THE SECOND DAY
Carson City (Thursday), June 26, 2003
Senate called to order at 9:23 a.m.
President Hunt presiding.
Prayer by the Chaplain, Pastor Albert Tilstra.
Today, as we meet again in this Senate Chamber, we ask that You hold us steady lest we lose our poise. Blunt our speech lest by cutting words and careless deeds we hurt our colleagues and the cause for which we speak.
Where we differ in approaches to a problem, may we ever be open to consider another and a better way, guided not by whether it be popular or expedient or practical but always whether it be right. Hear our prayer, O Lord, and help us achieve the reason for our coming here at all.
Pledge of allegiance to the Flag.
Senator Raggio moved that further reading of the Journal be dispensed with, and the President and Secretary be authorized to make the necessary corrections and additions.
MESSAGES FROM THE ASSEMBLY
Assembly Chamber, Carson City, June 25, 2003
To the Honorable the Senate:
I have the honor to inform your honorable body that the Assembly on this day passed Senate Bill No. 1.
Assistant Chief Clerk of the Assembly
MOTIONS, RESOLUTIONS AND NOTICES
Senator Raggio moved that the Senate resolve itself into a Committee of the Whole for the purpose of considering the proposed revenue plan, with Senator Raggio as Chairman and Senator McGinness as Vice Chairman of the Committee of the Whole.
IN COMMITTEE OF THE WHOLE
At 9:26 a.m.
Senator Raggio presiding.
The proposed revenue plan considered.
The Committee of the Whole was addressed by Senator Raggio; Brenda J. Erdoes, Legislative Counsel; Senator Mathews; Senator Townsend; Senator Care; Senator Neal; Senator Rhoads; Gary L. Ghiggeri, Senate Fiscal Analyst; Senator Carlton; Senator McGinness; Senator Amodei; Senator Titus and Rick Combs, Deputy Fiscal Analyst.
This morning we are considering Bill Draft Request (BDR) No. 32-14. Our Legislative Counsel Brenda Erdoes will go through the bill draft to make certain it is in conformity with the action taken by the Committee of the Whole yesterday. There is a summary before you from the Fiscal Division. We are looking at the column titled S.B. No. 6. In the event of approval, this bill draft will be designated as S.B. No. 6 of the 20th Special Session. Mr. Gary Ghiggeri from the Fiscal Division will explain the components of the measure.
Brenda J. Erdoes (Legislative Counsel):
Thank you. Sections 1-24 of BDR 32-14 explain the tax on wages paid by employers. That fee is charged on the base wage as determined pursuant to NRS 612. It is assessed at a rate of 1 percent. The provisions are the standard ones in the earlier bill. Sections 24.10 – 24.74 are the franchise taxes on financial institutions. This is on the net, taxable income of the banks at 3 percent. It was added last night pursuant to the vote of the Committee.
Can we clarify that this is on profits within the State of Nevada for those who have multi-state operations. There is an allocation or apportionment of their profits. Is that correct?
Yes, it is on the taxable income pursuant to their taxable income determined for federal purposes, then allocated to the State of Nevada.
I understood last night, when we voted, that the banks’ representative stated they would rather pay a higher payroll tax than a franchise tax. They offered to pay three times as much as other employers. I thought that was what we were voting on. I am now hearing this is a franchise fee.
The suggestion was made but not adopted by the Committee.
That will change what I do. I am not willing to do a franchise fee.
As I recall, Mr. McMullen appeared before the Committee and indicated that the banks’ preference was for tripling the employer payroll tax. That was not adopted by the Committee. The 3-percent franchise fee was adopted by the Committee.
That is not what I understood we were voting for. That will change the way I vote.
Thank you. The Chair’s recollection is accurate. I want to be certain everyone understands that I made a motion to amend S.B. No. 5 of the 19th Special Session, twice, and we clarified that. The Chair recognized that and repeated the motion; though, Mr. McMullen made the recommendation remembered by Senator Mathews. I was hoping the motion I made, twice, was clear enough. Apparently, it was not.
I would like to ask Counsel if under the scope of the definition of financial institution, the appropriate exemptions are there or if they fall outside the scope of the definition, for example, federal credit unions and 501(c) entities. Could you elaborate as to who that includes. I had conversations with people, yesterday, about mortgage brokers and others. Are we talking about chartered financial institutions?
Yes, it is anyone who is licensed under Title 55 or 56 in Nevada statutes or a similar institution that is chartered or licensed under the federal law.
My recollection was that we voted on the 3 percent now found in the BDR in section 24.38 regarding the franchise tax on financial institutions. That is what we voted upon even though Mr. McMullen presented his proposal; that proposal was not adopted. My bank has written me a letter indicating they do not have a problem with the franchise tax.
That was the Chair’s understanding of the motion.
What is the difference for the banks, financially, between the triple employer’s tax and the franchise tax? Are they equal or does one bring in more revenue than the other does?
Gary L. Ghiggeri (Senate Fiscal Analyst):
Mr. McMullen indicated in his testimony that his proposal would bring in more money. Staff has not had the opportunity to research that. He indicated they could make the employer’s tax effective as of fiscal year 2004. The financial institutions are also paying the employer tax so they would be paying that in addition to the franchise fee.
Sections 25 through 38 deal with the tax on live entertainment. It supplements the casino entertainment tax. It applies to more entities, and it stays at the rate of 10 percent. Provisions starting with section 60 are various provisions added to NRS chapter 360, which is the preliminary, title-wide chapter in the taxation title where all the general provisions are contained. For example, the first one is the passive-revenue generator to require the Tax Commission to adopt regulations for the electronic submission of returns and payments by credit cards and electronic transfers.
There is a similar provision for the Department of Motor Vehicles. These types of provisions are added throughout here. The provisions are under taxes on fuels, section 75.
This does not increase the taxes on fuels.
