Nevada Goes Bust
All across state and local government services, from healthcare through public safety, the news is just as bleak. There's talk of shuttering Nevada's twenty-five state parks, and pushing firefighters and police officers to accept rollbacks to their pension benefits. Several DMV offices have shut, causing long lines at the few that remain. Gibbons and other top state officials have openly pondered the possibility of closing the Nevada State Prison, in Carson City, not because the state has dramatically decreased its prison population but because it can't afford to keep its antiquated facilities open and staffed. And huge cuts have been implemented at the county and city levels. Carson City officials slashed the city budget by 10 percent in March, resulting in the loss of nearly thirty public-safety jobs. In Las Vegas, the police department has lost $40 million over the past year alone, with more cuts likely on the way. In April, the sheriff announced a reduction in his force of nearly seventy officers.
Last year, the Reno-based Desert Research Institute lost hundreds of thousands of dollars used to fund an innovative cloud-seeding program that scientific supporters argue increases the snow yield of winter storms, and thus the state's precious water supply, by 5 to 15 percent. This year, university campuses have been slashing an assortment of majors, firing support staff, eliminating departments. Class sizes in schools are up; year-round school has been rescheduled to nine months. The Nevada Conservation League reports that the state reduced the Department of Wildlife's diversity program by nearly $800,000 (a cut of approximately 50 percent), sacrificing $2.4 million in federal matching funds in the process.
Teachers, who have already agreed to a freeze on some salary increases, may soon be asked by cash-strapped local school districts to accept more reductions. Rancho's principal, James Kuzma—an enthusiastic leader and animated speaker, whose brushed-back brown hair, pressed shirt, patterned tie and black trousers make him look a bit like an up-and-coming politician—had been hoping to plug the holes over the coming years with federal Race to the Top grants. Nevada didn't qualify for those funds, but the likely state cuts to education are so large that even if the application had been accepted, Race to the Top money would have been only a Band-Aid on an increasingly gaping wound. Similarly, the recent influx of $83 million in education funds (allocated to Nevada through the federal jobs bill Obama signed in August) can buy only so much time. More than 1,000 teaching positions were recently eliminated in Clark County, dominated by Las Vegas, and at Washoe County School District there had been talk of losing up to 1,500 teaching positions. The influx of federal money has allowed both districts to hire new teachers this year. But Kuzma, whose school is part of Clark County School District, worries that he might lose more teachers once federal stimulus money goes away, especially now that the state is out of the running for Race to the Top funds. His worst-case scenario? Rancho could "see class sizes go up for students already at risk regarding graduation to begin with. Kids this age need a place where they feel they belong. All those extra things—sports, fine arts—give students a place to belong. Those things may be the things keeping you here. When they go away, it increases the chance you won't want to come back to school."
And all of this might be only the first course presaging a feast of cuts to come.
Most analysts believe that Nevada is facing a shortfall of about $3.4 billion for the coming two-year budget cycle—meaning it does not have the revenues to fund about 50 percent of its current obligations. The state thus confronts a crossroads moment: find ways to stabilize and increase its tax base to at least partially plug these holes or face a rollback of government services unprecedented in the modern era. The Silver State is constitutionally required to balance its budget and prohibited from imposing a state income tax; it does not have a stable, across-the-board business tax and is being buffeted by increasingly strong anti-tax winds from the Tea Party movement. For all these reasons, a 50 percent revenue shortfall means the state would face the fiscal equivalent of a St. Valentine's Day massacre: line up large state programs, have them face the wall, mow them down. (Were California in a similar position, its budget would have to shrink to $50 billion from the already denuded $80 billion that is being talked about as the new bottom line.)
"It's going to be much more difficult to raise taxes this year," Governor Gibbons argues. "The American populace, including Nevadans, aren't enamored of raising taxes. They're more keen on reducing government expenditure. Government's not going to look the same. It's not going to be the same. We have to all roll up our sleeves, get out of the wagon and push."
Wild West homilies aside, however, it's not at all clear that a little bit of good will and a sense of shared sacrifice will be enough to get Nevada through this crisis. After all, when it comes to government spending, it's not as if Nevada is starting from a high plateau. According to data generated by the Progressive Leadership Alliance of Nevada (PLAN), the state ranks at or near the bottom for proportions of state GDP controlled by the government or allocated to general fund expenditures. On a white board in PLAN's Reno offices, in a beautiful old building on the north side of the Truckee River—the city's moneyed elite live across the way, in mansions on the bluffs above the south shore—is a chart comparing states' GDPs and expenditures. In 2007, when Nevada was still flush, it had a $127.2 billion GDP; of that, total state expenditures (general fund spending plus miscellaneous other expenditures) came to $8.2 billion, a mere 6.4 percent of state GDP. According to the chart, Nevada ranked fiftieth in the country when it came to the percentage of GDP spent by the state. It also ranked dead last for the number of state employees per 1,000 residents.
