GIBBONS LOBBIES FOR SPENDING REDUCTIONS AND NO NEW TAXES

By Lisa J. Wolf, M.F.A., Correspondent

May 22, 2009

Eureka, Nevada

Governor Jim Gibbons told those assembled at the Eureka Opera House May 20^th at noon what “an honor and a privilege to be in Eureka. I just think this is the heart and soul, this is the salt of the earth for the State of Nevada and we’re very proud of this community and we’re very proud of this State as well; even through probably some of the most extraordinary times the State is going through. How that is going to reflect on our future is completely in the hands of the legislature today.”

Pointing to a chart and table, Gibbons started “by showing you that if we took the biennial budget from this last biennium and just did level funding across the State of Nevada for our spending that was enacted in 2007, this is what the level would be: $8.3 billion dollars for two years. $8.3 billion  that’s coming out of your pockets to fund your government if we had level funding and we were not in an economic recession. Where are we today? Well, we’re down here in this economic recession revenue of $5.4 billion dollars. Mathematics may be a tough curriculum for some people, but in this case it’s easy to see: we’re $3 billion short of just having straight across-the-board level funding so those choices have to be made. Where do we make up that $3 billion? Well, the federal government came in and gave us some real easy money and said, ‘If you take it $1.4 of that we’re going to offset some of your expenses which is really needed in this day and age but there are some strings attached, some of it we have to go back and spend more money just to get money. For example, $240 million that was allocated in the Supplemental Stimulus Package for Education required us to spend $500 million to get $240 million; so there’s some choices we have to make. We applied for the waiver; we’re got the waiver; we’re going to get the $240 million; if we had to come up with $500 million, we would not know where we would take it from.”

The Governor said, “This difference here is about 40%” in “reduced revenue to the State of Nevada” and even adding “in the Stimulus of $1.4, we’re still $1.6 billion different from where we are. Choices had to be made. Where are we going to reduce the spending or where are we going to raise taxes?”

Gibbons said he has 4 budgets he can deal with: “Education, K-12, Higher Education, 13 through 20 or whatever you want to call a PhD; there’s Health and Human Services and there’s Public Service.” Gibbons explained, “Health & Human Services are the programs that keep those people on Medicaid and other programs healthy in the State of Nevada and everybody understands that if you don’t have your health no matter how much money you have it doesn’t do you much good. The federal government also mandates a certain level of spending. Spending in Health & Human Services actually has to rise in times when the economy is tough because people are losing jobs, more people are going onto Medicaid. For example, for every 1% increase in unemployment, the Medicaid rolls rise 16,000 cases.” Gibbons noted, “We’ve gone in unemployment in the last 2 years from 3% to 10.5 and it’s rising; so we’ll be at 11% probably within the end of the quarter; and so you’re looking at about 8 percent; so multiply 8 times 16,000. If unemployment were a city in Nevada today, folks, it would be the fourth most populated city in the State of Nevada. That’s just unemployment.”

Gibbons turned to revenue. “I don’t know many areas of the economy in the State of Nevada that are doing so well that you can walk out and tell them that they need to have a $3 billion, $1.6 billion, you name it, $1 billion tax increase because there’s so very little going on. If you drive up and down the Main Street of Eureka--I don’t care if it’s Eureka. I don’t care if it’s Austin. I don’t care if it’s Fallon, I don’t care if it’s Reno, Carson City or Las Vegas. Every one of the cities that we live in in this State have signs in the windows in many of their business communities that say, ‘Going out of business. Closed. Moved. For Sale:’ telling you that the economy of this state is not doing well.” Gibbons noted the bankruptcy of Chrysler led 4 Vegas auto dealers to have their franchises cancelled. “You say, ‘Well, so what?’ You may not buy a car in Las Vegas but it is all of the ancillary things that go along with that. It’s the 100’s of employees in each one of those businesses. It’s the subsequent advertising; it’s the taxes that they pay that will not take place in the State of Nevada. Folks, we’re in one of the most extraordinary economic times this state has ever faced. When they start talking about taxes, I ask myself, ‘Who do they mean, they’re going to tax the wealthy?’”

