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Lawmakers free up $58 million through full sweep of car registration fees; hold initial hearing on major budget reductions
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Lawmakers free up $58 million through full sweep of car registration fees; hold initial hearing on major budget reductions

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Nevada Legislature

Nevada Assemblyman Alexander Assefa on the eighth day of the 31st Special Session of the Legislature in Carson City on Wednesday, July 15, 2020. 

Nevada lawmakers freed up an estimated extra $58.6 million on Wednesday and took several other small steps in their quest to mitigate expected massive cuts to the state budget.

An amendment dropped late Wednesday in the state Senate to SB3 will pull the entirety of the state’s Governmental Services Tax (assessed on car registration fees) toward the battered state general fund, which is one of the changes expected to add back $58.6 million to the state’s $1.2 billion budget shortfall. Gov. Steve Sisolak’s original budget proposal called for that tax revenue stream to be split between the general fund and the state’s highway fund.

And after several sluggish days, members of the Assembly on Wednesday held their first hearing on the bill implementing the bulk of Gov. Steve Sisolak’s proposed budget cuts and heard more than an hour of irate testimony from dentists, teachers and other members of the public upset with the state’s plan to balance the budget through massive spending cuts.

Most of the information on the proposed cuts had been presented during prior presentations during the initial days of the special session. But Assembly Speaker Jason Frierson said he expected the Assembly to vote out the major budget bill sometime Thursday, after drafting and approving an amendment reflecting the Legislature’s priorities in changing the proposed cuts.

Beyond giving a tentative timeline of a vote Thursday, Frierson opted not to share many specific changes that legislators were looking to restore, beyond a desire to reverse the proposed 6 percent cut in Medicaid reimbursements and other optional services suggested to be eliminated.

“There are tons of things on there that are painful, you know having to pick between Medicaid for seniors, autism services for children, and everything in between,” he said. “These are really, really tough decisions. I believe that replenishing the cuts in Medicaid are important because it also reflects a return on our investment from the federal government, and so I think that certainly is high on my list and on the list of many of my members.”

Frierson said lawmakers were also looking to mitigate or modify cuts to K-12 education and proposed once-a-month state worker furloughs where possible. The speaker also gave a flat “no” when asked whether lawmakers had given up a push for an increase in taxes to help quell the massive budget cuts, but declined to give specifics on what tax areas the Legislature might consider.

Lawmakers pass bill amended to bring nearly $60 million more to mitigate cuts

Senators voted 19-2 in favor of SB3, a bill that seeks to fill the budget gap with several tried-and-true methods the state used in the past — asking mining companies to prepay taxes, collecting delinquent taxes through an amnesty program and diverting vehicle registration taxes from roads and into the general fund.

But after a hearing over the weekend in which Republicans questioned whether more could be squeezed from those revenue sources, lawmakers approved an amendment to the bill.

The measure now sends 100 percent of vehicle registration fee revenue into the general fund in the current fiscal year, replacing the prior proposal that split GST revenues 50-50 between the general and the highway fund. The change approved Wednesday brings in an additional $47.6 million, meaning the total revenue the bill will now yield above current levels is $71.4 million.

Fiscal analysts confirmed that the highway fund will only take a net hit of about $14 million, because it is receiving $38 million from the federal CARES Act, is cutting spending on a technology project and will be furloughing employees to save about $9 million.

Officials with the Nevada Department of Transportation had testified on the earlier version of the bill, saying that with a reserve fund of $340 million and a generous federal match on road construction projects, the highway fund could absorb the diversion without any road projects getting off track.

Another change from the amendment was a re-estimation of how much would come from a tax amnesty program. The new projection, which recalculated revenue from local school support taxes, now says the amnesty program could bring in $21 million rather than the original $10 million.

And the amendment also changed a plan to have mining companies turn in two years of payments at once. After some Republicans raised concerns about how upending the payment schedule could put local governments that depend on mining in a lurch, the proposal was amended to only require companies pay tax due to the general fund ahead of time. Tax owed to local governments would continue on its original schedule.

The substance of the amended bill attracted opposition only from Sen. Ira Hansen, who argued that mining has become a “favorite whipping boy” and is being treated differently than other industries. He said the vast majority of operations are small and not very profitable and that singling them out for prepayment could “jeopardize their economic future.”

He clarified he wasn’t speaking on behalf of the mining industry as a whole.

"I think they would rather have me not say one word about it because they understand they have a significant PR problem in the state. And they would rather just pay it and act like they're very delighted to pay it,” he said. “But the truth is, we've held a gun to their head … when in fact they're one of the best industries Nevada has ever had.”

In an Assembly hearing that didn’t wrap up until nearly 11 p.m., members voted 30-10 to pass the bill. The vote did not fall on party lines — four Democrats split from their party and voted against it, and seven Republicans voted in favor.

Assemblywomen Robin Titus and Alexis Hansen took to the floor to praise the mining industry’s contributions to the state, from shaping its nascent years to making donations in rural communities.

But Democratic Assemblywoman Shannon Bilbray-Axelrod poured cold water on those comments.

"As a third-generation Nevadan ... I think I'm very aware of what mining has or hasn't done for this state ... it's time they pay their share, and honestly this bill doesn't do nearly enough,” she said. “So thank you for what you have to say about mining, and I'm so happy that they're here in Nevada and rake the earth ... But this is our state, and they do things and it's not right, and you know it. And it's high time they pay. And this isn't the end of it."

