Supporters gather around Nevada State Treasurer Dan Schwartz while he announced his candidacy for governor during the Nevada Republican Men's Club luncheon at Bali Hai golf course on Monday, Sept. 4, 2017. (Jeff Scheid/The Nevada Independent)

Pugnacious and combative, Treasurer and gubernatorial candidate Dan Schwartz has never been one to back down from challenging the state’s political orthodoxy.

It’s that attitude and behavior that’s informing the first round of attacks against Schwartz’s nascent, longshot bid — a recently formed Super PAC dubbed “American Integrity Project” launched a digital ad campaign targeting Schwartz within minutes of his official announcement getting in the race on Tuesday.

Their target? Schwartz’s controversial “alternative” state budget proposed and quickly shot down during the 2015 legislative session.

“As state treasurer, Schwartz introduced an ‘alternative’ state budget that was ridiculed by his fellow Republicans,” the ad states. “Schwartz wanted to hit Nevada businesses with a new tax. He proposed new taxes on food and drink sold in Nevada casino restaurants, plus higher taxes on gaming. Schwartz even wanted to impose a new tax on passengers arriving at Nevada airports, even though this was illegal under federal law. Schwartz wanted to raise taxes on Nevadans, while opposing funding for children with autism, and increasing his own taxpayer funded travel budget a whopping 372 percent.”

The recently formed Super PAC counts Republican consultant and Ricketts family political guru Brian Baker as a “senior advisor,” though Baker told the Las Vegas Review-Journal that the PAC has not received funds from either the wealthy Ricketts family or casino magnate Sheldon Adelson. This, even though both American Integrity Project and Future45, a super PAC funded by the Ricketts family and Adelson and overseen by Baker, lists the same person as treasurer and identical banking information on their PAC registration.

Baker was also scheduled to co-host a May Washington D.C. fundraiser (along with Todd Ricketts) for another likely Republican gubernatorial candidate, Attorney General Adam Laxalt, which was called off because of a legislative hearing into a secret recording made of Laxalt by the state’s top gaming regulator.

Emails to the group were not returned. Rory McShane, a spokesman for Schwartz, didn’t address the substance of the ad in an email but bragged that the treasurer’s candidacy had the establishment “running scared.”

Regardless of origin, the attacks are merely a preview of what is likely to be a contentious and bruising primary between Schwartz and Laxalt. But just how accurate is it?

Dan’s alternative plan, quickly panned

Nevada Republicans had a lot to celebrate in November 2014 — party candidates (including Schwartz and Laxalt) swept all six state constitutional offices and took control of the state Assembly and Senate for the first time in decades.

But the party quickly balkanized over a still-contentious proposal by popular Republican Gov. Brian Sandoval to raise and extend $1.1 billion in tax revenue to jumpstart funding to Nevada’s long-suffering K-12 public education system.

The proposed and eventually approved tax hike divided Republicans then and now — efforts to repeal at least portions of the tax package through a ballot question was introduced just last month, and at least two Assembly Republicans lost primary challenges inspired in part by their votes to raise taxes.

Schwartz and Controller Ron Knecht quickly fell into the opposition camp, and roughly two weeks after Sandoval released his proposed two-year budget during his January State of the State address, the duo announced they were releasing their own “alternative budget.”

Citing their “careful review and analysis,” the “alternative” budget proposal came in nearly $400 million under what Sandoval had proposed in the state’s normal two-year budget, while calling for $20 million in agency cuts while proposing $540 million in new taxes on top of the “base” budget — $450 million from a $5 per passenger fee at airports, $70 million from increased gaming taxes and $20 million from cuts to state agencies and boards.

In a release announcing the budget, Schwartz criticized plans to invest more money in education and said that past “generous funding” to the education system had “failed to deliver the goods.” In interviews following the release of the budget, Schwartz questioned the need for the state to fund auxiliary educational services such as anti-bullying and autism therapy.

“What education needs is teachers, not social workers,” he said at the time.

The proposal was unusual for different reasons — the state’s treasurer is nominally charged with managing the state’s investments and managing low-key programs like unclaimed property and college savings accounts and scholarships, with no language directing the office-holder to create a budget plan for the state. The three-page proposal also served as more of a budget outline, rather than as an actual replacement for the 3,300 plus page actual two-year budget put forth by the governor’s office.

Further complicating matters was the fact that the proposed passenger fee is illegal under the federal Anti-Head Tax Act, which prohibits states and localities from charging fees to individuals traveling on airplanes (Schwartz as recently as Tuesday week defended the idea to tax airline passengers, calling it a “great idea. I just can’t do it.”).