Gibbons described meeting “a guy named Dan Boyle just the other day” in “Las Vegas” who “15 years ago in his garage at home made a wake board, you know one of those things they get on behind a boat and ride around over wakes” and “he started marketing that out of his garage” and “grew his business over the last 15 years to where now he sells not only wake boards; he sells skidoos, he sells 4 wheel off-road vehicles, boats, fishing boats, ski boats, etc.” Boyle told the Governor “he now pays to the State of Nevada more in taxes than he takes home from his business,” claiming “the State actually gets more of his profit than he does in taxes” through business and sales tax.  An increase in “sales tax will reduce the number of items people come in to buy if they have to pay 10% on an item or whatever amount it is that’s going to be raised. They’re going to make that decision whether or not they can afford it.”

The Governor said, “I’d love to buy a new car but I can’t afford the tax that goes with it.” Gibbons said the legislature wants to “double his business tax. Now here’s a guy who’s already paying the State more in taxes than he takes home and if the State decides in the wisdom of some of the legislators that are there that they want to double his business tax what is this guy going to do? Can he go and force you to buy more of his product? No, he will close his doors and lay the few remaining employees that he has off and those employees will then be on the unemployment roll, the Medicaid roll, and other services the State has to supply. Not only that, we will lose the tax revenue that he’s already paying the State of Nevada. So, if you double his business tax, as some of those people who think, ‘don’t tax me; don’t tax thee; tax the man behind the tree: businesses,’ this is the effect that you get. If you raise sales tax you’re also stymieing sales. Believe it or not, people do look at what the cost is of items to make a choice, make a decision.”

Gibbons said, “I chose to reduce spending because I believe in this time, in this day and age that many of you in this room are having to live either paycheck to paycheck, maybe worried that this last paycheck is your last paycheck; or you’re already living without a paycheck. That’s a horrible thing to do. In fact I met a young woman who has two kids just laid off, unemployed” and “the last bit of her revenue went to make a mortgage payment so her house is now going to go into foreclosure.”

Gibbons asked, “Do I go ask her to pay more when she’s already doing with less? In fact is probably wondering where she’s going to live right now because there’s not a lot of places that you can rent in this State or in this place on unemployment insurance and that limits so she’s out looking for a job obviously.” Gibbons said rather than “ask the people who are doing more with less, why can’t government decide to tighten its belt?”

Gibbons had “this little debate with the Chancellor of the University and in the Higher Education system there are 1,832 individuals paid for with taxpayer dollars that make almost as much or more than I make” and the University of Las Vegas football team “has 28 coaches.” Gibbons said, “When I played football in high school we probably had the same number of athletes on the football team and we had 2 coaches.” Gibbons didn’t think “28 coaches, 1,832 making as much as the Governor or more, tells me that you cannot reduce your spending and that your choices are impossible.”

“State government is going to make those tough choices because we have to. We don’t have the choice of just telling you to dig in your pocket and come up with $3 billion. There’s some in the legislature who feel very compelled, ‘That’s what we’re going to do!’ You’re reading about it in the newspaper today: $780 million of new taxes taken from businesses for sales tax or some other tax out there but you pay: instead of making the tough choice to reduce spending. If I’m a farmer and my revenue because of the potato prices don’t come in, guess what, folks? I have to reduce my expenditures. I mortgage the farm, and mortgage the tractors. I mortgage whatever I can to make it to the next year in hopes that I’ll be able to survive.”