The massive budget bill finally gets a hearing

Members of the Assembly finally heard the bill that will be responsible for balancing much of the state’s budget shortfall. However, the version of the legislation presented Wednesday wasn’t yet final, with significant changes expected to still come before the Assembly approves the legislation and forwards it on to the Senate.

GOP Assemblyman Al Kramer, during the question and answer portion of the hearing, asked whether the legislation’s proposed 6 percent across-the-board cuts to Medicaid were really necessary. Legislative staff said it’s not yet possible to know whether the federal government will extend federal matching dollars to the state’s Medicaid program, which would generate an additional $30 million in revenue to the state.

If that happens, the additional funding would be brought before the Legislature’s Interim Finance Committee, which could restore certain programs.

The bill also contains a provision that would allow the Department of Health and Human Services to reshuffle funds within its budget as needed, subject to the recommendation of the governor and approval of the Interim Finance Committee.

The bill faced significant criticism in an hour-and-a-half-long public comment session, where members of the public and policy advocates raised a host of concerns, including the legislation’s cuts to education funding, mental health services and Medicaid.

As proposed, the $1.2 billion in budget cuts would slash several K-12 education programs, including support for “Read by 3” early-childhood reading, school supplies for teachers, and other categorical programs that aim to help students with extra needs. The proposed cuts to K-12 programs exceed $166 million, while cuts to the Nevada System of Higher Education are about $110 million.

Several mental health-focused organizations, including the National Alliance on Mental Illness’s Nevada chapter and the Nevada Psychiatric Association, lamented the bill’s proposed cuts to behavioral health spending. Lawmakers are considering $19.1 million in cuts to public and behavioral health, with the majority coming from the Southern and Northern Nevada Adult Mental Health Services agencies, as well as additional cuts in other areas of the Department and Health and Human Services (DHHS) budget, such as the proposal to eliminate psychosocial rehabilitation coverage from Medicaid.

“I would add that when we talk about cuts to the DHHS budget it is easy to see that these cuts directly affect those individuals and families who are dealing with mental health conditions. But I want to be very clear — mental health issues are in every cut, you're looking and considering today,” said Robin Reedy, executive director of NAMI Nevada. “So when you cut behavioral health funding at DHHS during a pandemic, you're exacerbating cuts being made elsewhere.”

The legislation also faced significant opposition from several dentists and dental hygienists who testified in opposition to the proposed elimination of Medicaid coverage of adult dental care and limits on dental services for pregnant women and children. Dental professionals testified that the legislation would exacerbate oral hygiene issues that can lead to more serious medical conditions and end up costing the Medicaid system more money down the road.

“Cuts to Medicaid services will enhance the burden on a patient population that’s already at a disadvantage in terms of access to care and affordability,” said Dr. Tyree Davis, chief dental officer with Nevada Health Centers, a federally qualified health center. “By removing adult dental coverage. Some patients will choose to go without care, and may experience other costly systemic health issues as a result.”

Dignity Health, which runs three acute-care hospitals in Southern Nevada, also testified against the legislation’s proposed across-the-board cuts to Medicaid. Hospitals have long advocated for rate increases and argue that a rate decrease would make it hard for them to stay afloat financially while also caring for coronavirus patients during the pandemic.

“We have no idea what the next six months will bring,” Dignity Health lobbyist Katie Ryan said, “and we'll need all the financial help we can get to make sure we can keep our doors open.”

Tax Department employees upset with planned layoffs

Ahead of the bill hearing, roughly a dozen state employees at the Department of Taxation wrote in to legislators to protest the planned layoffs for the division.

Under Gov. Sisolak’s initial budget plan, the division would keep 33 positions vacant (including 10 in the Marijuana Regulation Division), lay off 23 workers and close its Henderson-based office. It’s part of plans by the governor’s office to limit state worker limits to under 50, while still implementing furloughs and freezes on merit pay to help address the budget shortfall.

But department employees who emailed legislators said they were being unfairly targeted, and that the layoffs or workforce reductions should be shared more evenly across state agencies.

Erica Scott, a revenue officer with the department, said requiring so many layoffs at the agency would “gut our already small department” and that it would harm the state’s ability to ensure tax compliance and revenue.

“I cannot sit quietly while other massive departments have not a single layoff and are still getting admin paid leave as we speak,” she wrote in an email to lawmakers. “Taxation was deemed essential and I have been working diligently the entire COVID19 shut down, collecting $1,470/every hour I worked in June 2020. How am I now not considered essential when generating revenue for the state is the exact thing that I do?”

Rhonda Gallant, a revenue officer with the department who has worked for the state for the past seven years, said the combined vacant positions and layoffs would result in a roughly 23 percent reduction in staff. She said such a reduction would make it harder for the state to implement a proposed tax amnesty program (as part of SB3) waiving penalties for delinquent taxpayers if they pay their accounts due.

“It is difficult for me to see how we could successfully implement that program and generate the revenue expected if we don’t have staffing to do our normal workload,” Gallant wrote in a letter to lawmakers.

Asked about how the potential layoffs would affect the amnesty program, Department of Taxation Director Melanie Young said the office planned to partner with business agencies to announce the amnesty program, and that many of the applications or work needed to run the program could be accomplished online.

“We’ve always done more with less,” she said.

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