Employment, Economy, Taxes: A Look At The State Of The State

Surging Population, Property Tax Spikes, State Coffers Overflowing, High Employment

by Johnny Gunn

Nevada's economy is robust, at least according to figures released by the Department of Employment, Training, and Rehabilitation, but there are shadows creeping across the horizon according to some in government. While 75,000 new jobs have been created in the last year, while unemployment is at a very low 3.9 percent statewide, property taxes have been skyrocketing, roads and highways have been crumbling, and greenbelts have been disappearing.

On the other hand, Nevadans have been spending their paychecks in record amounts. The Nevada Taxation Department reports that taxable sales have risen in 2005 by 14.3 percent. The Economic Council will meet May 2 to forecast the state's economy. As we go to press, the council's current projections are off by as much as $27 million.

Taxable sales in February 2005 are 10.9 percent ahead of February 2004, and that means Nevadans spent $3.2 billion this February. Governor Kenny Guinn says, "Nevada once again continues to make positive gains in its economy."

Organizations like the Economic Development Authority of Northern Nevada (EDAWN) and its counterparts around the state, hail the arrival of new companies and businesses that offer high paying jobs to well educated employees while the state has an education system that ranks in the bottom ten percent of education systems in the country.

There are dichotomies at every step in Nevada's economy, and while full employment is generally considered a favorable part of a healthy economy, the economic factors that lead to it can bring problems in other areas. We see that daily in Clark County with schools bursting at the seams, roads virtually at a mid-twentieth century level, and building continuing at a mad pace. Highways being built today were designed a quarter of a century ago. They are, to put it simply, inadequate.

In its latest release the Department of Employment says there were 1.16 million people employed in Nevada in March of this year, an increase of 3.3 percent from March 2004. About 48,000 Nevadans were out of work in March 2005.

Las Vegas reported an unemployment rate of 3.9 percent, Reno at 3.8 percent, and Elko 3.5 percent. The national unemployment rate is 5.2 percent, and California's rate is 5.8 percent. Job growth rate in Nevada, according to Birgit Baker, employment division director is 6.8 percent, the highest in the nation.

Population figures in the Silver State also continue to grow fueled by Nevada's fine weather, lack of personal income tax, and an affordable housing market. This has led to skyrocketing property values bringing skyrocketing property taxes. The Legislature has addressed the issue with a cap on tax increases, but there is an intense struggle going on, not only in the legislature but in the business community as well, to do more.

The fight over taxes began in the 2003 Legislature when Governor Kenny Guinn shoved a massive tax increase through the session, leading to court battles all the way to the Supreme Court. Many in his own Republican Party still feel betrayed. Among them, former Assemblyman, now Senator Bob Beers (R-Las Vegas). Beers was leading a charge to change the entire tax structure of the state, to create a taxpayer bill of rights similar to Colorado's (click here), and possibly even as stringent as California's Proposition 13.

Under Beers' proposed amendment, taxes would have been capped based on inflation and population. Beers' measure failed in committee. However, there is another tax plan that is still alive.

Under SJR 9, a resolution supported by Assemblyman Lynn Hettrick, government spending is limited by way of growth of personal income, but there is an out for the Legislature. If a proposed tax doesn't meet the requirements based on personal income, the legislature can, by way of a super majority of two-thirds vote, override the cap.

Population is at the heart of the tax problem in Nevada. In nearby California, homes are priced out of the market for the majority of middle income people. Many home owners have found they can sell a home in California for an extravagant amount of money and move to Nevada and buy a home as good or better for far less money.

This has brought about much higher prices for homes in Nevada and has led to massive increases in assessed valuation for tax purposes. Clark County is home to 1.65 million people while the state as a whole has a population of 2.3 million. Growth in Nevada is at 4.1 percent, more than any other state in the nation. Washoe County's population stands at 380,754.

While we tend to think of Clark County as leading the way in population growth, and they do as far as shear numbers are concerned, it's Lyon County, southeast of Washoe that leads in percentage growth. Lyon grew by 7.2 percent from 2003 to 2004, the little hamlet of Fernley has incorporated, and schools are becoming overcrowded.