Gibbons told those assembled, “We’ve got to make some tough decisions. Are they easy? No. They’re not. Are they permanent? No. They’re temporary. One of the things I did was I asked every state worker to take a 6% salary reduction starting with me. It begins with the Governor. 6% means that they’re going to have a 94% revenue stream at the end of the day. If I don’t get 6% out of those state workers, all 29,000 of them who work for the State of Nevada, I have to lay off 10,000 state employees. Well, it’s actually 9,820, but I round it up just to make it sound good: 10,000. Those 10,000 state employees are going to have a 100% if I don’t get 6% from everybody. There are some who are adamantly against taking a salary cut that they say, ‘No way. You’re not taking any of mine.’ So, they’re going to stand there and watch their colleague who sits next to them, or perhaps even has the office right next door, pack their desk and walk out the door and they’ll sit there smugly with their 100% salary while that person, that mom, that single mom with 2 kids takes a 100% salary reduction and loses her house. Yeah, some people just do not understand, when times are tough, we all have to pull together. And that’s what this State’s going to do. This is not a time when one fraction or faction of our state is going to benefit over the other. We’re all in this together. I don’t care whether you live in Eureka or Las Vegas, Gerlach, Nevada. We’re all going to pull through this. We’re all going to share in some of the difficult decisions but in the end of the day we’re all benefitting because we’ll have a better government, we’ll have a more efficient, more effective government. We’ll have to go through and do some of this unnecessary spending reductions that are so important to keep us from looking like California.”

Gibbons pointed out, “It’s not about raising taxes: if it were, California would have solved that problem.” Gibbons said, “I daresay I never want Nevada to get to that point” as California “has taxed everything under the sun from the air you breath, to the water you drink, to the car you drive, to the house you’re in, to the street you walk on. Everything is taxed and the public in California is starting to rise up against the continual demand for the State to keep spending. They actually yesterday voted down the 5 measures that were critically important for California to continue that high level of spending in State government and why? Because the public is smart. You’re smart. You understand. It’s just like my home. It’s just like my personal finance. My own business. My little business that I started making wake boards in the garage and now selling fishing boats. My mine that’s out here trying to keep 2 or 3 hundred people employed. When you don’t have the revenue, you have to cut your spending. California’s finding out that they are going to have to make some tough choices. I would much rather make choices before we ever got to the same position in California but I can’t tell that to your legislators. They do not want to listen. They want to come home to you and say, ‘You know I would have loved to have cut the budget, but that would have meant the red fire truck I just got the $800,000 for isn’t going to come to your community. You’re going to have to get by with the one that’s 12 years old.’ But guess what, folks? I drive a truck and it’s 17 years old and it’s the only car I have. Well, no: I have one that’s older, 90 years old, a Model T, but I get by with those.”

Gibbons said, “There’s a silver lining to that cloud” and promised, “We’re going to work our way through this recession and like all recessions, like every depression even, it does have an end” and Gibbons gave “a little history lesson.” In “1880 and 1890 the State of Nevada was a one industry state: mining” which “had a depression” and “the State worked its way through that to make sure it survived” by diversifying “its economy, by adding to that agriculture” and in 1930 “to work Nevada out of that Great Depression” legalized gaming and “created one sound state philosophy which said in the 1930s, ‘We’re going to attract businesses to Nevada based on being a business-friendly state.’ That means low taxes, business-friendly government, regulations that encourage businesses to grow instead of making obstacles for them to be established. So, Nevada turned the beacon on in 1930 and said, ‘Businesses come to Nevada. Bring your families; bring your jobs. Come to Nevada.’ Fast forward again to today’s day and age: 21^st Century. We’re in a recession. We’ve got all those things. We’ve got mining. We’ve got agriculture. We’ve got business-friendly environment. We’re still in a recession. We’ve got taxes and we don’t know where to go.”

