Archive for category: Political Update

August 13, 2019
13 Aug 2019

Political Update – August 13, 2019



EDITORIAL: Nevada PERS counting on unrealistic investment assumptions

 

Las Vegas Review-Journal

 

August 10, 2019

The current stock market volatility is another reminder of the precarious position of public pension systems, including Nevada’s plan for state workers. That’s because public pensions invest heavily in volatile assets, like stocks.

Across the country, state and local pension plans are only 73 percent funded, according to a review of 180 plans by the Center for Retirement Research at Boston College. The Public Employees’ Retirement System of Nevada does slightly better, coming in at around 75 percent funded. But neither statistic is encouraging.

“State and local pension plans have about $4.4 trillion in assets according to the Federal Reserve,” The Wall Street Journal reported last week, “$4.2 trillion less than they need to pay for promised future benefits.”

Imagine the uproar if pension plan officials announced they were going to pay out only 75 percent of promised benefits. Yet that’s all the assets most of these pension plans currently have — assuming they hit their investment assumptions.

This is especially concerning, because pension systems are riding a 10-year-wave of positive investment returns. The S&P 500 has more than tripled in value since the beginning of 2009. If pension systems are only 75 percent funded after a decade of healthy growth, what happens to the unfunded liability during the next downturn?

Pension managers, however, assure the public that there’s nothing to worry about. To make up for the deficits and growing obligations, they assume pension plans will earn a 7.4 percent return, on average. Nevada PERS assumes annual returns of 7.5 percent.

In fact, these projections disguise the real problem by likely underinflating long-term obligations by overestimating portfolio performance. Thirty years ago, a level of return of around 8 percent may have been realistic. As the Wall Street Journal reported last month, a 30-year U.S. Treasury bond had a return rate of almost 9 percent in 1987. This week, the yield on a 30-year U.S. Treasury bond was 2.25 percent.

Quote of
the week

 


Quote:

"When returns fall short, however, the amount the government must contribute increases,” the Journal noted, “potentially diverting money from other public services.” Or leading to tax hikes on the private sector taxpayers who are ultimately responsible for funding these generous retirement plans."

Las Vegas Review-Journal

 

NEVADA SHOULD END TAX BREAKS FOR THE SELECT FEW

Thomas Mitchell
Lincoln County Record

August 8, 2019

For the past decade Nevada’s Governor’s Office of Economic Development (GOED) has doled out billions of dollars worth of tax breaks to select companies in order to entice them to make capital investments here and create jobs. The companies getting the tax breaks include giants such as Tesla Motors, Apple, Amazon, eBay and Switch.

The office has done this despite the fact the state Constitution declares, “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …” It’s not uniform or equal if a select few get breaks while others don’t.

Keystone's Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone's Mission:

• To focus on candidate support on state legislative races and the governor's office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

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It’s time for GOED to go

Robert Fellner
Nevada Policy Research Institute

July 31, 2019

The RGJ’s recent report, Nevada got a fraction of the jobs, investment promised by Tesla-style tax breaks, confirms what experts have been warning about for years: Nevada’s corporate welfare program is a bad deal for taxpayers.

The Governor’s Office of Economic Development (GOED) provides billions of dollars in tax breaks to large corporations like Apple and Tesla, based on the idea that the added jobs and investments they bring to Nevada will more than offset the cost.

But that claim has been repeatedly debunked by academic research, which finds that programs like GOED tend to be a wash or, in some cases, a net negative. A study published in the peer-reviewed Journal of Regional Science, for example, found that tax incentives actually reduced job growth and business expansion. The study also found that businesses who received the incentives consistently overestimated the economic benefits they would deliver, just like what has happened here in Nevada.

Unfortunately, while the promised benefits have failed to fully materialize, the costs imposed on taxpayers are here to stay. In an effort to quantify that cost, experts at the Mercatus Center recently estimated that eliminating corporate incentives would yield enough savings to reduce Nevada’s sales tax by 7 percent.

That bears repeating: Nevadans are effectively paying more in sales tax just so some of the world’s richest companies can receive a tax break, like the $13.6 million tax abatement given to eBay for a project which created a grand total of two new jobs.

While free markets require that businesses serve the needs of consumers in order to profit, politics rewards insiders who can afford to hire the best lobbyists. This explains why so many legislators support giving tax breaks to giant corporations rather than ordinary Nevadans: the former tends to spend much more on lobbying efforts than the latter.

There is also the issue of concentrated benefits and dispersed costs. Jobs created through GOED give politicians a great opportunity for free press, while the costs are widely dispersed and thus unseen.

