Assembly Speaker Jason Frierson following a press conference with Senate Majority Leader Nicole Cannizzaro at the Legislature on the 12th day of the 31st Special Session in Carson City on Sunday, July 19, 2020. (David Calvert/Nevada Independent)
Nevada’s 31st Special Session ended with a whimper Sunday as legislators resignedly finished the process of slashing hundreds of millions of dollars from health care, education and other state agency budgets.
The omnibus budget-cut bill was the foundation of the state’s plan to balance a $1.2 billion shortfall caused by the swift shutdown of major parts of the economy due to the coronavirus pandemic.
The special session, which began July 8 and slogged on for 12 days, will likely be remembered not just for its painful budget cuts, but also for the political partisanship put on full display during its penultimate day, when what would have been a hallmark piece of legislation on mining taxes devolved into a high-profile failure to compromise that played out in news headlines.
A lot happened. So, here’s a recap of everything legislators accomplished, everything they didn’t accomplish, and what is expected to happen next.
Assembly Bill 3: Massive budget cut, state furloughs
Gov. Steve Sisolak’s proposal to legislators detailed approximately $549 million in budget reductions. That amount included the implementation of furloughs and merit pay freezes for state employees, the elimination of all funding to a program for economically disadvantaged students, the elimination of all funding for a reading literacy program, and significant cuts to the Nevada System of Higher Education.
Health and human services and K-12 education each make up about a one-third of all general fund appropriations, so naturally take the biggest cuts.
Assembly Bill 3 is the implementation of those budget reductions. Legislators were able to blunt some of the devastation within health and human services by using approximately $138 million in funds freed up during the special session.
As part of those restorations, state employees will have to take six furlough days during fiscal year 2021, as opposed to the 12 originally announced by the governor. That change sparked criticism from Republicans who proposed their own budget adjustments that would have kept state furloughs as originally introduced by the governor and instead directed more funds to K-12. In defense of the decision, Senate Majority Leader Nicole Cannizzaro said state employees were often asked to do more with less and that there is a misconception that state employees are paid exorbitantly. She added, “There is still a lot of pain in these cuts.”
A late amendment to AB 3 also allocated $50 million in federal CARES Act dollars to a new fund dedicated to supporting students with the greatest needs during their transition to the upcoming school year. That amendment helped win the support of Senate Republicans, who originally opposed the bill.
The bill also prioritizes what cuts will be restored if additional relief funding comes in from the federal government. Topping that list is funding for the transition to a weighted funding formula for K-12, program funding for Read By Grade Three, and then cancellation of furloughs for state employees.
AB 3 passed with bipartisan (but not unanimous) support in the Assembly and unanimous support in the Senate.
Senate Bill 3: Advance payments for mining, government services tax redirected, tax amnesty program
Senate Bill 3 resurrected three policies the state used to balance similar budget shortfalls during the Great Recession a decade ago.
First, the bill requires mining companies to make advance payments on the state portion of their taxes, which are on the net proceeds of minerals. The advance payment requirement is expected to bring $54.4 million into the state early. Once economic conditions improve and the state presumably no longer needs the advanced money, the mining companies go through a “true up” period where they get back onto their typical payment schedule.
Second, the bill temporarily redirects revenue raised by a government services tax from the State Highway Fund to the General Fund.
Thirdly, the bill allows the Department of Taxation to create a tax amnesty program whereby people or businesses with tax debt can have their penalties and interest waived if they pay their tax debt in full.
Senate Bill 1: Capital improvements
Senate Bill 1, which passed unanimously, takes back $72.6 million of funding approved by the 2017 and 2019 Legislatures for capital improvement projects.
While the bill affects dozens of projects, only nine will be canceled completely. The most significant of those cancellations: a new engineering building at the University of Nevada Las Vegas, which the state had previously allocated $20 million for.
Other affected projects will either be scaled back or continue as planned by replacing the reverted general fund money with bond funds. Bond funds will offset $39 million of the $72.6 million in project cuts, reductions in scope account for $10.5 million, and cancellations reflect $23.2 million in savings.