No, it does not increase taxes on fuel or add any taxes on fuel. It requires the Department of Taxation to adopt regulations to provide for the electronic transmission of returns and payments using credit cards for remitting fuel taxes.
The business license fee is increased in section 76 from $25 to $75. That is only in existence from July 1, 2003, to January 1, 2004, in chapter 364A. When the provisions in chapter 360 take effect, the business license fee remains at $75 and is then renewed annually at the same $75 rate.
Section 78 increases the taxes on intoxicating liquors. Those are increased by the category of liquor such as wine or beer or by the amount of alcohol in the beverage. These are across the board increases to 89 percent. These figures were the result of the action the Committee took last night.
Section 79 reduces the discount allowed for the collection of the liquor tax to 0.5 percent.
Sections 80 through 85 increase the cigarette tax by 55 cents per pack. It is a 55-cent increase in the first fiscal year, and there is no increase in the second fiscal year. Included in sections 80 to 85 are the reduction of the allowances for fixing the revenue stamps and for collecting and administering the cigarette tax. The collection allowance is reduced to 0.5 percent as well. All of the retail collection allowances are decreased to the same amount, 0.5 percent.
There is no increase in the sales and use tax. The collection allowance is changed to 0.5 percent. In sections 86 and 87, the amount required to be paid by a seller for the issuance or renewal of a permit goes from $1 to $5.
Sections 88 and 89 require businesses that purchase tangible personal property for use in the State to register with the Department of Taxation. That is another passive-revenue generator that helps the Department of Taxation with collections.
Sections 91 and 92 increase the amount required to be paid by a seller for the issuance of a renewal of a permit. These are the local school support taxes. These are parallel to the sales‑and‑use tax changes because chapters 372 and 374 are parallel chapters in NRS. A seller’s permit under sales tax law will increase from $1 to $5. The collection allowance is reduced to 0.5 percent.
The real property transfer tax becomes effective July 1, 2004. It adds a state real property transfer tax that will be collected by county recorders. It was reduced pursuant to your action last night in the Committee of the Whole from $1.35 for each $500 of value of the property to $1.30 of each $500 of value.
The business activity tax is repealed as of January 1, 2004, when the payroll tax takes effect. These changes occur in sections 118 through 124.
The Legislative Committee on Taxation, Public Revenue and Tax Policy is created in sections 126 through 131. This committee will expire by limitation on June 30, 2005. Even though this is a statutory study, it will only be in effect for two years. Section 132 requires the Committee on Local Government Taxes and Finance to review the laws relating to exemptions from state and local taxes.
I have a question on section 130. We amended that section into the bill last night. Am I correct?
That is correct. Section 130 is the new provision added by the Committee of the Whole to the study provision that says the committee may review the impact of any changes to taxes and their fiscal affects. The language contained in paragraph (c) was added last night. Let me point out that the committee’s ability to study the effect of the live entertainment tax is in section 196.3.
We are referencing the same committee on these pages.
The new committee, the Legislative Committee on Taxation, Public Revenue and Tax Policy, is created by this bill.
Sections 134 through 143 impose a state tax at the rate of 1 percent of the gross receipts from the rental of transient lodging in each county and city. That room tax will be collected by local entities on behalf of the State.
Section 144 through 171 have various changes related to the State’s financial administration. Sections 144 and 146 are passive-revenue generators.
For my understanding, when you say passive generators, what are you referring to?
A passive-revenue generator does not impose an additional tax but can change the way the taxes are collected, or there is some other change that increases the amount collected under an existing tax.
These were in the other versions of S. B. No. 5. of the 19th Special Session.
Sections 149 through 159 are the provisions that convert the disaster relief fund into the disaster relief account. It is an account in the rainy-day fund, whose technical name is the Fund to Stabilize the Operation of State Government.
Section 162 is the change suggested by the State Controller during the 2003 Legislative Session. It provides for a $25 check fee that would be uniform throughout the State. Sections 163 to 165 authorize the State Controller to continue that program. That was previously a pilot program in the Department of Motor Vehicle and the Department of Wildlife for the collection of debt.
Were those the provisions in S.B. No. 5 of the 19th Special Session?
Is that the provision that allows the State Controller to give information to the DMV and the DMV can then remove someone’s vehicle registration for bouncing a check?
No, these are not those provisions. These are based on the Department of Wildlife section.
That was in the original S.B. No. 5 of the 19th Special Session. I thought that was going to be changed. That was one thing to be discussed, but after the moving of the gaming license, we were never able to discuss that part of the bill.
This was not discussed previously in the Committee of the Whole.
I have problems with someone losing their vehicle registration over a bounced check.
This is part of that program. If a person “is in default on a debt owed to an agency or the State of Nevada. The department, may after sending a written notice, required pursuant to that subsection suspend, cancel or refuse to renew.” If a person had bounced a check to the Division of Wildlife and they went to DMV, their license would be suspended until it was taken care of. This is not something new. This is part of the pilot program that is ongoing through the Controller’s Office. We are removing the sunset on it.
I believe there was discussion about removing that sunset during the regular session. It did not make it through both Houses. It was not something that was worked on or processed all the way through. I thought that was something that had lost during the regular session.
The bills that would have allowed for the continuation of the program were in the Assembly Ways and Means Committee. I do not know if they had a hearing. They did not pass the bill to this House so we included it in the tax bill since it is a significant revenue generator.
I wish to speak in support of the comments given by Senator McGinness as he referred to section 163 and 164. He is correct. This was a trial program implemented two sessions ago. They wanted to expand this to all State agencies. We refused to do that. We allowed them to take off the sunset as it applied to the Department of Wildlife and the Department of Motor Vehicles. We did not have any complaints about the programs during the trial period. We decided to allow the programs to remain in those agencies.
In the original S.B. No. 5 of the 19th Special Session, which failed, there was a section of the bill that addressed some board issues including the subject of bounced checks. Are those provisions still in this BDR?