Speaking of that which is unseen, it was quite troubling to read that GOED refused to answer the RGJ’s questions “about whether or how it pushed companies to meet the state’s performance measures,” particularly given the tax-funded agency routinely claims it does just that when responding to reports of underperformance.

Quote of
the week

 


Quote:

“That bears repeating: Nevadans are effectively paying more in sales tax just so some of the world’s richest companies can receive a tax break, like the $13.6 million tax abatement given to eBay for a project which created a grand total of two new jobs.”

Robert Fellner
Nevada Policy Research Institute

LETTER: No such thing as a ‘temporary’ tax in Nevada

Daniel Honchariw
to the Las Vegas Review-Journal

August 3, 2019

Kudos to state Senate Republicans for challenging the unconstitutional modified business tax extension. The voter-approved, two-thirds constitutional requirement for any tax increase is too vital a taxpayer protection to diminish.

But on the heels of this legal challenge, one may be inclined to ask: Do taxes ever actually sunset as planned? There’s plenty of recent evidence to suggest “temporary” taxes, in practice, are about as rare as unicorns. Besides the MBT extension, here are a few other “temporary” taxes that have already been, or are likely soon to be, extended into perpetuity:

— DMV technology fee — This $1 fee was supposed to expire in June 2020, but Senate Bill 542 of the 2019 session extended the fee for at least two years. This extension is also being challenged in the pending litigation, having been approved with less than two-thirds support in the Senate.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
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August 7, 2019
07 Aug 2019

Political Update – August 7, 2019

It’s time for GOED to go

Robert Fellner
Nevada Policy Research Institute

July 31, 2019

The RGJ’s recent report, Nevada got a fraction of the jobs, investment promised by Tesla-style tax breaks, confirms what experts have been warning about for years: Nevada’s corporate welfare program is a bad deal for taxpayers.

The Governor’s Office of Economic Development (GOED) provides billions of dollars in tax breaks to large corporations like Apple and Tesla, based on the idea that the added jobs and investments they bring to Nevada will more than offset the cost.

But that claim has been repeatedly debunked by academic research, which finds that programs like GOED tend to be a wash or, in some cases, a net negative. A study published in the peer-reviewed Journal of Regional Science, for example, found that tax incentives actually reduced job growth and business expansion. The study also found that businesses who received the incentives consistently overestimated the economic benefits they would deliver, just like what has happened here in Nevada.

Unfortunately, while the promised benefits have failed to fully materialize, the costs imposed on taxpayers are here to stay. In an effort to quantify that cost, experts at the Mercatus Center recently estimated that eliminating corporate incentives would yield enough savings to reduce Nevada’s sales tax by 7 percent.

That bears repeating: Nevadans are effectively paying more in sales tax just so some of the world’s richest companies can receive a tax break, like the $13.6 million tax abatement given to eBay for a project which created a grand total of two new jobs.

While free markets require that businesses serve the needs of consumers in order to profit, politics rewards insiders who can afford to hire the best lobbyists. This explains why so many legislators support giving tax breaks to giant corporations rather than ordinary Nevadans: the former tends to spend much more on lobbying efforts than the latter.

There is also the issue of concentrated benefits and dispersed costs. Jobs created through GOED give politicians a great opportunity for free press, while the costs are widely dispersed and thus unseen.

Speaking of that which is unseen, it was quite troubling to read that GOED refused to answer the RGJ’s questions “about whether or how it pushed companies to meet the state’s performance measures,” particularly given the tax-funded agency routinely claims it does just that when responding to reports of underperformance.

Quote of
the week

 


Quote:

“That bears repeating: Nevadans are effectively paying more in sales tax just so some of the world’s richest companies can receive a tax break, like the $13.6 million tax abatement given to eBay for a project which created a grand total of two new jobs.”

Robert Fellner
Nevada Policy Research Institute

LETTER: No such thing as a ‘temporary’ tax in Nevada

Daniel Honchariw
to the Las Vegas Review-Journal

August 3, 2019

Kudos to state Senate Republicans for challenging the unconstitutional modified business tax extension. The voter-approved, two-thirds constitutional requirement for any tax increase is too vital a taxpayer protection to diminish.