Put simply, after decades of underinvesting in vital public infrastructure, there just isn't much fat to trim on this particular cut of meat. "What is so hard," says Assemblywoman Debbie Smith, "is right now we're forty-ninth in the nation for K-12 education funding, and we don't suitably fund mental health services, and on and on. That's what's so stunning about where we are. We've gotten down to bare bones. You get to a place where you have to look at closing offices and eliminating services. It's brutal."
The situation is so brutal, says Mary Lau, president and CEO of the Retail Association of Nevada, that without new taxes Nevada's decision-makers could eliminate all spending not related to education or health and human services—including all funding for police, prisons, highway patrol and the like—and still be left with a budget deficit. Lau argues that the state can't cut its way out of trouble; it has to agree on new tax sources to raise additional funds. Like many analysts, she supports a tax on services in the state, making last year's temporary tax hikes permanent, perhaps some additional taxes on businesses. "I don't think you can say, 'Screw you and the donkey you rode in on—no new taxes!' You still have to maintain a certain level of government services." You have to fund schools adequately, for example, if you want the state to attract a growth industry like green tech, which state boosters believe might offer Nevada a way out of the economic wilderness but which requires highly skilled workers.
Outside Republican government circles, most of Nevada's major institutional players accept the need for more taxes. They just can't agree on what to tax or how to sell the idea to a skeptical public. The Mining Association, riding high on $1,200 per ounce gold prices, agreed to some tax increases last year; but it fiercely resisted PLAN's push to get voters to approve an initiative that would tax gold-mining profits at a higher rate, instead preferring a general business tax. (Launce Rake, the 47-year-old communications director of PLAN's Las Vegas office, says the group may revisit this initiative and thinks rising public support has improved its prospects for future passage.) The Manufacturers Association is wary of implementing taxes considering a forthcoming increase in unemployment insurance. And the Reno-Sparks Chamber of Commerce recognizes the need for the state to have quality schools in order to attract educated workers and their families, yet it balks at the imposition of new corporate taxes, preferring to rely on cost-saving suggestions generated by a spending and efficiency commission established by Governor Gibbons in 2008. Meanwhile, nobody believes the public would be willing to overturn the constitutional prohibition on a state income tax.
"I'm not sure the electorate understands just how deep this deficit is," says Josh Hicks, "and how much of a risk of reduced government services we're facing regarding schools, public safety and even healthcare. There's serious exposure to federal lawsuits around education and healthcare, because there are mandates in those areas." Lau shares the sentiment. "I don't know how the public gets educated and how you articulate a defense of government," she says in bewilderment. "The public doesn't quite get that."
At his more optimistic moments, George Flint thinks he might have the answer. The flamboyant 76-year-old is the lobbyist in Carson City for the state's brothel owners. He suggests imposing a $5 or $6 entrance-fee tax on visitors to the state's famed houses of ill repute. (The brothel owners, he said, would gladly accept a small tax on their business if it granted them more legitimacy and made it that much harder for antibrothel politicians to propose outlawing them in the future.) But, he says glumly, sipping an Absolut on the rocks, since prostitution is illegal within Las Vegas city limits, and since the vast bulk of the state's paid sexual transactions actually occur in Sin City, that would make only a dent in the state's budget deficit even if you could simultaneously legalize mega-brothels in Las Vegas. And that, he says with a twinge of realpolitik regret, probably isn't going to happen anytime soon.
And so, absent a viable route to increased tax revenues, the state is left with little option but to slash and burn its way through the deficits, undermining its future in order to try to save its present.
Rake, a phlegmatic ex-journalist, calls it a "Hurricane Katrina in slow motion." He leans back in his swivel chair and looks out of his chaotic, paper-and-detritus-strewn office a few hundred meters north of the Stratosphere Hotel, at the dilapidated northern end of the strip. Used to be, he says nostalgically, people's image of Las Vegas was one of glamour and glitz. These days, one of the most popular shows on cable television is Pawn Stars. And where is it filmed? In the pawn shop on the street below his window. It is, Rake figures, a suitable symbol of his state's decline.