I am referring to S.B. No. 5 of the 19th Special Session at the back of the bill under sections 184 and 185. I will read the board issues, “for a check made payable to the board that is dishonored upon presentation for payment. The board shall assess and collect a fee in the amount established by the State Controller pursuant to section 162 of this act.” Section 162 is the provision that allows the State Controller to communicate with the DMV to remove the vehicle registration.
It is still in this BDR on page 186.
I do not believe that was ever discussed in the Committee of the Whole.
The Committee of the Whole took S.B. No. 5 of the 19th Special Session as it was adopted. The amendments we are talking about were incorporated into this BDR. That is what we are discussing.
So this provision will be staying in this BDR.
Is this the same provision that was in the other version of S.B. No. 5 of the 19th Special Session?
Yes, there were several of them that were part of the same package that goes with section 162. We did not add those last night. This was part of S.B. No 5 of the 19th Special Session.
I would like to clarify, when we were processing S.B. No. 5 of the 19th Special Session, we did not have discussions of these provisions then. It is not yesterday I am speaking about. It is the last special session. We did not discuss these provisions being put into S.B. No. 5 of the 19th Special Session. In the Senate Committee on Commerce and Labor, I do a lot of work with the boards, and I understand they have problems with this. Allowing a board to communicate with the State Controller through the State DMV to pull vehicle registrations is a bit confusing. We should have had a thorough discussion of this provision in the original S.B. No. 5 of the 19th Special Session.
The Senator’s comments are noted. The Chair asked yesterday if there were any additional amendments to the bill before we brought it out today.
Thank you, Mr. Chairman. This portion was part of the amendment I included as part of the State Controller’s package.
That is the Chair’s recollection.
If you make the check good, you may keep your vehicle registration.
I appreciate that. That is good. We want people to make their checks good, but the point is that someone who bounces a check might need their car to get to work so that they can make the money in order to make the check good. That is the other side of that point. We are not here to trade quips. We are here to get information. I recall when that section was added, it was late in the evening at about the same time another provision was added and then had to be removed from the bill because it was added without discussion.
Section 148, subsections 1 and 2(a) have added more language. It looks at reestablishing the base for the budget. Could we have a clearer explanation of how this works? Senator Rawson referred to it yesterday. This is the section about State financial administration.
This was an amendment that was brought from the Senate Committee on Taxation. This changes the basis for calculating the growth of the budget. In subsection 2, it changes the base to the prior fiscal year in the prior biennium. The amendment added yesterday by the Committee of the Whole indicates the Chief may exceed the limit to the extent necessary to include a proposed expenditure from the State General Fund to pay for expenditures made during the current biennium that were to be paid from a source other than the State General Fund but for which the alternative source of revenue was not received or will not be received during the next biennium.
This amendment was provided to allow for the expansion of expenditures due to loss of revenue from non-General Fund sources. An example of that would be the estate tax.
That provision was included as part of the Care-Amodei proposal.
The live entertainment tax will take effect January 1, 2004. Section 32 contains a definition of live entertainment. Section 35 states that the “department will provide by regulation for a more detailed definition of live entertainment.” Does this contemplate that the Department will have a more detailed definition drawn up prior to January 1, 2004, so that we are not applying two standards when we apply the tax?
That question refers to the Department of Taxation. Is that correct?
Yes, Mr. Chairman. That is what the Department of Taxation had agreed to. I want to be certain the answer is clear to Senator Care’s question. This was added last night. It is a change that the staff made due to a mistake that we found. This came about because the Fiscal Division determined there was a conflict in NRS 463.401, section 174. On the second line, the following was removed: “in a cabaret, nightclub, cocktail lounge or casino showroom.” That language was in the bill before. It was struck to make this section work. In doing so, we added a definition in subsection 5. That definition of live entertainment is what will control from July 1, 2003, to January 1, 2004. The definition the Department of Taxation will do by regulation will be effective January 1, 2004. It is this definition that is in subsection 5, and it will control until then.
Where does this definition come from?
It matches the definition in the first section of the live entertainment tax.
On the employer tax at 1 percent of capped wages, is there somewhere that this is spelled out?
It does not specifically state that it is capped. The amount to be levied is based upon an amount that is calculated by the Employment Security Department. That amount changes on an annual basis.
Can we look at the language that defines that?
It is a reference to chapter 612 of NRS.
Rick Combs (Deputy Fiscal Analyst):
Section 11 states, “as determined pursuant to NRS 612.545.” That section sets the capped amount, an amount that moves each year.
It is the Chair’s understanding that is the reference to a percentage of the annual average wage in the State as defined for the purposes of the Department of Employment Security.
That is correct. It is two-thirds of the average annual salary.
Let us look at BDR 32-14 and the dollars generated by the proposed tax plan.
The retention allowance for the cigarette tax has been changed with the increase based on the 55-cent increase. This increase is projected to generate $81.3 million in fiscal year 2004 and $84.7 million in fiscal year 2005. There is a collection allowance change at 0.5 percent. Liquor is reflected at an 89 percent increase. This change was approved by the Committee of the Whole last night. It is projected to generate $18 million in fiscal year 2004 and $18.4 million in fiscal year 2005. The collection allowance for State and local school support tax and retail allowance has not changed.
The business license fee is reflected at the $75-annual fee. That has not changed. The business license tax is shown as ending effective January 1, 2004, when the employer tax is implemented.
The business license tax was known as the BAT tax.
The estate fee increase has not changed. That has been reflected continuously.
The live entertainment tax is at 10 percent on casino and non-casino entities and is shown at $46.5 million in 2004 and $78.7 million in 2005. This is projected based on the 10-percent tax on admissions to live entertainment excluding food and beverages in facilities with over 5,000 seats.
The room tax is reflected at the increase of 1 percent. This would generate $24.8 million in fiscal year 2004 and $34.4 million in fiscal year 2005.