But on the heels of this legal challenge, one may be inclined to ask: Do taxes ever actually sunset as planned? There’s plenty of recent evidence to suggest “temporary” taxes, in practice, are about as rare as unicorns. Besides the MBT extension, here are a few other “temporary” taxes that have already been, or are likely soon to be, extended into perpetuity:

— DMV technology fee — This $1 fee was supposed to expire in June 2020, but Senate Bill 542 of the 2019 session extended the fee for at least two years. This extension is also being challenged in the pending litigation, having been approved with less than two-thirds support in the Senate.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
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July 30, 2019
30 Jul 2019

Political Update – July 30, 2019

Letter to Keystone Board from
John Tsarpalas, President
Nevada Policy Research Institute

July 29, 2019

Dear Keystone Board Member,

Since Keystone is officially one of the plaintiffs in the unconstitutional extension of the Modified Business Tax by the Democrats in the last legislative session, you as a Keystone member, should have a basic understanding of the issues (see points to the right). 

See the Nevada Policy Piggy Book story (below) that explains why the DMV is short on money.

The DMV: It’s all foreign to me 
The Nevada Piggy Book
Nevada Policy Research Institute, 2018

One has to hand it to the DMV: For being the poster-child for government inefficiency, the agency has recently been making some bold attempts to modernize. 

It likely won’t shock anyone to learn that the agency’s computer system is less than modern. To fix this problem the Legislature approved a $75 million contract to upgrade the Nevada DMV’s outdated and inefficient computer system in 2015. 

It had until 2020 to get with the times, and implement a “new and improved” computer system. 

The $75 million comes directly from an added fee tacked on to all DMV transactions — so yes, you’re paying for it. 

But at least we’re paying to modernize government, right? 

For reasons that are still unclear, the Legislature awarded the contract to Tech Mahindra — a multinational technology company headquartered in Mumbai, India. 

In hindsight, choosing a firm a bit closer to home would have been a much smarter move. 

According to an audit released in late 2017, it was revealed that the program was months behind schedule. The audit cited the DMV’s failure to “ensure compliance with requirements, protocols, and procedures” — aka providing basic oversight — as the primary cause for the delays. 

(Of course, the DMV didn’t have any trouble implementing the new fee. But that’s not really surprising.) 

There were a few other failures, however, that rested solely with the Indian-based multinational firm. First, Tech Mahindra had only delivered 6 employees to begin work, despite originally promising that 25 members of its so-called “A-Team” would be deployed on the project. 

The second, and admittedly much larger problem, was that not all of the employees could speak English. 

Naturally, the language barrier caused some issues. 

Under the section of the audit entitled, “Contractor Did Not Provide Personnel Proficient in English,” we learn that the “DMV had to edit project documentation and meeting minutes provided by the contractor for grammar and spelling because they were not written in a clear manner and were not useable.” 

Imagine awarding a $75 million technology contract to a foreign company, then receiving the meeting minutes written as if they were translated through Google — because that’s basically what the DMV seemed to be facing.

After the audit was made public, Tech Mahindra was finally fired.

One thing the DMV readily admitted would be a complete waste of taxpayer funds, was the $25,000 spent on a customized communications plan between the Nevada DMV and Tech Mahindra. 

That’s right: A $25,000 communications plan with a firm that couldn’t even provide reports in a language that DMV personnel could read! Ensuring someone at Tech Mahindra was fluent in basic English probably would have been a better place to start. 

“The $75 million comes directly from an added fee tacked on to all DMV transactions” Of course, that wasn’t the only loss. 

By the time the state had terminated the contract, roughly $17 million had already been spent with the firm. 

Of that, about $12 million is considered a complete loss. Another $4.7 million is considered “salvageable” and will be usable by a future contractor for the modernization project. 

“We are also still working to sell back some of the remaining equipment, although of course the return value isn’t as much as the paid value,” DMV spokeswoman Alex Smith told The Nevada Independent. 

So, for now, the DMV continues to use antiquated technology, the project continues to miss deadlines and we continue to pay an extra fee every time we are required to make a transaction with the Department of Motor Vehicles. 

But at least they give us our bills in a language we can understand.

