blank.gif (51 bytes) January/February 2000
State of the Nostrum

Guinn’s Big Review Increasingly
Looks Like Window-Dressing

by Del Tartikoff

n his 1999 State of the State address, Kenny Guinn promised Nevadans that his administration would conduct "the most comprehensive review of state government" in Silver State history. He assured us the review would ask the key questions Nevada has so long needed-questions like "What is the proper role of government?" and "What services must we provide?"

Only after those questions were asked and answered, the new governor assured us, would the subject of taxes be considered.

For tax-weary Nevadans, it sounded great. At last, it seemed, we had a governor who lived in the real world—someone who understood that Nevada, for most of its citizens, has in the last two decades become a high-tax state.

Guinn, it appeared, recognized that Nevada's always-growing tax burden is not only a direct expression of runaway government growth, but hampers the state's economic development and diversification.

Public Relations Exercise

Since Guinn's inauguration, however, rising from the governor's Carson City mansion has been a large number of what look like trial balloons. Watching them, Nevadans grow uneasy.

It's the constant theme of the "balloons" that produces the unease. Whether it was press interviews given by Guinn himself or speeches by his then-chief of staff, Pete Ernaut, virtually all have managed to suggest that the state will "need" to raise taxes.

The most common example is Guinn's oft-repeated intention to produce a long-range plan to "restructure" Nevada's tax base.

"Guinn ... reiterated that he'll have a plan to restructure Nevada's tax base before the next Legislature starts in January 2001," wrote Jane Ann Morrison of the Las Vegas Review-Journal after a July interview with the governor.

But as close observers of the political scene know, in the Silver State today "restructuring Nevada's tax base" is code language for hiking taxes on ordinary Nevadans. This has been made very clear by the Nevada State Education Association and the Nevada Resort Association for the last 10 years. In both the press and the Legislature they've argued that Nevada has a "structural revenue deficit"—i.e., too low a tax burden—and so needs a "broader" tax base—i.e., new taxes on anyone but gaming.

The fact that Gov. Guinn has repeatedly, over the course of the last year, insisted on publicly characterizing Nevada's revenue situation in the same terms as used by the NSEA-NRA partnership is serious stuff. Given such a definition of the "problem," higher taxes are the only possible solution.

Intends Bigger Government

Theoretically, of course, a "restructured tax base" could remain revenue-neutral or even drop in terms of total tax take. But Guinn doesn't talk that way. What he wants to finance, he said in a mid-September interview with Carson City AP Bureau Chief Brendan Riley, is larger government:

 "The Republican governor said the potential for the quick expansion [of Indian gambling in California] ... shows the need for Nevada to have a plan for government growth that's not heavily dependent on casino-related taxes (emphasis added)."

As when the Jane Ann Morrison story was published in July, Guinn's comments here preceded even the first meeting of his so-called "fundamental review" committee. More formally known as the "Governor's Steering Committee to Conduct a Fundamental Review of State Government," the panel, Guinn promised Nevadans, would address questions about appropriate levels of government services. Yet virtually every time Guinn spoke to the public in 1999, he acted as though those questions had already been resolved to his own satisfaction.

Of course, what that would mean is that the whole "fundamental review" process is empty—little more than a public relations ploy.

Surprisingly, the governor's own chief of staff virtually said as much last December.

"The fundamental review of the budget," said Ernaut, according to a Dec. 9 report in the Las Vegas Review-Journal, "is intended to show the public that the state is spending wisely the money it already has, so if new revenues are needed, taxpayers will be confident that a tax increase is justified."

Note that the primary purpose of the "fundamental review" is candidly defined as a public relations effort—preparing the public to accept a tax increase, should it be "needed." Note also that the governor's chief of staff didn't even pretend that the review might suggest anything to reduce the scope of state government.

Given the high hopes that Nevada's free-market Republicans have had for this governor, many probably would be inclined to hope that Ernaut was only speaking for himself.

It doesn't look that way. Guinn's own remarks just a few days later—in an extensive year-end interview given AP bureau chief Riley—show the governor has already devoted significant thought to how to sell a tax hike.