The gaming increase has not changed as reflected at $45 million in 2004 and $48.8 million in 2005.
The restricted slots are reflected at the 33 percent increase. This adds $2.3 million in 2004 and $2.4 million in 2005.
The real estate transfer tax is reflected at $1.30 per $500 of value. That is effective July 1, 2004. That is the amount approved by the Committee last night. It is projected at $57 million in fiscal year 2005.
The employer tax at 1 percent is projected to generate $128 million in fiscal year 2004 and $199.6 million in fiscal year 2005.
The bank franchise fee is effective January 1, 2004. It is a 3-percent bank franchise fee. Collections are anticipated to begin in March, 2005, with a projected collection of $13.2 million.
The total revenue is projected at $359.4 million in fiscal year 2004 and $513.7 million in fiscal year 2005.
Will the employer tax, based on 1 percent of the capped wages, equate to $215 based on a percentage of the average annual wage which is currently $21,500.
That is correct.
Are there any other questions?
Senator Townsend moved to introduce and do pass BDR 32-14.
Senator Neal seconded the motion.
Senators Amodei, Care, Coffin, Hardy, Mathews, McGinness, Neal, Nolan, Raggio, Rawson, Rhoads, Schneider, Shaffer, Titus and Townsend voted yes.
Senators Carlton, Cegavske, Tiffany, Washington and Wiener voted no.
Senator O'Connell abstained.
On the motion of Senator Townsend, the committee did rise and report back to the Senate.
SENATE IN SESSION
At 10:27 p.m.
President Hunt presiding.
INTRODUCTION, FIRST READING AND REFERENCE
By the Committee of the Whole:
Senate Bill No. 6—AN ACT relating to state financial administration; providing for the imposition and administration of an excise tax on employers based on wages paid to their employees; replacing the casino entertainment tax with a tax on all live entertainment; eliminating the tax imposed on the privilege of conducting business in this state; revising the taxes on liquor and cigarettes; imposing a state tax on the transfer of real property and revising the provisions governing the existing tax; revising the fees charged for certain gaming licenses; establishing the Legislative Committee on Taxation, Public Revenue and Tax Policy; making various other changes relating to state financial administration; making an appropriation; providing penalties; and providing other matters properly relating thereto.
Senator Raggio moved that the bill be referred to the Committee of the Whole.
REPORTS OF COMMITTEES
Your Committee of the Whole, to which was referred Senate Bill No. 6, has had the same under consideration, and begs leave to report the same back with the recommendation: Do pass.
William J. Raggio, Chairman
Senator Raggio moved that the Senate recess subject to the call of the Chair.
Senate in recess at 10:31 a.m.
SENATE IN SESSION
At 11 a.m.
President Hunt presiding.
MOTIONS, RESOLUTIONS AND NOTICES
Senator Raggio moved that the Senate recess until 1 p.m.
Senate in recess at 11:01 a.m.
SENATE IN SESSION
At 1:24 p.m.
President Hunt presiding.
MESSAGES FROM THE ASSEMBLY
Assembly Chamber, Carson City, June 26, 2003
To the Honorable the Senate:
I have the honor to inform your honorable body that the Assembly on this day passed Senate Bill No. 3.
GENERAL FILE AND THIRD READING
Senate Bill No. 6.
Bill read third time.
Remarks by Senators Nolan, Titus, Neal, Hardy, Raggio, Schneider and Tiffany
Senator Raggio requested that the following remarks be entered in the Journal.
Thank you, Madam President. I think that we have spent an inordinate amount of time and consideration to get to the point where we are right now, justifiably so, considering the magnitude of the issue that is before us. The fact that we have entered into an unprecedented second special session demonstrates the seriousness of the matter and the deliberations that we have given to this bill.
There are a number of us in this body that may not agree with certain aspects or components of the appropriations before us. I believe there are many of us here who wish the budget was not what it is. Many of us would have liked to see some modifications there. We can all be satisfied the Senate has worked together to fully fund education and the Distributive School Account. The cuts in programs presented to the public will not happen under this budget or in the funding formula we put together in this bill.
However, the reality is, the budget is passed, and we are not going to be provided the opportunity to do anything more with it. We know we have a statutory deadline of July 1, 2003, by which the funding of the budget has to be adopted. Whether or not the consequences to the employees and the vital services of the State and to our educational institutions of not doing that would be actual or contrived, to take the State to this threshold could have disastrous results and could result in a court-ordered policy of taxation.
This process has been in a stalemate for a number of weeks. Under the circumstances, it is necessary to pass this bill to the Assembly so they can carry on the debate, knowing that it will be amended to their liking. We must do so in the interest of forcing this process forward. I believe it is necessary and has to happen in order to come to an eventual resolution and to fulfill our constitutional responsibilities. For that reason, Madam President, I will be voting in the affirmative on the passage of this bill.
I would like the record to show that I am going to vote in favor of Senate Bill No. 6 for two reasons:
First, I believe it is critical that we get a bill moving so that negotiations can begin in earnest between the two Houses and so that we can resolve this impasse before we cost the taxpayers any more money and before we violate our own Constitution by not funding schools and other needed services prior to July 1, 2003. I have opposed a special session since day one of the regular session and worked hard to get this job done in 120 days. Unfortunately, that did not happen, and here we are in a second special session.
Now, we have to take some action. Instead of digging in our heels, we must roll up our sleeves. This can no longer be about building barriers. It must be about building bridges. We must move forward in a reasonable and responsible manner. The people of Nevada deserve no less.
Second, I will vote for Senate Bill No. 6 because I am confident this bill will be changed before a final version is passed. There are several amendments that need to be made. I have spoken against a payroll tax in the past and am still opposed to its being the cornerstone of a tax package—it should be a substitute for the current business license tax and nothing more. Instead, we should include a true, broad-based business tax that allows big retailers like Neiman Marcus to pay their fair share in return for all the prosperity they have enjoyed for free in Nevada for so many years.