Modified Business Tax Extension Facts

Nevada Policy
Research Institute

Under Article 4, Section 18, subsection 2 of the Nevada State Constitution,
“…[A]n affirmative vote of not fewer than two-thirds of the members elected to each House is necessary to pass a bill or
joint resolution which creates, generates, or increases any public revenue in any form, including but not limited to taxes,
fees, assessments and rates, or changes in the computation bases for taxes, fees, assessments and rates.”
• This provision was added to the Constitution via ballot initiative in 1994 and 1996 (Question 11). It passed by an
overwhelming majority in both years.
What is the Modified Business Tax?
The MBT is a payroll tax on (taxable) wages above $50,000 for private business.
• The current rate of 1.475% was set during the 2015 Legislature. (The MBT itself had existed for years prior, at a
lower rate.)
• However, that 2015 legislation contained a provision which automatically lowered the MBT rate if certain tax sources
brought in more revenue that what was projected by the state’s Economic Forum.
Thus, due to robust tax revenues over the past biennium, the Modified Business Tax rate
was set to decrease to 1.378%.
• But, instead of allowing the partial sunset to occur, Democrats passed SB551, which eliminated the sunset provision from
law, effectively maintaining the current rate of 1.475% in perpetuity.
• Eliminating the sunset provision is expected to produce an additional ~$100 million over the next biennium.
• SB551 also eliminated ESAs from law
Why the lawsuit?
• Democrats passed SB551 without a 2/3 majority vote, as required by the Nevada State Constitution.
• They relied on a legal opinion from the Legislative Counsel Bureau which suggested a 2/3 vote was not required because
a tax “extension” did not constitute an increase.
• The plain text of the Constitution is unambiguous. Seemingly, the LCB lawyers did some mental gymnastics to arrive at
their preferred conclusion.
• Sen. Settelmeyer called the LCB opinion “a work of legal fiction.”

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
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July 23, 2019
23 Jul 2019

Political Update – July 23, 2019

Nevada Senate Republicans sue over bills eliminating reduction of business tax and extension of DMV fee

Nevada Appeal staff report

July 19, 2019

Eight Nevada Senate Republicans on Friday followed up on a May promise to challenge the extension of the Modified Business Tax sunset.

The senators led by Senate Minority Leader James Settelmeyer, R-Gardnerville, filed suit in Carson City District Court alleging Gov. Steve Sisolak and Senate Majority Leader Nicole Cannizzaro violated the Nevada Constitution.

The challenge involves Senate Bill 551 and Senate Bill 542 passed by the 2019 Nevada Legislature. SB551 extends the existing Modified Business Tax rate and generates $98.2 million. SB542 extends the DMV technology fee set to sunset in 2021. That fee generates about $7 million.

The suit alleges the bills are unconstitutional because the Senate approved them 13-8 — one vote shy of the two-thirds majority.

During the session, lawmakers obtained a legal opinion from Legislative Counsel that the two-thirds rule didn’t have to be applied since it was extending an existing tax rate rather than raising a tax.

In May and again when Sisolak signed the bill Settlemeyer vowed to take the passing of the MBT and DMV fee to court.

He said Nevada’s constitution requires a two-thirds majority to pass “anything that increases revenue in any form.” He said that has been the ruling on sunsets in the past as well as new or increased taxes.

Quote of
the week

 


Quote:

“We have checks and balances for a reason and eroding the two-thirds requirement is an unprecedented disregard for the constitution and creates a dangerous precedent.”

James Settelmeyer
Senate Minority Leader

Analysis: Nevada got a fraction of the jobs, investment promised by Tesla-style tax breaks

James DeHaven
Reno Gazette Journal

July 22, 2019

It was a different time. 

That’s what Nevada lawmakers say these days when asked about the massive, recession-era tax breaks approved for companies such as Tesla, Amazon and Apple.

It’s also what legislators tend to say when defending new efforts to rein in incentives now that the state has rebounded from the downturn.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
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July 16, 2019
16 Jul 2019

Political Update – July 16, 2019

VICTOR JOECKS: Letter from Nevada Democrats hints at quid pro quo

Victor Joecks
Las Vegas Review-Journal 

July13, 2019

Even by swampy congressional standards, a letter signed by three Nevada Democrats to a local casino company reeks of demanding quid pro quo.

In May, 13 congressional Democrats sent a letter to Frank Fertitta, chairman of Red Rock Resorts. The signers, including Reps. Dina Titus, Susie Lee and Steven Horsford, urged Fertitta to “respect the rights of employees at Red Rock Resorts Inc. properties to form a union and collectively bargain.” That seems like little more than another poke in the eye from allies of the Culinary union.

But the letter took an unexpected turn. It started talking about tax policy.

In 2017, Republicans passed tax reform. In their haste — insert joke about “passing the bill to find out what’s in it” here — a drafting error changed the depreciation schedule for certain capital expenditures. Before the bill, companies could depreciate interior remodeling projects over 15 years. After the bill, businesses had to spread those expenses over 39 years.

The letter points out that Red Rock Resorts is seeking to revert that provision to its original form. The company is hardly alone. Hundreds of businesses — including Wendy’s, Best Buy and Target — have asked Congress to make the change. A bill to do just that has 169 co-sponsors. Titus, Lee and Horsford are among the 88 Democrat co-sponsors.

