By Ron Knecht
Nevada State Controller
When I ran for Controller, I said I’d post a monthly Controller’s report. Less than a month into my term, the first one is on the Controller’s web site. In sum, it says:
1) Nevada does not have a problem of insufficient revenues. The problem is a failure to reasonably manage state spending. The spending burden on taxpayers has increased 10% in real terms in the last decade. Inflation and population growth, etc. do not explain that uptick because 10% is the increase in taxpayer burden over and above state spending increases caused by inflation and head-count growth. So, we need real cost-management reforms and improved services.
2) Nevada’s spending problem is part of a 60-year national trend of government being bigger than the levels that maximize economic growth and thus human well-being, and yet still continuing to grow relative to the economy and the incomes of families and businesses. Nevada is responsible for at least its share of this problem because its total taxpayer burden has grown to 25th or 26th among states, depending on how measured.
This comprehensive government over-reach has caused economic and job growth to slow over the last six decades and has led during the last six years to the slowest and worst recovery by far since the Great Depression. We would have much higher incomes and more jobs today if we had reasonably restrained the growth of government.
So, now public-sector growth faster than the growth of the economy is destructive of human well-being. Going forward, it is in the public interest to restrain state spending growth to rates lower than or equal to the growth of Nevada’s economy.
3) We should ignore misleading budget-cut claims by the special interests that benefit from public spending, and focus instead on the actual year-to-year spending levels. These data show that the 10% increase in taxpayer burden for overall state spending has been caused by huge increases in the two largest state spending categories, Health and Social Services (37%) and K-12 education (23%).
Some other major categories have declined greatly (such as general government at -18% and transportation by -51%). HSS spending has mainly been driven by federal mandate, but K-12 increases have been due to political agendas to pacify teacher unions.
And the great K-12 spending growth of a few years ago has not yielded any improvement in student achievement. So, the Governor’s proposals to repeat those mistakes with big new increments of K-12 spending should be rejected. Instead, we should adopt proven low- and no-cost policy improvements such as increasing parental choice, teacher merit pay and tenure reform.
The Governor’s proposed margins tax is one of the worst tax ideas, and it should be rejected. And we should embrace other reforms such as ending collective bargaining between local governments and unions, as well as eliminating prevailing-wage and project-labor-agreement practices that increase taxpayers’ project costs by as much as 20%. If new taxes are needed, we should consider hiking the gaming drop tax, which is paid by casino patrons and is lower in Nevada than any other significant gambling jurisdiction.
As a companion to my report, State Treasurer Dan Schwartz reviews a number of specific spending and revenue adjustments that could help turn the Governor’s flawed business-as-usual budget into one that serves the public interest. Dan’s piece, soon to be posted on the Treasurer’s web site, includes discussion of the options, plus policy reforms similar to those I listed. It is thoughtful and merits your close reading.
We solicit your consideration of these matters and your feedback.