I also am opposed to section 148 of the bill, which limits future Legislatures to a certain degree of spending. That provision will doom Nevada to remaining at the bottom of every quality of life index imaginable. We are a prosperous state and should not operate like a third world country.
I look forward to seeing those two major changes in the final bill and reserve the right to vote against it if they are not included. Let me repeat, I will not vote for a final bill that does not incorporate these changes so be sure you do not include me as one of the two-thirds needed for passage if they are not added.
But for now, let us move forward to do the right thing for the people of this State—to pass a reasonable, fair revenue package that will enable us to fund education and balance our State budget. One that taxes big business, banks and gaming while keeping the tax burden as low as possible on average citizens and small businesses.
So, let’s rock and roll.
Madam President and members of the Senate, I wish to speak to the members of this body from a position of experience and tradition. I am one of the oldest members of this body, and I have been through this process many times but not one of this magnitude. Those of you who have seen me operate know that I come into a session with certain ideas. I put them before the Legislature to act upon, and in many cases, those issues I propose are voted down. Regardless of that, I have remained respectful of the process. The process is one that requires we operate by compromise. That is why we have 21 Senators.
Not all of us share the same opinions. If we did, there would be only one person here, not the Legislature. Only the Governor would make decisions. I do not disagree with those who take certain positions and who are opposed to my ideas. That is your right to do so. Let me remind you that when you take a position it must elevate the State. When it is not geared to do that, then you have become an obstructionist. In the past, I have voted against tax measures. One was the BAT tax. I voted against it in 1991, and I gave the reason as to why I voted against that tax. I thought it would have a distilling effect on employment in this State.
I voted against the big change of 1981 when we shifted the taxes from property tax to sales tax under the List administration. I gave the reason as to why I voted against that tax. I voted against it because it was discretionary and would destroy many of our local governments throughout the State. Some years after that tax was passed, it was necessary for us to come back to make changes.
There are those of us who will sit here and vote no without any specific reason and without stating on the record as to why, though it is your right to do so, but the public needs to know why you have voted in such a fashion.
I have tried to compromise my ideas over the years. I have strongly supported increasing the gaming tax. The bill before us does not include the changes I would like to have seen. On the other hand, the things gaming asked for are not in the bill either. I can compromise on that. I can compromise on other things in the bill such as the entertainment tax. We know certain people came here with ideas about what that tax would do, how it would affect gaming. I feel it is necessary to have that tax. As you know, gaming makes a great deal of money in this State. We made a bargain with them in 1932 that when they came to this State we would be able to extract from them money to take care of our educational needs. Somehow, since then, that bargain has been forgotten. It is up to this Legislature to deal with this issue.
When you are dealing with the State, the State cannot function on a “0” balance. It needs money to render services to the people. When people go to get their driver’s license and they stand in long lines, they look to the Legislature to correct that. How do you correct that? You do not correct it by cutting the staff. You correct it by reorganizing and providing the necessary people to render those services. It is a cost. You have to have the money to do that. I saw an article yesterday in USA TODAY where it stated Paradise Valley Township has not done anything to raise money. As Madam President can attest to, most of their money comes from the county commissioners. They are the ones taking care of the services on that strip. Those of us who believe that government can function without any money are in the wrong place. Even dictatorships cannot function without funding.
We have issues placed before us. Major issues that deal with the children. In the future, they are the people who will fill these seats we now occupy. We owe it to them to provide for their education. Over the years, many of us have supported tax measures that have taken from those children. Many of us have voted for sales-tax exemptions or a use-tax exemption that takes money away from the operation of schools. I know that some of you support exemptions for the arts. Those exemptions take millions of dollars from the operation of schools. You come before this body and say we cannot support a franchise tax. Well, I think that my grandchildren, your children, your nieces and nephews deserve to have the best education possible. They deserve to have the money to be able to compete in a world that has grown smaller each year. We are obligated to provide those services.
In my office, today, I received a handout from Nevada Women Lobbyists. It says, “Choose your next campaign. The Legislator who puts children first or this Legislator who puts corporate profits first.” I do not know why I received such a document or a flyer with my picture on it because I have always put people first in this legislative process. I think that is why we are here. It is to provide for now and for the future. That is why we make laws. Government is not only here to provide fire protection and police protection. It is here to provide for those who are less fortunate, for those who are at the sunset of their life, our senior citizens, for those who are in the prime of their life, the workers, and for those who are newborn.
That is why we have government. That is why we have this concept called Democracy. It works, but it takes time. It takes an understanding to make it work.
I was more fortunate than many who came into this Legislature. I had training in government. Some of you who sit here in this body have had that same training. I know that we cannot do it all at one time. If we could, there would not be a need for any additional legislative meetings. Sometimes, we have to settle for a half-of-a-loaf or a fourth-of-a-loaf. We might have to come back again and again to achieve our end. That is the way the founders of this State and this country made it so. It is bad when, sometimes, we seem to be hampered by what some have referred to as the tyranny of the minority, but it is also bad when there is a tyranny of the majority.
We have to seek a balance sometimes to achieve the will of the people. We do not stand here on our own. We stand here because someone voted for us to be here. They gave us the reason under our Constitution to represent them. They gave us the authority to make certain decisions about their lives and how they would function. That is why we are here. Any individual who will accept the fact that they are totally here on their own and are not supposed to address any other needs but their own should not be here.
I am pleased that one of the Senators has decided to vote on this bill. I heard him make statements about his constituents and their concerns about the room tax. He said he would back off from that. I am glad to hear him say that. In his area, we voted to extend the road into California. I opposed that. The people in Laughlin sent letters to most of us asking us not to raise their room taxes, even though we paid $17 million to extend that road into California to allow them to bring the tourists in so they would not have any accidents. I am glad that the Senator is able to understand the need for us to move forward.