The full list of projects affected by SB 1 is available here.
Senate Bill 4: Public borrowing
Senate Bill 4, which passed unanimously, allows the state to borrow up to $150 million through general obligation interim debentures, which are similar to bonds. Debentures can be issued only during this current fiscal year and only if the cash balance of the general fund falls below a certain threshold. Treasurer Zach Conine pitched the bill to lawmakers as being an additional tool for the state to rely on if the state’s financial situation were to worsen.
While the bill is not inconsequential, it is not one that addresses the state’s immediate financial needs.
Senate Bill 2: Millennium Scholarship
Senate Bill 2, which passed unanimously, gives the Board of Regents the ability to temporarily waive eligibility requirements for the Millennium Scholarship.
Because NSHE colleges and universities allowed students to request a “satisfactory” or “unsatisfactory” grade rather than a traditional letter grade for the spring and summer semesters, students are at risk of losing scholarship eligibility due to grade point average and credit load requirements.
Senate Bill 2 gives regents the authority to approve waivers for these requirements and any others deemed appropriate. It will only apply for the upcoming academic year.
Officials estimate the waiver will help approximately 2,200 college students maintain eligibility for the popular program, which provides up to $10,000 in scholarship money for graduates of Nevada high schools who attend in-state public colleges.
Assembly Joint Resolution 1: Urging Congress to act
Assembly Joint Resolution 1 urges President Donald Trump and Congress to “provide flexible funding for state, local, and tribal governments to account for anticipated public budget shortfalls as a result of the COVID-19 pandemic.” The full text of the resolution is available here.
The resolution passed unanimously in the Assembly and nearly unanimously in the Senate, with Republican Sen. Ira Hansen casting the lone nay vote.
Democrats introduced Assembly Bill 4, which would have instituted a percentage cap on the deductions available to mining companies. Because it is effectively a tax increase, the bill needed a two-thirds majority to pass — something the Democrats do not have in the Senate. After the bill was blocked by the eight Senate Republicans on its first vote, Democrats struck an overnight deal with one of them to amend the bill to protect smaller mine operations and direct the new revenue into a fund dedicated to education. State Sen. Keith Pickard agreed to support the bill but hours later withdrew that support, explaining later that he believed the numbers and estimates within the bill to be wrong. The bill would have brought in $50 million annually to support the state’s transition to a weighted funding formula — something that has now been gutted in the budget cut bill.
The birth, death, resurrection and second death of AB 4 was a rollercoaster.
Meanwhile, Assembly Bill 2 was dead on arrival. That bill would have allowed Clark County School District to recoup any money saved by its individual schools. After an ice-cold reception from lawmakers and education advocates alike, Assembly Speaker Jason Frierson indicated the bill had no future, but not before a dramatic game of finger pointing ensued over who was responsible for proposing the bill. CCSD Superintendent Jesus Jara publicly attempted to absolve himself of responsibility, which prompted Frierson to say the bill was explicitly requested by the district. Jara then pointed blame at the state department of education, which the state superintendent and governor harshly rebuked. The session drama has spilled beyond Carson City and prompted calls for an evaluation and possible firing of Jara.
Special session the sequel
In the waning hours of the 31st Special Session, Gov. Steve Sisolak announced via press release that he would not immediately call for a second special session as he’d previously indicated he would do.
“I have serious reservations about having our lawmakers convene again for a similar — or longer — period of time in the midst of this spike (of COVID-19) in our state,” read the governor’s statement.
Sisolak continued that his goal is still to issue a proclamation calling for a second special session, and he included a list of “critical policy issues” that would be addressed. They are: criminal and social justice reform, voting issues, safety standards for workers, business issues related to COVID-19, and the unemployment insurance program.
In a press conference held before Sisolak’s announcement, Speaker Frierson was tight-lipped on details about the expected 32nd Special Session. When asked if Democrats would pursue a constitutional amendment to raise mining taxes — something progressive advocates have been pushing for as a natural extension of the failed Assembly Bill 4 — he said only that the priority was to finalize balancing the budget.
He added that conversations were ongoing.
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