"Everything's a hard sell and it should be a hard sell," said Guinn, when asked about getting public support for a tax increase. "But my job is not to make all the decisions. It's to lay out the circumstances. Good leadership is a person who defines the constraints that you're operating under.

"If we're going to say there's no more revenue stream, then I say, 'OK, where do we cut?' But if you can show (the public) the backup material on the state's needs, they'll be more helpful than you could ever imagine," said Guinn.

Clearly the governor and Ernaut were on the same wave length last December: Almost a year before the "fundamental review" panel's final report is due, both men had settled on the same strategy for getting Nevadans to accept new taxes.

But surely this was only contingency planning, right? Everything awaits the report of "the most comprehensive review of state government in our state's history" doesn't it? And didn't Guinn say the review was going to first ask basic questions about the proper role of government and what services must we provide?

Unfortunately, reports from the "fundamental review" front indicate that little going on there is actually "fundamental." Ominously, most of the state budget was excluded from the purview of the "Steering Committee to Conduct a Fundamental Review of State Government." Not even included in the original schedule for review were the university system and K-12 education—the two largest areas of the state budget that together suck up over 55 percent of the state general fund.

Later, at member initiative, two facets of education expense—mushrooming special education costs and the state's commitment to the dubious class-size reduction program—were added by the panel to its tentative schedule. Yet the great bulk of state education-related expense remains exempt from consideration.

The people Guinn selected for his "fundamental review" steering committee are another piece of evidence that the panel was never intended to actually produce any serious proposals likely to challenge the status quo in any important respect.

Of the 16 appointees to the steering committee, the largest group, six, are current employees of state or local government. Five more are elected politicians—including Culinary shop steward Maggie Carlton and Assembly Assistant Majority Leader David Parks. Of the remaining five presumed representatives of the business community, four are familiar names who may on occasion tip their hats in the direction of limited government, but can be counted on to never make a serious fuss. It is similar with key staff. Most are longtime government employees who by their nature will rarely find any government function inappropriate.

The steering committee's meetings also themselves do not inspire confidence. According to committee minutes, those sessions largely consist of members assembling every couple of months to sit before teams of state bureaucrats for a day. The bureaucrats then "explain" to the panel members why the bureaucrats' particular departments should receive increased funding. According to the committee minutes, most panel members themselves rarely even speak—an impression confirmed by visitors to the sessions.

Either intentionally or unintentionally, Kenny Guinn had structured his "fundamental review" process in a way that appears to make it quite unlikely that it will come up with any essentially novel ideas that could save the State of Nevada significant money. A glance at the review committee's minutes suggests the body will probably produce some good recommendations for minor administrative reforms, but nothing "radical"—nothing that would break with the "centrist Democrat" rut that Guinn's friend Bob Miller followed for the last 10 years and that the new governor himself followed last year.

Doing the Bob Miller

Not only did Guinn present the Legislature with a state budget 10 percent larger than Miller's final offering, he also introduced a brand-new and perpetual entitlement—the politically juicy but educationally dubious Millennium Scholarships. (As for dealing with the real sources of Nevada's educational problems—the state's uncompetitive, union-dominated K-12 schools—Guinn failed to even answer the bell.) In other words, at the same time Nevada's new governor was drafting remarks in his State of the State address bemoaning limited state revenues, he himself was also galloping to spend tens of millions the state did not even have, but only expected—the national tobacco settlement.

No clearer illustration could exist that Nevada's problem is not a lack of stability in the state's tax base. No, it's a lack of stability in the tax spenders. Whenever revenues even start to rise, state pols—governors and legislators alike—immediately crowd into the bill drafters' office in Carson City, waving schemes to use public money to make themselves look good.

Even as this article is being finalized, it's happening again. Despite administration poor-mouthing all last year about expected revenues, in early February this year the state budget department announced that Nevada could have a budget surplus of $155 million by June. That's roughly double the amount that was projected during the 1999 legislature, and stems from strong growth in casino and sales taxes.

Yet already it is conventional wisdom in Carson City that any such surplus will immediately be spent by the politicians. Consider these paragraphs from a report by longtime Carson City AP bureau chief Riley:

If there are no big surprises ... the budget surplus will be even bigger than $155 million by June 2001.