I did not get all that I would have liked to get out of this process. As I have said before, I come up here for one term at a time. At the end of each term, I pack my bags and all of my pictures, and I take them home. I am only guaranteed one term at a time. Somehow, I am in my 31st year of doing that and trying to do the right thing for the people of this State. No one can accuse me of being tied with any corporate interests because I have tried to vote for the peoples’ concerns. I have tackled the hard issues. I have said gaming should pay more. Many of you have disagreed with me. That is your right, but that is my feeling. I have felt that I should push that issue. When you do that, you must suffer the consequences. I have had gaming come after me four times during the past 31 years. They have not been able to get me yet, and they probably will not be able to get me. That is the way I saw it, and that is the call I had to make. I made it based upon what I thought was right. I saw what the industry had done to the people of this State in terms of the cost of operating. Gaming has been allowed to become the dominant entity. In no jurisdiction in the world has gaming achieved such dominance as it has here. I felt it was necessary to push those issues to bring them before you and to allow you to make whatever decisions or choices you have to make relative to that. I was voted against. It has happened to me in this Session and in many other sessions before, but I recognize it is your right to do that. Sometimes, you have to compromise on what you believe.
The late Senator B. Mahlon Brown told me on many occasions in my first years in this Legislature, that for all you do in this body, protect the process. If you do not protect the process, then things have a tendency to go haywire.
Part of that process is compromise whether you like it or dislike it. It is a compromise. It is not like being at home. This Chamber is not a household. This Chamber is a part of one of the three branches of government. It functions under certain rules and traditions. Whatever we do here, it can have a positive effect or it can have a distilling effect on the population of this State. We are charged with making that choice. I have made my choice about this piece of legislation. It is not all I would have liked it to be, but sometimes, you have to face the situation and move on.
To those who vote no, we would like to know why. The public demands to know those reasons. Do not cast just a no vote, but be on the record stating why it is necessary for you to vote against the measure.
The greatest call in this bill is to help the children. They do not have a vote. They do not make the telephone calls. They do not meet you at Adele’s and Glen Eagles to talk over a drink. Nevertheless, one day, they will sit here and make decisions about you as old men and women. I came here as a young man. I ran into a young man one day who stopped me outside and reminded me that he sat with me in the Chamber, one day, 15 or 20 years ago, when he was a Boy Scout. I looked up at him and asked him if I treated him right. He said that I had, and I told him that was what was important. My point is that people grow here. There are changes. Nothing is in stone.
During the 31 years that I have been here, I have seen legislation I have voted on come back to this House for changes. One of the most honored bills I was privileged to pass dealt with the retrofitting of the hotels. It underwent a change in this Legislature. People come, people go. We cannot bind succeeding Legislatures to what we do here. Another Legislature can change that. That is why we meet every other year to see what changes should be made.
Hopefully, the time has come for us to transport this measure to the other House to see what they can do with it. We have had Assemblymen trying to tell the Senators what they should do, how they should vote on this bill, what they should put in it, what they would need in this bill so that the Assembly would pass it in the other House. Somehow, we have forgotten we are a bicameral Legislature. There are two Houses by our Constitution. One bill passes one House to be received in the next House to go through its committee process to be reviewed and to be amended. Then it comes back to be accepted by us; if we do not, then conference committees are appointed. That is the process.
We have never been beholding to the other House during the entire 31 years I have been here. The other House has never determined what should be done here. We do it, and we move on. If it comes back to us then we deal with it. That is the process I hope we will honor this afternoon by passing this measure.
Thank you, Madam President. I have watched this process, in one respect or another, from one side of the glass or another, for almost 15 years. I came into this Session with a firm belief that this Legislature could never pass a perfect tax package. I have mentioned this many times to my colleagues. However, I was wrong. I would like to amend that now to say that the Legislature could never even pass a good tax package.
I have watched how the process works through the years. It seems from time-to-time that the debate is sometimes separated. As my colleague, Senator Nolan, mentioned, some of our colleagues down at the other end of the hall are working on the budget numbers. They are attempting to have that changed. I agree with him that there are certain aspects of the budget that could be changed.
As we have just heard, sometimes it is important for us to support the product of the system. What has settled before this Senate and before this body is an opportunity to try to get the tax method correct. That is where I have focused my attention in the last few days to try to get the method right. As my colleague from Carson City has mentioned, the budget number comes and goes. The tax policy will be forever. I think it is critical that we get that right.
The tax before us is far from perfect. It is probably far from even being good. But, from my perspective, the core portion of the payroll tax, or the employer tax, passes two important tests in my opinion with regard to good tax policy. The first is the cost of administration. It will not require us to create a mini-Internal Revenue Service to administer the tax. The second is that it creates a nexus, or a relationship, between the individuals who will be using the services the Legislature is constitutionally obligated to fund and those who will pay that tax. As the good Senator from southern Nevada mentioned, I am concerned about the room tax. I think it does have an impact on my district in Laughlin, Mesquite and other areas. I do have a concern about that. I, like the Minority Leader, will judge this package when it comes to us based upon what is included in that package.
To identify myself with the remarks of the good Senator from District 4, I will support this bill as an imperfect package in order to get the debate rolling and to allow the democratic process to continue its work.
Thank you, Madam President. I appreciate all the eloquent remarks made by the Senators who have spoken. There is a thread of agreement in all of the comments.
Like the distinguished Senator from southern Nevada who came here 31 years ago, as I did, we have seen a lot of change, been through a lot of travail and trials, agreements and disagreements. Good or bad, that is part of the process. I want to indicate my belief in the process. The dignity and purpose of the Senate Chamber is what is important.