To make up for the missing $450 million, Schwartz proposed a 25 cent receipt tax on meals and drinks over a certain amount (which he called “far better” than the original proposal), assumed to bring in $125 million a year, and an undefined increased in gaming revenue taxes to bring in $70 million per two-year budget cycle. He also suggested the Legislature “re-prioritize” $400 million worth of spending in the governor’s proposed two-year budget

Nevertheless, lawmakers invited Schwartz to present his alternative budget to a Senate budgetary committee in early February, where the proposal was quickly and thoroughly panned by lawmakers and parents of children with autism.

Reaction from lawmakers to the budget ranged from perplexity to outright hostility — then-Senate Majority Leader Michael Roberson — now a candidate for lieutenant governor and endorsed by Laxalt —  called the proposal an “absurdity” and a “hijacking” of the budget process.  

“I’m in shock and dismay that you would be here today proposing this,” he said. “I’m embarrassed for you, sir.”

Sandoval’s Chief of Staff Mike Willden, who crafted much of the state budget, said he was “insulted” by the suggestions put forth by Schwartz and said the three-page proposal was ignorant of several important budgetary steps and reflected numerous “misunderstandings” of how state programs were funded.

“Behind the three volumes of information are thousands of documents in the systems that create the budget,” he said. “It is a detailed, thoughtful process. I would challenge anyone to cut $500 million from this budget.”

Despite Schwartz’s incessant defense of the alternative budget, legislators quickly panned it and declined to take it seriously — Senate Finance chair Ben Kieckhefer concluded the hearing by calling it as best “a poor error in judgement” and at worst “incredibly risky behavior for our state treasurer” that could threaten the state’s bond rating.

Schwartz wasn’t the only Republican to propose an alternative to the governor’s plan — a group of 12 Assembly Republicans put forth a plan dubbed the “Balanced Plan for Growth” nearly $391 million less than the governor’s proposal and without any tax increases. Ultimately, lawmakers approved a compromise plan combining elements of Sandoval’s original tax plan with portions of a proposal brought forth by moderate Republican Assembly members Derek Armstrong and Paul Anderson.

Garnering less public attention was a proposal from Schwartz’s office to increase the allotted travel budget for his office from an average of $6,809 in the 2015 fiscal year to more than $31,000 per year — an increase of more than $24,000, or 358 percent.

Schwartz defended the requested increase to members of an Assembly budget committee, saying the percentage increase was high but that the previous travel budget was only sufficient for his office’s staff to make about a dozen trips between Reno and Las Vegas, and that increased travel would help increase participation in the state’s 529 college savings plan by facilitating in-person “staff discussion of innovative ideas.”

After negotiations, Lawmakers ultimately decided to fund the office’s travel budget to the tune of $6,380 per fiscal year.

Verdict:

In a series of digital ads, super PAC “American Integrity Project” claims that Schwartz presented an “alternative budget” that would put higher taxes on restaurant tabs, gaming licensees and airline passengers, while opposing funding for programs treating children with autism and asking for his own travel budget to be substantially increased.

While Schwartz’s plans had a miniscule chance of advancing in the Legislature, the ad generally hits accurate notes in describing what the “alternative budget” would look like. Republicans and Democrats alike panned the budget, which flamed out after one hearing. Schwartz also requested a $24,000 per year increase in his office’s travel budget, though that request was turned down.

Though it’s important to note that Schwartz’s tax proposals never had a realistic chance of becoming law and were brought forth as an alternative to a higher tax increase, nothing described in the ad is inaccurate.

We rate this ad Honest as Abe!

False
True
Verdict: Honest as Abe
INDY FAST FACTS Adam Laxalt Job: Nevada State Attorney General Party: Republican In current office: 2015-present Birthdate: August 31, 1978 Education: Georgetown University (B.A.) Georgetown University Law Center (J.D.) Other public offices held: None Total donations: $8,262,050 (1/08/14 - 6/07/18) Top donors: Station Casinos/Zuffa/Fertitta $208,500 Las Vegas Sands $75,000 Marnell Properties LLC $42,500 Starpoint Resort Group/Partners $40,000 MGM Resorts $35,000
INDY FAST FACTS Brian Sandoval Job: Nevada Governor Party: Republican In current office: 2011-present Birthdate: August 5, 1963 Education: University of Nevada, Reno (B.A.) Ohio State University (J.D.) Other public offices held: U.S. District Court Judge (2005-2009) Nevada State Attorney General (2003-2005) Nevada Gaming Commission Chair (1999-2001) Nevada Gaming Commission Member (1998-2001) State Assemblyman, District 25 (1994-1998) Total donations: $5,035,808 (1/7/11 - 7/5/17) Top donors: Caesars Entertainment $245,000 Station Casinos $158,072 MGM Resorts International $160,000 Wynn Resorts $80,000 Marnell Properties LLC $70,000

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