State Budget Deal KSNV coverage of the final verdict on Nevada budget, June 1, 2011.

Related Document (.pdf) Details of the budget agreement

Sun Coverage Sun politics coverage

CARSON CITY — Big business will emerge from the 2011 Legislature paying no more in state taxes than they did before the session began.

Teachers and administrators, meanwhile, will take pay cuts totaling 7.5 percent; higher education and state workers will take a 4.8 percent pay cut in the form of furloughs; and social services will be cut.

Since Republicans were fighting to keep taxes low and Democrats were seeking to fund government services, including schools and universities, who do you think won the legislative endgame?

In a deal announced Wednesday, Gov. Brian Sandoval and Republicans extended for two years taxes passed in 2009 to fund a budget that contains pay cuts and layoffs for public employees and cuts to social services.

Over the next two years, the state will spend $6.77 billion — about $313 million more than Sandoval had originally proposed. It’s a number that despite its significant size is only a few percentage points higher than Sandoval had proposed, an amount Democrats railed against as devastating.

In exchange for Republican votes to extend the taxes, Democrats bucked their union allies, agreeing to support significant changes to education policy — making it easier to fire teachers — and collective bargaining, which dictates how local governments negotiate with unions.

As Tray Abney, lobbyist for the Reno-Sparks Chamber of Commerce, which has consistently opposed taxes, put it: “They (Democrats) traded long-term permanent reform for two years of temporary taxes.

“My big guys will be paying the same, and all my little guys will be paying nothing,” he said, referring to the payroll taxes, which will be unchanged on larger businesses and eliminated for the 70 percent of businesses with payrolls of less than about $250,000 a year.

Rusty McCallister, lobbyist for the firefighters union, said, “We’ll be back here in two years doing exactly what we did: More permanent reforms for temporary taxes.”

Democrats’ universal defense was this: It was the best they could do under the circumstances.

“About a week ago, the proposal was to give gaming and mining a tax break,” said Senate Majority Leader Steven Horsford, D-North Las Vegas.

Democrats had the majority in both the Assembly and Senate, but lacked the two-thirds majority in each house required to pass a tax. On top of that, they had Sandoval, newly elected on a pledge not to raise taxes. He held fast to that decision until last week, when the Nevada Supreme Court issued a ruling, calling into question some of the local government money grabs contained in his budget.

Democrats saw the defeat coming. So they began early to frame many of the reforms they would agree to as their own. They did this despite the fact these issues — education and collective bargaining reforms — antagonized their base of union members and advocates for greater spending on government services.

“I think our education reforms make a lot of sense,” Assembly Speaker John Oceguera, D-Las Vegas, said.

Horsford noted that Senate Democrats pushed many of these reforms in 2009. “The overwhelming majority of teachers and the public support these reforms,” Horsford said. “They get to the heart of student achievement.”

But Republicans drove the reform efforts further than Democrats would have wanted.

The groundwork for Wednesday’s deal was laid in November, when state Senate Democrats lost a seat to a conservative Republican and failed to get the two-thirds supermajority. When longtime state Sen. Bill Raggio retired in January, a moderate voice for compromise on taxes, that set it in concrete.

Wednesday’s news conference was the predictable end: Sandoval stood at a lectern with Democratic and Republican leadership and about 40 of the 63 lawmakers.

Both sides tried to portray the agreement in a favorable light. Sandoval used some creative math to distract from the fact he had acquiesced to the Democrats’ spending and broken a campaign promise not to extend the 2009 tax increases. (He highlighted that general fund spending would drop to $6.2 billion, but another $500 million will be going to fund schools directly.)

Still, even though Sandoval accepted the Democrats’ overall spending plan, lawmakers were forced to make significant cuts. College and university students will have to pay higher fees, faculty and staff will take a pay reduction. K-12 personnel will be asked to take a 2.5 percent pay reduction plus see 5 percent their salary diverted to their retirement. And Clark County School District says about 500 people will be laid off.

Democrats faced an uphill battle on taxes — in their view, the game is rigged against tax reform because of the two-thirds required to pass a tax increase, or override a veto from the governor. They had little hope of winning enough Republican support to pass the new taxes they introduced this session to broaden the tax base and raise a total of $1.2 billion over two years.

“The most important reform didn’t get any serious consideration. And that’s tax reform,” Sen. Sheila Leslie, D-Reno said. “But unless the governor will stand up and lead on this we are never going to get anywhere.

“It’s the tyranny of the minority. The only way to get at that is at the ballot box.”

Yet, even on that point, Democrats failed to win a concession from Sandoval. He would not agree to sign a bill that places a binding question on taxes directly to voters.

Oceguera said they likely will send him a bill anyway, even if it means a certain veto.

If Democrats are unable to override Sandoval on that issue, teachers and labor groups are saying they will collect signatures to put a tax increase in front of voters.

“Voters will have a say if legislators don’t act,” Horsford said.

Despite their victories, not all Republicans were happy with the deal.

Many voiced frustration that Sandoval chose to broadly interpret the court’s ruling that the state couldn’t take $62 million in user fees from the Clean Water Coalition. Sandoval believes that ruling calls into question $656 million in local money grabs that he included in his budget.

The interpretation spurred outrage from conservative operatives, an indication Leslie says proves Democrats “didn’t lose everything.”

As a result, not all Republicans are expected to vote for the compromise budget despite the fact their leaders won the desired policy concessions from Democrats.

Sen. Michael Roberson, R-Las Vegas, said he won’t support the deal.

“My strong belief is that the Supreme Court decision creates an unexpected $62 million liability for the state,” he said. “That’s easily managed without the sunsets. We can’t make decisions based on hypotheticals or the fear that someone is going to sue us. You can’t be afraid to make tough decisions for the state.

“There will be at least one no vote in the Republican caucus.”