There’s not a policy link between the two issues, but there is a political link. The letter notes that Red Rock Resorts “is currently completing a $690 million renovation of the Palms Casino Hotel.” The drafting error in the new tax law is likely costing Red Rock Resorts tens of millions of dollars.

“We were disappointed, however, to learn that the company has refused to recognize the union at this facility, even after 84 percent of employees voted to form a union,” the letter reads.

Quote of
the week

 


Quote:

“It’s fine for congressional Democrats to support the Culinary. What’s unacceptable is using their political power to threaten Red Rock Resorts for not acquiescing to union demands.”

Victor Joecks
Las Vegas Review-Journal 

Segerblom wants sales tax hike to fund schools

Ray Hagar
Nevada Newsmakers
Las Vegas Sun

July 14, 2019

Clark County Commissioner Tick Segerblom said on “Nevada Newsmakers” that he is ready to start working to get more funding for the Clark County School District through a sales tax hike.

The Nevada Legislature recently gave county commissions the authority to implement a quarter-cent sales tax increase for education.

“I ran a campaign with the platform of ‘give me the authority for a 1-cent sales tax so we can give $400 million to the School District,’” he told host Sam Shad. The district faces a $17 million budget deficit entering the new school year.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
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July 9, 2019
09 Jul 2019

Political Update – July 9, 2019

Will new Nevada law lead to state income tax?

Steve Wolford
News3LV

July 3, 2019

On June 13, Governor State Sisolak signed a bill giving state employees the right to collective bargaining, but the Nevada Policy Research Institute says it may have put Nevada taxpayers on a trajectory that will increase the cost of government for state employees who work for agencies like the Nevada Department of Transportation and the Department of Motor Vehicles.

“The price tag associated with this is something that really worried us,” said NPRI Communications Director Michael Schaus. “simply because we’re already straining our budgets.”

Local union leaders disagree. Harry Schiffman, president of the American Federation of State County and Municipal Employees Local 4041 says it’s too soon to even know because a deal hasn’t even been negotiated yet, and safeguards are built-in to the law to keep raises in check.

“Even if they all agree to a deal, it’s still the governor,” said Schiffman, “the governor still has a say whether he agrees, or he wants to veto it or to change it, and also, it has to go back to the legislature.”

That’s something the NPRI says could be difficult to do because of the intense political pressure unions can exert on politicians, and eventually, the growing cost of state government could hit critical mass.

“The big concern is, sooner or later the income tax is going to be an issue that is going to be talked about simply because lawmakers are going to run out of existing revenue sources to keep on increasing our tap,” said Schaus.

Shiffman, however, says if a state income tax goes on the table in Nevada, collective bargaining won’t be the reason.

Quote of
the week

 


Quote:

“The big concern is, sooner or later the income tax is going to be an issue that is going to be talked about simply because lawmakers are going to run out of existing revenue sources to keep on increasing our tap.”

 Michael Schaus, Communications Director
Nevada Policy Research Institute

PUBLIC WORKER CONTRACTS SHOULD BE NEGOTIATED IN THE OPEN

Thomas Mitchell
Mesquite Local News

July 4, 2019

Despite being duly warned, Nevada’s Democratic lawmakers and Democratic governor this past legislative session lit the fuse on a huge budget bomb — passing and signing into law Senate Bill 135, which gives state public employees the right to collectively bargain for wages and benefits.

A study commissioned by the Las Vegas Metro Chamber of Commerce estimates this unionization could in two decades increase the cost of state public employees as much as $1.75 billion a year in inflation-adjusted dollars. The entire current general fund budget amounts to about $4 billion a year.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
Click here to unsubscribe 
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July 2, 2019
02 Jul 2019

Political Update – July 2, 2019

EDITORIAL: Why government pension plans are failing and what to do about it

Las Vegas Review-Journal

June 29, 2019

The stock market continues to flirt with record highs, yet government-run pension plans are far from fully funded. That should concern every taxpayer.

The Public Employees’ Retirement System of Nevada, which is officially only 75 percent funded, falls into that category. The funded ratio would be much lower if PERS were held to the same accounting standards that government regulators demand of private companies.

Starting on July 1, contribution rates are increasing to 29.25 percent for regular employees. That’s the fifth increase since 2009, when the rate was 20.5 percent. Government agencies (read: taxpayer) and employees split the contribution rate increase equally.

In a recent National Affairs article, Manhattan Institute senior fellow Josh McGee traces how government pension plans, such as PERS, have ended up in this precarious predicament.

