Lawmakers seek critical legal opinion on votes required to extend expiring taxes

Riley Snyder
Riley Snyder

The first weeks of Nevada’s 120-day legislative session are typically slow, with few bill hearings and short floor sessions the norm ahead of the usual last-minute rush.

But amid a relatively slow first three weeks (outside a contentious gun background check bill), lawmakers are preparing for a potentially major legal opinion from legislative attorneys that could have significant implications for Gov. Steve Sisolak’s $8.8 billion budget and the rest of the session.

Although the Democratic governor promised no new taxes in his State of the State address, his budget includes delaying a scheduled reduction in the state’s payroll tax — worth nearly $100 million over the two years of the budget cycle. But because legislative Democrats are one vote short of a super-majority in the state Senate, lawmakers — including Senate Majority Leader Kelvin Atkinson — have requested an opinion from legislative legal counsel on whether extending the taxes will require the usually constitutionally mandated two-thirds vote required for tax increases.

“I’m willing to have that debate, but I’m on the side of, that’s not a new tax or a new fee so I don’t necessarily think it should require two-thirds,” Atkinson said in an interview prior to the start of the legislative session.

The politics surrounding a vote on extending the “sunset” taxes are obvious — if extending the taxes only requires a majority vote, Democrats won’t need to compromise or water down any of their budget plans to attract requisite support from at least one Republican state senator. But that requires a legal go-ahead on whether extending an expiring tax falls under the Constitution’s requirement for a two-thirds vote for any bill that “creates, generates, or increases any public revenue in any form.”

Atkinson said Monday that he had not received an opinion back from the Legislature's legal counsel. Asked whether his office believed that a two-thirds majority was necessary to extend the taxes, a spokeswoman for Gov. Steve Sisolak said the office is awaiting an official determination on the issue from legislative legal counsel.

Possible guidance may come in the form of an earlier legislative counsel opinion, commissioned by former Assemblyman (now state Sen.) Ira Hansen over a 2015 bill that in part authorized the school board of trustees to extend general obligation bonds under certain conditions.

Hansen queried legislative legal staff over whether the bill — approved on narrow margins in both houses of the Legislature — required a two-thirds vote as opposed to a simple majority. Although the opinion dealt specifically with the ability of the Legislature to authorize a school district to authorize bonds, its language could be interpreted to read that a two-thirds vote is required only when taxes are approved in the “first instance.”

“With regards to S.B. 119, there are no provisions of the bill which directly bring into existence, produce or enlarge public revenue in the first instance because the provisions of the bill authorize or enable, but do not require, the school board to take the discretionary action permitted by the bill,” the opinion states.

The opinion does note that the Nevada Supreme Court has never issued a “controlling decision” on how to interpret the constitutional provisions of the two-thirds requirements for any tax increase.

Hansen, who said in an interview that he disagreed with the 2015 opinion, said it would be “really weird” for legislative counsel to determine that extending an expiring tax would only require a majority vote after previously determining lawmakers needed a two-thirds majority to extend “sunsetting” taxes in previous sessions.

“I’m not saying that because it would give the Republicans some possible leverage,” he said. “I’m just saying that because it’s in the Constitution. And in my mind, if there's any doubt, you always lean in favor of the side that people wanted.”

The issue of “sunsetting” or expiring taxes first arose in the 2009 session, when former Republican Senate Leader Bill Raggio — the self-proclaimed “architect of the sunsets” — delivered Republican votes for last-minute increases in sales and business taxes designed to balance the state budget as the state dealt with the ongoing economic collapse. The bill passed with a two-thirds majority in both chambers — 17-4 in the Senate and 29-13 in the Assembly.

Raggio retired ahead of the 2011 Legislature, but former Gov. Brian Sandoval’s proposed budget included ending the “sunset” taxes with significant budget cuts and the taking of tens of millions of dollars from a Clark County sewer infrastructure public authority. But a last minute state Supreme Court decision challenging the move blew a hole in the governor’s budget, causing him to relent and extend the expiring taxes for another two years. Again, the bill passed with a two-thirds majority in both chambers: 36-6 in the Assembly and 15-6 in the Senate.

The sunsets were continued into the 2013 session with Sandoval’s recommendation (again passed with a two-thirds majority), and enshrined permanently into state law in 2015 as part of the governor’s $1.1 billion approved increase in new and extended taxes to pay for K-12 education.

“It's time we are honest with ourselves — these revenues are now a part of our comprehensive budget,” Sandoval said in his 2015 State of the State speech.

But that 2015 tax increase planted the roots of the present-day questions over “sunsetting” taxes — creating an automatic reduction in payroll tax rates if certain tax revenues over-perform expectations.

That scenario happened in 2018, with state tax officials announcing in October that the rate would decrease from 1.475 percent to 1.378 percent, as collections from the state’s payroll tax, tax on gross revenue and bank excise tax exceeded projections made by the five-member Economic Forum, which regularly projects expected state revenue.

Hansen noted that Raggio had a reputation for getting back legal opinions in his favor from legislative counsel, but reiterated that an opinion was not a binding legal document and could be challenged by a court.

“I think if Majority Leader Atkinson wants something, he can get it, you know what I mean,” he said. “(Legislative Counsel Bureau) opinions, I have a lot of respect for them, but that doesn’t mean it’s going to hold up if somebody actually challenges it and it goes to a court.”


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