Gibbons said, “We do. There’s one thing that’s going to be the future of the State and that’s renewable resources. That’s our future” and “it’s going to benefit rural Nevada more so than the rest of the State, because that’s where these resources really are. We’re a solar capital in the South, we’re a geothermal capital up here in the North and we have wind in between. We today import $2 billion worth of electricity to run our economy. That’s just into Nevada. That means we take $2 billion of your dollars, we go out to some place, Wyoming, Nebraska, Texas and we buy electricity and we ship it into Nevada: $2 billion. If we could generate that $2 billion with renewable energy here that’s $2 billion that stays in our economy, stays in our State, creates jobs. If you look at the economic status of investments usually it’s 4 or 5 times so you would take that $2 billion and it would be either an $8 or $10 billion increase to our economy every year just from meeting our own demand today. Now California has said it will purchase all the green energy we can make. At some point folks down the road when we get this going we’re going to have a renewable energy future which is what will build us out of the recession that we will someday not just be powering the lights here in Eureka with geothermal plants or solar or wind but we’ll be powering the air conditioning, the street lights, the business offices in San Francisco right here in Nevada; and when we do that we will no longer be subject to the invariable cycles of recession. Gaming got us from 1935 to today. Energy will make us an energy state like Louisiana, Texas and Alaska in the 21^st Century.”

Gibbons asserted, “It is because of this recession. It is the perfect storm that’s pushing us in that direction. We are two years ahead of every other state, two and a half years now. I started in 2007 looking at this: putting together the State of Nevada’s programs and needed requirements to be able to produce renewable energy.” Gibbons said, “We’re two years at least ahead of the New Mexico’s, the Arizona’s, the Utah’s, Southern Californian that all want to generate their own renewable energy to meet this growing demand. They came to us and wanted to know what we are doing because we’re so far ahead of them. I told them to pound sand because I am not going to get in this fight and let somebody else take advantage of where we were and how hard we worked for the last two years to make Nevada the leader. We’re the solar capital per capita of the world. We’re the geothermal per capita of the world. We’ve got a long way to go in this but we have got to stay the course whether it’s this government or this future, we’ve got to stay the course.”

Gibbons told those assembled, “By the way, if you want to see our budget, I for the first time of any governor put all 3,000 pages line by line item expenditures and state government spending on-line and you can go to that: link up to our Governor’s office. It will link you right into the spending. You can look at every detailed aspect of the State budget and I hate to say it, I accept criticism well. If you want to come in and tell me how you disagree with the State budget spending, please do so; but remember you have a Constitutional requirement: you’ve got to balance the budget. So when you take from Peter to pay Paul remember what effect you’re having over here: just remember to balance it out and send me what you think the spending ought to be. You can see just as well as I do all 3,000 pages. So bring your criticism but bring a solution at the same time. Because you’re just as smart as anybody else who put this budget together even though we had 200 people working 12 to 18 hour days, 7 days a week for 6 months.”

Gibbons encouraged the public to “look at it and make your own choices and make your own recommendations. We’re certainly interested in hearing from you. Although you’ve got 2 weeks. It’s a little late night reading, 3000 pages of late night reading. You may need glasses by the time you’re done. We’ve got 2 weeks because that’s the end of the legislature.”

Asked about the timeline for renewable energy, Gibbons said, “We have projects underway today” and are “the solar capital per capita of the world in Las Vegas. Although I’m not sure; I just got told yesterday that Arizona offered some tax incentives to the largest solar company in the world to build right next door to Las Vegas that just happens to be in Arizona so we’re going to lose the property tax and the jobs and Arizona is going to have that program partly because ‘those people’ didn’t want to give an incentive to a company coming in and building. I say, ‘Give them the dog-gone incentive. I’d rather have 5 years down the road for those 5 years 50% of something than 100% of nothing. Then after that, we’ve got a company there, the jobs are there, the basic funding is benefitting. So you’ve got to give people credit for being smart. As I say, Arizona is chasing. They’re trying to outdo us from what we have. So let me also say that we have another problem and this is what we put together the Renewable Energy Transmission Access Advisory Committee who studied regions of renewable resources, whether geothermal, wind, biomass, that we overlaid that with the current grid system. That’s the problem. Folks, geothermal like a mine doesn’t always come conveniently located to a power line or the source of jobs or whatever. The grid has got to be improved and this is the real dichotomy with this program. So we designed a smart grid for Nevada, but it’s going to take somewhere between $4 and $10 billion of investors’ money to build power lines to connect these areas in this region to a smart grid. Well, the problem with that is you can’t build a power line unless you’ve got the power company putting electrons in it. If it’s carrying no electrons, it’s not going to pay for itself. Likewise if you build a power plant in the middle of Nevada that taps into geothermal and it’s generating electrons and can’t ship them down the pathway, it doesn’t do you any good to invest in that company. We’ve got to build them together and that investment takes coordination that we put together in our office, the Energy Office, the coordinated ability to bring all of this together and make it happen.” Gibbons estimated that “building out the renewable energy in Nevada” will “take us through 2040 to 2060 time frame.”