Part of the reason for the growth is industry. Large distributing companies such as Amazon.Com have built in the area, Sherwin Williams Paints is planning to build, Quebacor has printing and distribution facilities, and growth can be seen on a day to day basis. The latest estimate puts school enrollment in what used to be a sleepy little agricultural county at 8,132.

In Washoe County and many other counties in the state, an economic indicator used by city councils and county commissions, is the state of its gaming businesses. When a casino or hotel in Reno or Sparks closes, it is an indication that things aren't as rosy as they might be. In Fernley, a new glitter brightens the night with the opening of Pioneer Crossing Casino on the Fernley to Fallon highway. According to General Manager and partner Gordon Drendel, Fernley's growth and continued economic conditions, it was the right time.

Along with Drendel, the other partners in the property are Reno's Little Nugget owner Rick Heaney, Reno Attorney Mike Melarkey, and Las Vegas businessman Mike Benjamin.

Lyon County seat is Yerington along the banks of the Walker River, but population centers are now in Fernley, Dayton, and Silver Springs, all developing an industrial economic base.

The property tax hike law enacted by the current session of the Legislature and signed by Governor Guinn caps increases on private property at five percent and on business property at eight percent. Many in the rural counties feel left out of the picture. While property values in the large population centers have been skyrocketing, while Californians and others have been massing at the borders to buy property, the rural counties have been losing people. Property values in many of the least populated counties have decreased.

The least populated county in the state is Esmeralda County with Goldfield as its seat of government. Only 830 people lived there in 2004, 22 less than 2003. Besides Goldfield, the other communities of any size are Silver Peak, a mining community and off to the west, agricultural Dyer in Fish Lake Valley.

It seems that while Nevada has been growing by leaps and bounds with an economy as robust as any in the nation, it's the children who have been suffering. In report after report, Nevada's education system has been ranked at or near the bottom. The current session of the Legislature has not addressed this issue yet and we're more than half way, almost two thirds of the way through the regular session. The regular session is scheduled to end June 6.

In 2003, the legislature had to go through special sessions to find enough money to fund education, and in the meantime, Nevada's leading economic indicator, that is, gaming, is flourishing with billions of dollars being counted every quarter. Nevada's gaming industry pays less state tax for their privilege than in any other state with legalized gaming.

Legislators and gaming corporation officials must see this correlation. Cynics often say the gaming giants don't want thousands of really well educated children coming out of Silver State schools. They won't work for $6.00 an hour. Others say it's simply corporate greed that keeps the giants from pursuing a higher road. Regardless, it's the children of Nevada that suffer.

Interestingly, it's property taxes in Nevada that fund most of the education system. School systems throughout the state have been reported in poll after poll of being top heavy in administration, in having poor teacher to student ratios, and in particular of having very low per pupil funding. The federal No Child Left Behind Act has placed more than 200 Nevada schools on its watch list.

The amount of money that is spent, the way that money is spent, and the source of education money must be reevaluated if Nevada's children are expected to compete in the 21st Century.

Department of Employment, Training, and Rehabilitation Director Birgit Baker said recently that there would be a huge spike in employment when Steve Wynn opened his new mega-casino in Las Vegas. That casino -- Wynn Las Vegas -- began operating April 28th. Wynn hired thousands of new employees, and as the old saw goes, gamers don't build these glitter gulch resorts because tourists win lots of money.

Is the Colorado approach to state taxes the right way to go? Is California's Proposition 13 more likely to be right for Nevada? Or can compromise in the Legislature answer some of these questions? SJR 9 might be right. SJR 5 wasn't accepted. If SJR 9 makes the grade, it will have to be voted on by the public and passed again the legislature before it becomes a full constitutional amendment.

According to the Taxation Department, general merchandise sales in February were up 10.2 percent while automobile sales and gasoline spending was up 10.8 percent. Storey County still suffering from heavy snowfall and a lack of tourists to Virginia City faced a 22.4 percent decrease in taxable sales.

Overall, the sales tax brought $242.8 million to the state's coffers, to be split with state needs, education, cities, and counties. The state will get $66.2 million from February sales.

If you have an opinion on this, yea, nay, or otherwise, let your legislative representative know it.

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