The process has been observed in that manner, as it should have been. I want to thank each and every Senator here, whether you support this bill or not, for the manner in which we have been able to work together in this Chamber. This Special Session, whether we all agree or not, has been an example of how 21 Senators from both minority and majority parties can work together when the need is apparent. Fortunately, we were able to operate as a Committee of the Whole and no one was left out of the process. Unfortunately, that did not work as well in the other House. Through the Committee of the Whole process, each Senator had an opportunity to comment, to participate and to reach an accord on every issue we discussed.
There is not a Senator or Assemblyman, whether in this Special Session, in the previous sessions or in future sessions, who would ever like to vote for an increase in taxes. Those of us who have served for 31 years and those serving even fewer years have not had to increase taxes, until now. Before, we have been able to patch and paste to meet our fiscal needs.
A tax shift was mentioned. We did that in the early 1980s. We gave the real property tax to local governments. The State decided that, because of the economy we had at the time, we could serve all the State’s needs for the foreseeable future, primarily, with the gaming and sales tax. Probably, we created an imperfect tax system for the State’s needs.
Nevada is a growing state. No other state in the Nation has grown more than the State of Nevada, and particularly southern Nevada which has had extraordinary growth. With growth comes increased needs. We all know what they are, and there is no need to further identify them. The public does not always understand that the growth of the State brings these expanded needs. In the early 1980s, a tax study was done by Price Waterhouse. We paid quite a bit of money for it. As a distinguished group of consultants, they alerted us that we could scrape along on the State’s existing tax revenues, but by the early 1990s, the State would not be able to meet its needs on that existing tax base. It was 12 years ago when they said we would have to identify additional revenues for this State, and for 12 years, we have avoided any serious increase in revenues.
In the 71st Session, we were able to fund a budget and meet needs with few new programs in the budget. There are not any new programs of consequence in this budget that we are asking to fund in this Session.
We were able to use reserves that were built up in the Temporary Assistance for Needy Families program and the Medicaid program, and we did not have to resort to tax increases for the revenue.
However, this session events have intervened. Who could have foreseen September 11, 2001, and the dramatic changes in the economy in this State? Nevada is a state, unlike most others, with its tax base in tourism which drives our revenues by gaming and sales taxes. I hear people say, “Why do you need new taxes?” It is because we have utilized all those reserves. Without the reserves in some of these programs I mentioned, we would not have survived all those years without increasing taxes.
More importantly, we utilized every dollar we had in savings for emergencies. If we had not had the rainy-day fund of $135 million, we would have had to raise taxes by that amount. The budget we are talking about, today, is a start at replenishing that fund. We are not replenishing $135 million in this particular budget with new taxes, but we are making a start. It is a meager start, and we are only going to add $30 million from this budget. It is the prudent thing to do.
There seems to be some misinformation about the budget that is being foisted on our public and our constituents by many people. I would have to question whether they really know what they are talking about. I am not referring to colleagues in the Legislature. I am talking about external forces that somehow think we are spendthrifts with the amount in the budget.
The Governor proposed $990 million in his budget for the next biennium The money committees of your Legislature began in mid January. The members of these money committees met every day, two weeks before session, to start this process of looking at the budget. They worked until the last day of the 72nd Session to fine-tune a budget. We did a careful job. There are things I did not like to agree to, but we had to compromise with the other House. The result is we cut the $990 million budget down to $850 million, that is $140 million cut from what was recommended by the Governor. We were still able to add some salary increases in the second year for teachers, who deserve that raise. I do not know of anyone, here, saying we should cut that out. We also increased the State workers’ salary in the second year by an additional 1 percent and no one, here, or in the other House, has said we should cut that out of the budget. They are also deserving of that raise. We have cut a lot, but we did come up with a responsible and defensible budget. Our obligation under the Constitution, as the Attorney General of our State indicated to the Assembly membership yesterday, is that we have a duty to fund the budget. The budget includes not only funding for state government, but also funding for education. This body has passed the basic budget in both the regular and special sessions. That is funding for education, the Distributive School Account and the class-size budget. Our duty is clear in this Special Session, that we must fund the budget before July 1, 2003, the end of the fiscal year.
I have received many letters on both sides of this issue―E-mails, telephone calls and structured mail―to indicate we should not raise any taxes. I do not know of many Legislators, except for one or two who have said we should not raise any taxes. If they do, then they are living somewhere else, not on this planet. The issue is more complex, but it has been lost to many in the public because of what they hear. The issue is, how much. Some say we should raise only $750 million in taxes, but that is not the message that is getting out to the public. The public is hearing we should not raise any taxes. I wish we did not have to raise taxes. The issue is how much should be raised. Is it right to raise $750 million in taxes and not fund the budget? Alternatively, is it more appropriate to raise the amount that is needed? That is not only appropriate, but it is a constitutional requirement. The Governor in his call for this Special Session has not given us the latitude to reopen budgets, nor have I requested the authority to cut or reopen the budget because I seriously do not believe after all the effort we have put forth to structure a budget that it would be responsible to cut that budget. People have suggested what should be cut. There is not enough time for me to go into the impact of cuts in the welfare budget or cuts in the mental health budget or cuts in the mental retardation budget. Most of these suggestions have come from people who have not seen the needs as they have been presented to us in committees nor have they witnessed them personally. They consist of clinics for children with special needs, mental retardation programs and the needs of those on Medicaid.
I am sure there is some waste everywhere, but Nevada ranks 47th in the Nation in the level of payments we make for welfare. This is one statistic. People say we are throwing away money on welfare. We have been a cautious state over the years, and some accuse us of being frugal. We have never been a legislature that threw away money, and I personally resent the misinformation that has been constantly thrown out to the public by people who have intentions that are less than sincere or accurate. I wanted to address that misinformation.
This is not a perfect tax plan. Changes will undoubtedly be made, and we will be asked to work together and to compromise. I cannot believe that there is anyone in this Senate who does not understand that because everyone here is a veteran of the legislative process.