The plans started small and promised modest benefits. For instance, PERS’ initial contribution rate in 1948 was 5 percent on the first $400 in salary. But rates didn’t stay that low in Nevada or around the country. Mr. McGee points out that employer pension costs grew from 9.6 percent to 16.9 percent of payroll from 1988 to 2017.

As workers grew older, the plans expanded by taking in new members. They also grew, because government hiring expanded rapidly. Unfortunately, governments didn’t fully fund the cost of their promises. Part of the reason was that plans unrealistically assumed they would earn investment returns of at least 8 percent annually. For instance, PERS assumed an 8 percent rate of return for decades, before lowering it to 7.5 percent last year.

An 8 percent rate of return wasn’t as risky during the 1980s, when interest rates were high. Pension plans could earn those returns primarily by investing in bonds. But as returns lagged, pension plans moved more money into stocks and hedge funds. Those are riskier, but offer higher returns. Currently, PERS’ target allocation is 72 percent of assets in stocks, real estate and private equity compared to just 28 percent in bonds. In 2003, PERS aimed for an even split between bonds and investments in stocks and real estate.

When the inevitable next downturn comes, it’s going to hit PERS harder than before, because the system has taken on greater risk.

“The upshot of this history is that public pensions are bigger and riskier than ever,” Mr. McGee writes. “Pension liabilities and debt have never been so large relative to taxpayers’ capacity to pay, and pension investments have never been so uncertain.”

All this should sound like alarm bells to an elected officials, starting with Gov. Steve Sisolak. Unfortunately, there’s little evidence he or most politicians — particularly Democrats — care to be bothered. They’re far more interested in currying favor with government unions, which shower them with campaign contributions in return for ignoring the issue and even expanding benefits. Or, in Nevada, for allowing PERS to keep confidential from taxpayers certain information regarding the pension payouts they are forced to fund.

Quote of
the week

 


Quote:

“[Politicians — particularly Democrats are] far more interested in currying favor with government unions, which shower them with campaign contributions in return for ignoring the issue and even expanding benefits.”

Las Vegas Review-Journal

Free Market Watch:
There is Nothing ‘Progressive’ About Big Government

Nevada Business
Michael Schaus 

July 1, 2019

If progressive voters really want the kind of “bold” and “transformative” changes big-government politicians keep promising, they had better change their voting habits. Despite the lofty-sounding rhetoric, there’s nothing inherently progressive—new, innovative or revolutionary—about the policy proposals being touted by big-government proponents. In fact, far from effecting sweeping change, such policies largely serve to cement the status quo. For a prime example, look no further than the education debate that took place in Nevada’s last legislative session.

Far from fundamentally transforming the state’s educational status quo, progressives doubled down on the very policies that have been failing Nevada’s youth, even going so far as to decimate the one innovative alternative available to low income students: Opportunity Scholarships.

Far from embracing any bold innovation to the way we deliver education in Nevada, progressives actively worked to erode any educational reform or program that didn’t enrich the same government special-interests that have been running the show for decades. Public schools received more funding, scholarships for low-income students were kneecapped and, at one point, even public charter schools found themselves in the cross-hairs of “progressive” politicians. In other words, it was “more of the same” from the education establishment that has run public education into the ground—and it was hailed as a victory by “progressive” activists and lawmakers.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

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June 25, 2019
25 Jun 2019

Political Update – June 25, 2019

Nevada Embraces Public Unions

Democrats let state employees collectively bargain. Watch out for a state income tax.

The Editorial Board
The Wall Street Journal

June 20, 2019

Nevada taxpayers had a good 54-year run, but this month their luck ran out. The state Legislature recently overrode a 1965 ban on collectively bargaining for state employees. Gov. Steve Sisolak has signed the bill, and watch now for a tax-and-spend ratchet to accelerate in one of the nine states without a tax on wage and salary income.

The legislation means the state’s 20,000 or so public employees can be represented by a union to negotiate wages, pensions and work rules. The law is a huge payoff for the unions that supported Mr. Sisolak and the Democratic legislative majorities that swept to power in November.

In effect the unions will now be on both sides of the negotiating table as they demand more money from the Governor they helped elect. Taxpayers won’t be represented because Mr. Sisolak will want to reward his union benefactors. This is why public unions differ from industrial unions that negotiate with a single private employer, and why Franklin Roosevelt opposed unions for public workers.

Nevada Democrats claim the law includes checks on wage and benefit increases. If Mr. Sisolak doesn’t like the result of negotiations, he can include “any amount of money that the Governor deems appropriate” in his proposed budget. A collective-bargaining agreement must also include a clause stipulating that “any provision” that “requires the Legislature to appropriate money is effective only to the extent of the legislative appropriation.”

