Court decision changes footing on state budget

Fri, May 27, 2011 (9:19 a.m.)

Sun Coverage

CARSON CITY -- The Nevada Supreme Court decision Thursday prohibiting the state from pilfering local water fees for its general fund may have broken what until then appeared to be an unbreakable impasse on the budget.

How? By providing Republicans and Democrats enough political cover to develop a consensus spending plan.

While Although the court’s decision applied to a relatively small sum compared to with the billions at stake in the state budget -- $62 million from the Clean Water Coalition -- the broader precedent set by the court likely prevents Gov. Brian Sandoval and lawmakers from looking to local government to solve the budget woes.

To keep his no-new-taxes pledge, Sandoval had avoided more draconian cuts by relying heavily on money from local school districts and county governments. The court decision removes that option, opening up at least a $500 million hole in the governor’s proposed budget. Loath to cut further into struggling state services and with only days left in the legislative session, Sandoval’s simplest option is to give in to Democrats’ demands to extend the temporary tax increase passed in 2009.

That move could infuse the state budget with at least $712 million.

Sources close to the governor said he is considering adding “up to that amount” to his spending plan. Although he could pick and choose which taxes to extend -- the sunsets applied to sales, payroll and business licensing taxes -- it would be politically difficult for him to do that.

“The ruling raises questions about certain assumptions in the proposed executive budget,” Sandoval, a former federal judge, said in a written statement. “As governor, I am forced to deal with their ramifications, and I am responding by reworking the state budget.”

The decision gives Sandoval political cover should he break his vow not to raise taxes -- a vow he maintained extended to lifting the sunsets on the 2009 increase. As one source close to the governor put it: “The entire ground has shifted.”

But the decision also gave Democratic leaders, particularly Senate Majority Leader Steven Horsford, D-North Las Vegas, political cover to meet the Sandoval halfway. Horsford had repeatedly and stridently declared the governor’s budget would not pass on his watch.

While Although Democrats had given up on getting a tax increase through the Republican minority, they were prepared to go down fighting over the sunsets.

With that funding now in place, the only thing left to do is agree on the details of how it’s spent. Sources for both sides said to expect a consensus budget to be announced today Friday.

“Now we’re back into the real world of negotiating,” state Sen. Sheila Leslie, D-Reno, said. “So far it has been only one side willing to negotiate. This ruling forces the other side to negotiate.”

Democratic leaders met privately with Sandoval late Thursday to work on the contours of that agreement.

Democrats have spent the past two weeks building building a budget that includes revenue from the taxes about to sunset. That will be the starting point for the negotiations.

The court decision, however, also opens up a hole, albeit a much smaller one at $160 million, in the Democrats’ spending plan.

Sources said that could likely be filled by extending the line of credit from the Local Government Investment Pool and raising taxes on the mining industry -- a priority for Democrats.

The budget agreement, however, robs legislative Republican legislators of the leverage they had wielded in an attempt to extract changes to a slew of their policy priorities.

Negotiations on everything from construction-defect s laws to collective bargaining to prevailing wage appeared dead in the wake of the ruling. Sandoval hadn’t taken the lead for Republicans on any of those policy areas, focusing his attention instead on education reform -- an area on which he, Horsford and Assembly Speaker John Oceguera, D-Las Vegas, have found some common ground.

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