Legislation is the art of compromise, and we are going to have to make some adjustments, but at least, we will send a tax plan consistent with our constitutional duty to the other House. Hopefully, they will work together, as the members of this Senate have done, to adopt something that is appropriate to meet the needs of the people of this State.
I agree with the remarks I previously heard that we are here to address the needs of the people of this State. Some people are affluent, some moderate and some are poor, but neither party has the edge on the other as far as the concern for the needs of all the people. Whatever we do, let us remember that probably the only group in this legislative process who does not have a lobbyist is the people. All other groups have lobbyists. We can take some comfort in supporting this bill because, if my observations are correct, at least, we have made almost everyone of them unhappy. That would be a good indication that we have as near a perfect bill as we can come out with in this Session!
I apologize for taking more time than I had intended. My purpose is to compliment the members of the Senate for their effort in this endeavor, for understanding as we do in this upper House the legislative process, the sanctity of the Senate and our obligation under the Constitution. We do not come here, hopefully, just to be re-elected. If we do what is right and want to be re-elected, the public will make that decision for us. That is my guide. Our duty is clear, and I hope the Senate will give the required two-thirds majority and pass this bill to the other House.
Thank you Madam President. I stand before you, today, as probably the most conservative Democrat in this building. The largest newspaper in this State has said the Democrats, here, are like drunken sailors. They spend money and waste taxpayers’ dollars.
I support this budget and this tax increase, and it is a Republican budget. For the past ten years, the Majority Leader of this House has ruled this budget process with a tight fist. He has trimmed where he could. I did not always agree with him. I voted against the last two budgets because there were a few things in there I did not like, but he has trimmed and trimmed this budget. I do not think the Majority Leader and his colleagues have behaved like drunken sailors, though maybe like drunken pirates in the night for they have cut and cut. I have supported their actions. We are lean in our budget.
We are last in the Nation in mental health funding. We are last in the Nation in Medicaid. As the Majority Leader just said, we are 47th in welfare in the Nation. I had a bill last session to fund education at the national average, but it did not get a hearing. If I am back again, next time, I will have the bill again. The bill was for $1.2 billion and would have only brought us up to the national average. Nationally, we are way down the list, and it is time we did what was right for the people of this State. I do not want to vote for taxes. This is awful, but I am ashamed to be in this State when we fund so low. I do not know who would want to be governor of a state where you are last in every category. It is time we made an effort to bring us up to, at least, the average in some areas. I will support this, and if the Majority Leader is back next Session, I will expect him to watch the pennies and dimes, but I will support him to move us up the ladder in funding. Thank you.
I have been sitting here thinking that I should get up and say something. I really have a different point of view. I think it needs to be expressed. I was challenged by our Senator over to my left. I have been very consistent this session on voting against some of these issues. We are seeing the largest tax increase in the State of Nevada by three times. This is a whole shift in the history on what we are doing with a budget, funding a budget and who it is on the backs of.
I sat on the money committees. This was not about cut here and cut there. It was about add here and add there. There were enhancements and maintenance items that I have never seen increased. I have been on the money committees for a long time. I have been in this Legislature since 1993. The only time I have seen a cut was in 1993 under our other Governor. He did cut pretty deeply, particularly in mental health. We have had nothing but growth since then. We grew 18 percent last biennium. This biennium there is a 33-percent increase, 42 percent to higher education, 40 percent to health and human services and 33 percent to K-12. I have never seen this in the time I have been here.
We have heard the rhetoric about the kids, the kids, the kids, health care for seniors. You know these are politically charged times and to throw the kids in the middle of this discussion is disingenuous. When we spend another billion dollars in new taxes, do you think that the reading scores are going to change or that the math scores are going to change or that proficiency scores are going to change? Do you think that we are not going to come back and hear how we still have waiting lists in rural clinics or how we have saved somebody’s life because we have added exponential growth to Medicaid and Temporary Assistance to Needy Families. It is not going to change. You are going to hear the same thing. What you are going to hear are from our constituents when they say what the heck did you do to my fishing license? What did you do for taxes when I got a speeding ticket? Who am I paying here? These are fees we are talking about. Wait until you see those, let alone these taxes. I had someone in my office recently that builds long-term-care homes for seniors. She said that the fee increase from the Health Department would now increase from $1,500 to $6,000 just to get a license.
I went to the Secretary of State just for a name change for a corporation and paid for that and paid one dollar just to get a copy of something. We have only begun to see what you are going to see when this increase is passed and what your constituents are going to say to you when they are paying it. They will be paying it in multiple ways whether they are buying something or whether they are a small or large business. We will see people making decisions about adding employees or not adding employees.
We have a 3- and 4-percent growth, which is healthy and reasonable. We have had a reasonable economic forum number come in which we have spent. The reason that I am not going to vote for this tax increase is the budget. I think that the Assembly will have further discussion on this tax bill. I hope there is more discussion on this budget because I think there needs to be. We really have not had the real, genuine discussion on the table where everybody is listening. I know that part of the members of the Assembly have been working diligently on it, and they deserve a fair time to do that. I stand up to tell you why I am voting against the taxes, and it is because of the budget. I believe that it is going to have a major impact on every taxpayer in the State of Nevada. I hope that on the other side it gives them a chance to reevaluate this and be ready for fair negotiations.
Roll call on Senate Bill No. 6:
Nays—Carlton, Cegavske, Tiffany, Washington, Wiener—5.
Senate Bill No. 6 having received a two-thirds majority, Madam President declared it passed.
Bill ordered transmitted to the Assembly.
Signing of Bills and Resolutions
There being no objections, the President and Secretary signed. Senate Resolutions Nos. 1, 2, 3.
Senator Raggio moved that the Senate adjourn until Friday, June 27, 2003 at 11 a.m.
Senate adjourned at 2:26 p.m.
Approved: Lorraine T. Hunt
President of the Senate
Attest: Claire J. Clift
Secretary of the Senate