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022604 GUINN ON GOVERNMENT SPENDING

PLASKON

Governor Kenny Guinn spoke to the Nevada Taxpayers Association in Las Vegas yesterday. The theme was avoiding fiscal crisis similar to California's and also featured California's taxpayer association president. KNPR's Ky Plaskon was there.

GUINN ON GOVERNMENT SPENDING SOQ 3:30

Carson City, is less than 200 miles from California's Capital, Sacramento and only a 2 and a half hour drive. So it comes as no surprise that ideas bleed across state lines and the two capitals face similar problems when it comes to taxation. Just like in Nevada, when California lawmakers faced resistance to raising taxes they held education finding hostage according to Larry McCarthy of the California Taxpayer's Association.

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"It is a game, it is manipulation, and it is unfortunate that it is a part of this budget crisis."

It's a game McCarthy partially blames for the state's 33 billion dollars in debt. And he added that businesses there face another significant threat of 64 billion dollars in new taxes through voter initiatives. He blamed California's budget crisis on the 11 billion dollars in unpaid energy bills, a legislatively mandated family leave for businesses and unemployment insurance. Larry McCarthy told the audience at the Stardust Hotel that this is relevant to Nevada because Nevada lawmakers had used California spending patterns as an example and good reason for approving new taxes in the last legislative session. But when Governor Kenny Guinn stepped up to the podium, he said unlike California, Nevada doesn't face California's problems.

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"I think, Larry you said it was because of bad management related to those issues in California and some of that I would agree with you on, on the other side that what I have given you on the side of Nevada, I think it was damn well management in this capital in Carson City, thank you for clapping."

He focused on the dissimilarities between California and Nevada. He cited Nevada's phenomenal job growth rate of 4 percent, a state government hiring freeze and outsourcing of jobs. For instance, Nevada's worker compensation program was loosing 80 million dollars a year. After privatizing it, its reporting 40 million dollars in gains. That privatization strategy in Nevada should continue he said.

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"And I can tell you that as we move forward in other areas, if we can privatize it we want to privatize it,"

In an interview with KNPR, Guinn said his office is constantly looking at 3 or 4 programs to privatize but wouldn't say which ones because that would raise fear among the employees of those government programs. He told the crowd there still no clear indication that the tax package passed in the last legislative session is paying all the government's bills. He emphasized spending responsibilities continue such as the need to build 55 new schools in Las Vegas over the next 3 years. On the subject of education Nevada does face some similar fiscal threats as California according to Kara Kelly, CEO of the Las Vegas Chamber of Commerce who attended the meeting. She says sage advice came from earlier speaker Larry McCarthy when he partially blamed mandated school funding as a contributor to the state's problems. Kelly says a proposed voter initiative in Nevada could have the same effect. The School's First initiative would mandate that the legislature fund schools at the national average.

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"There is not going to be one thing that is going to be worse to bankrupt our state than something like that."

She says to date, Nevada legislators have enjoyed flexibility, and that freedom is needed for Nevada's continued fiscal success. However, for now Nevada appears to be teaching California. California's Governor Arnold Schwartzneggar recently took cues from Nevada on how to restructure it's debt according to Guinn. But all this haggling over taxes and spending could be moot Guinn says. He estimates there will be a much bigger tax problem as consumers change their behavior.

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"The devastation that will come on us will not be the lack of tax money that we have today or the growth or the heath plans or the retirement plans, all the things that we are arguing over. Let us really take a look at what is happening to America's economy and it is moving to the Internet."

The problem he told the crowd is that the Internet is un-taxed and as consumers use it more, tax revenue from established sources will vanish. This problem's evident with phone service, which local governments rely on for tax revenue. Current available technology allows consumers to use the Internet for phone service.

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"There is no tax collectable under that for the counties and the cities and the . . . and it will be devastating throughout America."

He says as the public begins to use the Internet more for their phone services, cities and counties across the nation could loose 50 to 60 billion dollars in established revenue over the next 3 years. Clark County's loss from Sprint franchise fees would be 2.2 million dollars, and that's just one of 21 local service providers. There's currently no law allowing taxation of the Internet to recover those taxes for local governments. Guinn finished off his speech by telling the crowd, he's calling a meeting of all city and county leaders to find a solution to this threat to government revenue.

Ky Plaskon, News 88-9, KNPR

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