Gibbons noted as a geologist, “I can tell you that it’s almost a permanent heat source. It will change a few degrees over decades. But for the most part that geothermal heat being in the ground has been there for 10, 20, 30,000 years and we’re just now tapping into it. So it’s been there for a while and it will be there a lot longer than I am on this earth. I’m not worried about geothermal dissipating and being a nonrenewable energy. That’s like the sun, the wind. The sun will eventually burn out but none of us will be around to see it. The wind will be here especially with Carson City, the legislature being in session, a lot of hot area.” Gibbons added, “I’m just kidding. Don’t put that in the Eureka Sentinel.”

“Remember now, K12, 2.6% is a reduction when the State has 40% less revenue: 2.6%. I get a little chagrined when I have to face teachers who say don’t cut my programs. 2.6% is a cut but it’s not 40%; it’s not the 35 and that’s because I value K through 12 Education like all of you. I went to public school in Nevada. My kids went to public school in Nevada. My grandkids are going to public schools in Nevada. If you think I want to decimate public education in Nevada you’re crazier than I am, but it’s not true. I don’t want to do that. So 2.6% is a challenge for a lot of teachers, a lot of school districts in Nevada but it’s a lot easier than 10, 20, 30, or 40% reduction. We have managed to scrape by, not hire, take salary reductions. In fact, ladies and gentlemen, I submitted the budget to the legislature without raising taxes, balanced to a penny. Now this legislature doesn’t like the idea of not spending its money because it can’t come home to you, stand in front of you like I’m doing and say, ‘I reduced your programmatic spending’  because they think they won’t get elected. Well, I daresay, there are some of you that are going to be a little hotter under their collar about their tax increases on you than their spending reductions would be. Because everybody understands when my budget in my family is reduced, I just can’t spend what I used to spend. It’s harder to say, ‘I’m taking more out of your pocket because I don’t want to tighten the belt of government. Big difference in the two. You have to ask yourself, ‘What do you prefer?’”

Gibbons was asked given the composition of the legislature, if the budget comes to his desk and he does not sign it and it goes back to the Senate, whether he has enough support to have it not pass. Gibbons said, “I did until a couple of Republicans decided they didn’t want to come home to their constituents and tell them they supported the Governor on vetoing the budget. There’s a couple who want to believe you can’t cut spending 30 or 40%; so they’re willing to raise taxes but they’re also doing it because some sold their vote to get a program continued, defended spending that helps their District.”