But in practice this merely means that Democrats in the Legislature will have to be involved in the bargaining. And their incentive is to reward the unions too. Labor negotiations are exempt from the state’s open-meeting requirements, so the deal will emerge from the backrooms as a fait accompli.

This is the way it always works. Illinois and Connecticut are classic examples as public unions effectively run the state governments. In both states unfunded pension liabilities are more than 45% of the gross state product, according to the American Legislative Exchange Council. Illinois Democrats are now trying to kill the state’s constitutional flat income-tax rate, and Connecticut is raising taxes again, as taxpayers flee to lower-tax climes.

The Las Vegas Metro Chamber of Commerce estimates that Nevada can expect to spend an additional $1.7 billion to $1.75 billion annually by 2036. That comes to $579 to $596 per resident a year. Mr. Sisolak won’t admit it, but in signing this bill he has started the clock ticking on the date that unions and Democrats lobby to impose a state income tax.

Quote of
the week

 


Quote:

“In effect the unions will now be on both sides of the negotiating table as they demand more money from the Governor they helped elect. Taxpayers won’t be represented because Mr. Sisolak will want to reward his union benefactors.”

The Wall Street Journal

EDITORIAL:
Let Nevada taxpayers in
on collective bargaining talks

Las Vegas Review-Journal 

June 23, 2019

The legacy legislation that emerged from the 2019 session will be the bill allowing state workers to collectively bargain.

Long sought by Nevada’s public employee unions, the concept nevertheless languished for decades — even under previous Democratic governors, who feared the inevitable budget ramifications. But government lobbyists had their way in Carson City this year after labor helped Democrats gain large majorities in both legislative houses last November. On June 12, Democratic Gov. Steve Sisolak signed Senate Bill 135, giving state workers the right to bargain for wages and benefits.

The bill includes a provision allowing the governor to ignore any deal for financial reasons. That’s a tacit admission that allowing collective bargaining for government workers is a recipe for fiscal disaster, laying the groundwork for ever-escalating compensation costs and spiraling budgets, crowding other spending. Just ask Illinois … or Connecticut … or New York … or any progressive jurisdiction. But even that limiting codicil will have minimal effect. Abiding by the results of any negotiation will become a litmus test that will determine the political fate of legislative Democrats and gubernatorial candidates. 

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

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June 18, 2019
18 Jun 2019

Political Update – June 18, 2019

FILE SUIT TO UPHOLD TWO-THIRDS VOTE REQUIREMENT FOR TAXES

Thomas Mitchell
Mesquite Local News

June 13, 2019

So, the governor is confident that the extension of the modified business tax rate will withstand a legal challenge, according to both the Las Vegas newspaper and the online Nevada Independent.

“We’ve got legal opinion from LCB (Legislative Counsel Bureau) that, you know, a simple majority is what’s needed,” Gov. Steve Sisolak was quoted as saying this past week. “I’ve been in government for 20 some-odd years, and if you don’t trust your attorneys, you’ve got a problem. So I’m confident that the attorneys gave us a good opinion. We’ll move forward from there.”

Be prepared to move back, governor, by nearly $100 million in your budget for the next two years — the budget that promises 5 percent raises for teachers.

Republicans have promised a legal challenge if the business tax were extended without a two-thirds majority of both houses as prescribed by the Constitution. The tax extension passed the Senate on a party line vote of 13-8, one vote shy of two-thirds.

Voters in 1994 and 1996 amended the Nevada Constitution to state “an affirmative vote of not fewer than two-thirds of the members elected to each House is necessary to pass a bill or joint resolution which creates, generates, or increases any public revenue in any form, including but not limited to taxes, fees, assessments and rates, or changes in the computation bases for taxes, fees, assessments and rates.”

The modified business tax passed in 2015 by a two-thirds vote of lawmakers contained specific language saying the rates would be reduced in 2019 if tax revenues exceeded a certain level, which they have.

But the compliant LCB told the majority Democratic lawmakers and the Democratic governor, “It is the opinion of this office that Nevada’s two-thirds majority requirement does not apply to a bill which extends until a later date or revises or eliminates a future decrease in or future expiration of existing state taxes when that future decrease or expiration is not legally operative and binding yet, because such a bill does not change but maintains the existing computation bases currently in effect for the existing state taxes.”

The bill clearly “generates” revenue that two-thirds of the lawmakers in 2015 said would decrease as of July 1, 2019.

