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What the Economic Forum really heard: We need an alternative to boom-and-bust economics

05 May 2011 10:59 AM | Anonymous
Since the Economic Forum released its revised revenue projections on Monday, May 2, two plans have been released, a revised one by the Governor that focuses only on cuts to public services, and a new one by the Democratic majority that balances revenue reform with spending cuts.

On Tuesday, the governor reiterated his commitment to cut the state's budget rather than raise taxes. He relied on the logic that, if we do nothing, the economy and our budget problems will fix themselves. On one hand, the governor touted our economic growth as a means to fill holes resulting from his proposed cuts; on the other hand, he said the economy is still too weak to reform our current boom-and-bust revenue structure.

That is not what the Economic Forum heard from analysts who gave their testimony on Monday, nor is it what history tells us.

What the Economic Forum actually heard from analysts was that gaming revenues will never return to their previous levels, because Asian gamblers can now go to Macau, and American gamblers can gamble in their own backyards due to the spread of gaming throughout the U.S.  (Moreover, as we learned from a story today from the Nevada News Bureau, gaming companies contribute more in Pennsylvania and several other states than they do to their home state of Nevada.)

The Forum also heard that high paying constructions jobs will not return for a very long time, if at all, because the state is over-developed. It also heard that mining is making record profits due to gold selling at a record $1,500 an ounce. Barrick Mining is so profitable that is is able to bid on reserves in China at inflated rates – effectively moving Nevadan's treasure to China to secure its future profit rather than our state's future.

We need a tax structure that recognizes this new reality. Today, one is being presented by the Democratic leadership in the legislature as part of a budget alternative. This plan still involves significant cuts to services such as higher education, but it is a balanced approach, combining necessary cutbacks with a fairer, more equitable revenue policy.

Because it includes a plan to scale back the payroll tax, the Democratic alternative helps promote employment in the private sector, while providing the basis for adequate investment in our needed public services, such as higher education.

It is a plan to step out of the boom-and-bust cycles of the past to secure a more stable and prosperous future for our state.  

This plan delays the sunset provisions built into the 2009 revenue package – in effect, it is not a tax increase, but rather a decision not to cut taxes. Governor Sandoval’s assertion that not sunsetting the 2009 revenue enhancements is tantamount to raising taxes, and thus harming our chances for recovery, belies an important fact: Even with taxes at their 2009 levels, Nevada currently has one of the nation’s lowest overall tax rates, which has not lead to economic growth.

We call on all legislators to put aside ideologies and political agendas and come to the table now to govern – to find a sensible, compromise solution based on the very realistic and pragmatic plan presented today. Las Vegas Review-Journal columnist Steve Sebellius called the Governor's "cut-our-way-out" plan "faith-based economics," not a realistic plan. The legislature now has a realistic plan before it to discuss, and it should do so.

For higher education all of these issues are extremely important. Over the past 10 years, the Nevada System of Higher Education has grown exponentially, taxed its students by raising fees and taxed its employees by cutting their pay and benefits and increasing their workload. Yet all our efforts have only netted the System an extra $20 million under the Governor’s revised plan.

All we have left to cut are faculty jobs, rural sites and centers, and whole institutions. If we lose any of these remaining assets, Nevada will no longer have a complete system of higher education. We will go back decades to a time when students struggled to find complete programs, at reasonable prices, in-state.  In other words, we’ve grown and cut all we can without causing the state long-term harm and doing further damage to our quest for economic diversification by eliminating the educational institutions and programs that smart business leaders want and need.

At the Economic Forum meeting, more than one analyst cited the loss of public sector jobs as a potential drag on economic recovery. They noted that both increased visitor rates and increased spending by locals have to kick in before we’ll get out of this hole. But if you cut just as many public jobs as the private sector is creating, you end up with a net zero gain – especially in light of Nevada already having one of the lowest proportions of state workers to population of any state.

And consider this in the bigger picture: If you decimate higher education to protect business, you will also end up with a net-zero gain. Indeed, you will lose, because the businesses we want the most to protect and attract will avoid the state at all costs.

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