That means the 2001 Legislature would have a lot more money for 'one-shot' or special projects than the 1999 Legislature did. That's typically what such surplus funds are used for. (emphasis added)

[State Budget Director] Comeaux noted that during the 1999 session there was far less money available for one-shots....

Although Nevada has now endured two decades of always-rising taxes, the looting frenzy in the state capital rampages on, unimpeded. Any surpluses are immediately spent and then the thoroughly dishonest bleating—"Insufficient revenues! Lack of a stable tax base! Structural deficit!"— always begins anew.

In truth, all Nevada needs is some garlic to keep the special-interest vampires away from the Legislature. Or, in more pedestrian terms, some kind of powerful institutional brake on politician spending. A measure like the initiative passed by Washington state voters last fall—requiring public approval of all tax and fee increases—would fill the bill nicely.

It is Kenny Guinn's silence on the real sources of budget pressures, like his own eagerness to take taxpayers' money for feel-good politics, that convinces many Nevadans that his election-year posture as a champion of minimal government was just a cynical ploy to attain power.

Guinn the Tax-Raiser

There is also the historical fact that Guinn has a long unacknowleged record as a tax-raiser. During his 1998 debates with Jan Jones, he took her to task for allegedly helping push up the Las Vegas property tax several times during her mayoral term. But the actual record, as columnist Jon Ralston noted, is that, "No private citizen and perhaps no elected official has advocated for more property tax increases during the past decade or more than Guinn, who has fronted for every bond issue that has come along."

The Las Vegas Business Press made a similar point last year when the governor criticized raising taxes through the initiative process:

"Guinn's stance is hypocritical in light of his past support for tax-related measures that required a vote of the people. Before he became governor, Guinn played a major role in the campaigns for bond issues to increase Metro Police staffing and to build a regional justice center."

Finally, recall the effort a decade ago by then-Gov. Bob Miller to impose higher taxes on Nevadans? Active as point man for that effort was none other than Kenny Guinn. Miller and Guinn lined up with the Nevada Resort Association and the Nevada State Education Association, both of which, as always, were raising a din for tax hikes on Nevada's non-gaming businesses. In 1989 Miller appointed Guinn chairman of a committee of citizens named to "study" the question of taxes, and sure enough the Guinn-led committee dutifully endorsed both a big tax on Nevada businesses and a sales tax on services. The similarity to the governor's "fundamental review" strategy today is not encouraging.

The next year Guinn toured the state, preaching the NSEA-NRA line. He told a Reno business group that the state needed higher sales taxes because the economy was not keeping up with demand for services. It's the same argument Guinn used earlier this year in a phone conversation with NPRI President Judy Cresanta.

"Everybody knows that growth doesn't pay for itself," Guinn emphatically declared, recalls Cresanta.

When the Legislature met in 1991, Guinn went before it to testify for Miller's proposal for a 1 percent business activity tax. Casino interests had endorsed the idea but lawmakers chose instead a business employee tax—which Miller, Guinn and the casino bosses then got behind.

Given the yeoman service that Kenny Guinn performed for the resort industry a decade ago when it wanted a tax hike on general business, it's natural to wonder what kind of assurances he was giving industry donors during the 1998 election. There is little doubt that Guinn made it known that he shared the industry's opposition to a higher state gaming tax. But did he also express support for the gamers' other objective—getting another, bigger, tax imposed on Nevada's non-gaming businesses?

Given Guinn's behavior in the early '90s—plus his own position for years as a gaming-industry insider on the board of Boyd Gaming—it would have been a natural promise for him to give. For those same reasons, such assurances would have also had solid credibility with the gamers.

The unprecedented cash avalanche with which the casino industry subsequently "annointed" Guinn suggests that, behind closed doors, he did in fact make the commitment. That would be the simplest explanation for the remarkable string of hints and clues that have emerged from this nominally Republican administration over the past year.

If Kenny Guinn is not out to increase the tax burden on Nevadans, it is long past time for him to explain just what he is up to.  NJ


Del Tartikoff, a transplanted New Yorker, publishes the web newspaper Electric Nevada. Nevada Journal Managing Editor Steven Miller contributed to this article.


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