Gibbons “made a promise that I would not and I showed them, I showed this legislature twice how to balance this budget without raising taxes.” Gibbons told a story about asking government to reduce its spending: “Administrative costs are probably the highest cost of any operation in government. I don’t care whether it’s education.” Gibbons said when he was in Congress he “asked the administration to reduce their administrative operating budget. That means, ‘Do you think you guys could stop one year and not re-carpet your offices and/or buy a new desk or maybe a whole fleet of new cars; maybe turn your darned computers off in the end of the night, save a little bit of electricity. By doing so we’d save ‘x’ millions of dollars. They said, ‘Don’t cut the budget.’ I said, ‘Why?” ‘We’ll show you why.’ We gave them a reduced budget. What did they do? Did they stop buying those desks, the re-carpeting, the travel? No, they went out and closed the Washington Monument and guess what all of you who went back to see the Washington Monument came face to face with: a ‘Sorry, we’re closed: Congressional budget reduction’ and you got mad and you came back and you called your Congressman and you said, ‘Wow, I went to Washington and you closed the Washington Monument. How dare you do that?’ and I’m going, “No, I told them not to buy a desk. I didn’t tell them to close the Monument. That’s what happens. I would guarantee you there’s legislators in Carson City who say, ‘I’m not going to let you close the Washington Monument. I’m going to keep my spending going or I’m going to make it so painful, you won’t be able to reduce spending.’ So, I’m just saying there’s a lot of politics that goes on in the budget. Sometimes it has nothing to do with reality.”

Speaking about problems associated with selling power back to the power plants, Gibbons spoke of energy companies “who’ve spent hundreds of millions building their Valmy and other power plants, and it takes that rate of the electricity they sell you to pay off that investment. Now, if you’re selling them, they’re not going to be able to make the payment on the power plant and they’re going to be taking what revenue they have and paying you for it. So it becomes a question of economics. But I’m of the opinion they could market their electricity in the open market just as easily.” Gibbons noted, “It’s a very difficult and very complicated way to take every one of those homes and meter reverse cost: whether or not they sold it, how much they sold the electricity for in the system. It can be done” but Gibbons felt, “It’s easier to generate your own and use it on your property.”

As to how to encourage the legislature to be more responsible, Gibbons suggested, “Pick up the phone, call them, write them, e-mail them. Each one has an e-mail address. Let them know what you think about budgeting, what you have to do at your own business or family.”

“Let me just tell you something. The thought process of the legislators is to balance the budget for the two years and go home. Done. Fine. They’re not thinking down the road. Because, if they raise your taxes a billion dollars, two years from now, folks, they’ll be back with a $1.5 billion tax increase if we just keep spending because the Stimulus Package is going away. It’s a one-time economic shot in the arm from the federal government to the State of Nevada. It’s not a promise it’s going to come in every two years. So plan on this billion dollar tax increase this year is what they’re looking at. So just to maintain that level of spending is going to take a billion, $500 million in tax increases two years from now.”

Gibbons remarked that, “When they created the Open Meeting Law for the State of Nevada, guess what, folks, they crafted a wonderful little exemption for the legislature so they could sit in back rooms, negotiate these deals and not have to be open to the public. I have to be open to the public. Everything I do is open to the public. I invite them into my office for 6 months; they have their representatives sitting at the table when we went through this whole budget process.” Gibbons told the legislators, “You ought to come out and see the shadow you’re casting: that’s a tax shadow that’s a million dollars long.” Gibbons said, “Last night at midnight, they decided to unveil their tax package: midnight. So, when you say in the back room where no one else gets to see it, that has meaning.”

Gibbons said, “Why not let the citizens have their input, why not let them have their say? Let them express their concerns, feel that they’re part of this government instead of this little collective group of individuals who feel they know best.”

Gibbons thanked the public for attending, “This is what being a Nevadan is all about: it’s about having an opportunity to have your governor come out and talk to him and let you hear what my thoughts are and my concerns are and hear what your thoughts and concerns are as well and together we can make a better decision.” Gibbons assured listeners, “This State is going to survive. We’re going to persist into the future and we’re going to be that great State that we all want to be. But we’ve just got to pull together. This is where we all get behind the wheel of the wagon and start pushing.”

Asked about reeducating the legislature, Gibbons said, “Maybe that’s what the veto’s worth.” Gibbons is hoping to “educate people with common sense.” Gibbons closed saying, “Folks, I want to wish you the best” and assured everyone “we’re going to be a better state.”