parental involvement with 44 percent of executives ranking it in the top two.
“My top four were accountability, funding, parental involvement and teacher salaries,” said Wilcox. “We need some accountability, they need to be properly funded, parents need to be involved and we need to compensate our teachers fairly for the work they’re doing.”
Funding also ranked close to parental involvement in terms of need with 40 percent of respondents ranking it in the top two tiers.
“As I look at the overall picture, funding for programs and schools seems to be a major part of the problem,” said Bodager. “My next door neighbor is a teacher. Her biggest complaint is more and more extracurricular activities have had to go away. A lot of those activities were ways the children released their energy and they focused better when they had things they could access. And, so many of the programs have switched over to focusing on how to get children to pass tests as opposed to embedding learning. The common theme is funding, it’s the thing that continuously comes up.”
Behind the Curtain
Nevada’s Legislators have the ability to fix many of these issues, but whether they will, or if they will compound the issues, remains to be seen. Executives are hopeful they will get the job done but are watching closely, and critically, to see the results of their efforts this session.
While many of the elected officials in Nevada are new, this year’s poll asked for a grade based on how well they are anticipated to do for the state. Across the board, those that kept their seats, or in one case were elected to a new one, saw an improvement in their score from previous years.
President Donald Trump has seen a steady improvement from when he was first elected. On this year’s poll, executives gave him an average of B for his efforts on behalf of Nevada, that’s up from the D he received in 2016.
“I don’t necessarily like the individual, but I do like most of what he’s trying to accomplish through his policies,” said Wilcox of Trump.
Pickard added, “He’s a non-traditional; he’s not a politician, in the first place. I can support a lot of what he’s done in terms of some of the objective goals he’s set but he’s struggling to work within normal political processes and it’s hurting him.”
Another elected official that saw a significant spike in her grade was Secretary of State Barbara Cegavske.
“She’s very precise,” said De Gasperis of Cegavske. “She’s very business orientated, she’s a great listener and she’s very responsive to the state’s needs.”
Nevada’s large municipality’s mayors were added to this years poll and executives feel, generally, favorable toward the work they are doing. All four mayor’s from the state’s largest municipalities received A’s on the poll this year.
“The Las Vegas mayor seems to be really focused on continuing to improve public safety,” said Bodager.
Pickard added that Mayor Lee also, “is a great advocate for the City of North Las Vegas. He’s done a lot for them and I like what he’s done.”
The Way Forward
Nevada is in growth mode and that brings with it a host of challenges. Businesses in the state that survived the Great Recession are leaner and more watchful of their bottom line, and for good reason. When asked what was most worrisome of several issues of historical concern, ranking at the top were education and healthcare. Third most concerning was availability of water with taxes a close fourth.
“You have to educate to get the right people for the future,” said Bodager. “On a personal basis, I have to ask where the water is going to come from for all the new homes that are being built. I want to retire here, I’ve found it to be a fantastic place to live. I don’t want water to be the issue why I need to leave.”
Low on the list of priorities for Nevada executives is shortfalls in the state budget and transportation. Only 3 percent of respondents indicated they were very concerned with budget shortfalls.
When speaking of shortfalls, Pickard said, “It’s not that we’re getting less money. We’ve had more money in this last biennium than we’ve ever received in the state of Nevada. We have undisciplined spending. A lack of disciplined spending has created a budget problem.”
With gun control a hot topic at the legislature this year, executives were also asked their thoughts on stricter gun control laws. The issue was nearly split with a slight majority (51 percent) indicating they don’t support stricter gun control.
“I think enforcing the existing laws should be good enough,” said Osgood.
On the whole, many Nevada executives indicated they are excited for the future of the Battle Born state.
“I don’t think Nevada’s future has ever been positioned to be brighter,” said De Gasperis. “We just need to prosper and be safe, those two things are not in conflict.”
Bodager added that, “the state has a lot to offer. As the population continues to grow, we’re going to have our challenges with traffic and access to healthcare, but all growing cities have those challenges. Nevada’s future is bright.”