The state Constitution is not something to tamper with. Republicans should take it to court and make the Democrats abide by the rules, even if it means a special session would have to called. In fact, the GOP lawmakers should go directly to the state Supreme Court for an opinion that would be binding, unlike the LCB opinion “that future decrease or expiration is not legally operative and binding yet …”

Asked nearly the same question in 2011, 2013 and 2015, the LCB said a two-thirds vote was necessary. So, governor, when do you trust your attorneys? Now or then?

Republican lawmakers should join forces with those who will be paying the tax — Nevada businesses — and sue at the earliest possible convenience to defend the state Constitution. Randi Thompson, a lobbyist for the National Federation of Independent Business, has told the Las Vegas newspaper the organization is looking at the option of filing suit. Perhaps, the conservative Nevada Policy Research Institute can join the fray. The more the merrier. —TM

*NEW*

Quote of
the week

 


Quote:

“Republican lawmakers should join forces with those who will be paying the tax — Nevada businesses — and sue at the earliest possible convenience to defend the state Constitution.”

Thomas Mitchell
Mesquite Local News

EDITORIAL: Raising the sales tax for schools or the Culinary union?

Las Vegas Review-Journal 

June 10, 2019

Confusion, maneuvering and chicanery traditionally mark the conclusion of each biennial legislative session in Carson City. This year was no exception as lawmakers adjourned last week. Consider the hijacking of Assembly Bill 309.

Self-described public education and social justice advocates lauded the passage of AB309 because it authorizes the Clark County Commission to increase the sales tax by 0.25 of a percentage point to raise more money for schools and homelessness. The law allows the tax hike — which could generate $108 million a year — to be imposed through either a two-thirds vote of the commission itself or via a ballot measure put to Southern Nevada voters.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

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June 11, 2019
11 Jun 2019

Political Update – June 11, 2019

EDITORIAL: Nevada Republicans should sue over illegal tax increase

Las Vegas Review-Journal

June 6, 2019

The state constitution won’t defend itself. That’s why Senate Republicans must go to court to challenge efforts by legislative Democrats to brazenly ignore the voter-imposed supermajority requirement for tax hikes.

On Monday, Democrats approved Senate Bill 551, an extension of the current Modified Business Tax rate. It was scheduled to decrease as a result of higher-than-anticipated revenues from the Commerce Tax. But despite a record tax take, Gov. Steve Sisolak’s budget proposal sought to kill the sunset.

The Nevada Constitution requires that any bill which “creates, generates or increases any public revenue in any form,” receive a two-thirds vote in both legislative houses. A bill that nixes the proposed tax reduction clearly “generates” revenue. That’s the whole point, after all.

Democrats have a supermajority in the Assembly, but are one vote shy in the Senate. So the majority leadership sought cover from the pliable attorneys at the Legislative Counsel Bureau, which provides legal advice to lawmakers. The LCB obliged with a nonbinding opinion declaring that extending a levy’s existing rate doesn’t trigger the two-thirds requirement. Democrats took that as a green light to approve the tax increase in the Senate by a simple majority.

It’s worth noting that the LCB reached the opposite conclusion in 2011, 2013 and 2015 regarding similar bills.

The LCB’s flip-flop was the result of political pressure rather than lucid legal reasoning. Democrats have long chafed at the two-thirds restraint, which Nevada voters twice approved overwhelmingly during the 1990s. The state’s political elite has sought to avoid or erode the mandate for decades.

*NEW*

Quote of
the week

 


Quote:

“The alternative is to allow the LCB and legislative Democrats to flout the constitution and the will of voters by declaring for sheer political convenience that the plain English of the two-thirds requirement doesn’t mean what it says.”

Las Vegas Review-Journal

EDITORIAL: Nevada Democrats show themselves to be the party of the public sector

Las Vegas Review-Journal 

June 8, 2019

Wall Street Journal columnist Daniel Henninger has spent years chronicling how the Democrats have devolved into the “party of the state and the public sector” through the ascension of powerful government unions, “whose lifeblood is tax revenue.”

His observations might neatly describe the recently concluded 2019 session of the Nevada Legislature.

Keystone’s Mission:

To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services.

Keystone’s Mission:

• To focus on candidate support on state legislative races and the governor’s office.
• To oppose any form of corporate income taxes or other business taxes that discourage capital investment and therefore job creation.
• Support limiting Nevada state government spending to the rate of population growth.

P.O. Box 93596 | Las Vegas, NV 89193-3596

To ensure that you continue receiving email updates,

please add Info@KeystoneNevada.com to your address book or safe list.
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