As Nevada gears up for the 2021 legislative session, the Clark County Education Association has set its sights on economic diversification as an avenue toward improving schools and, in turn, the workforce.

The teachers’ union commissioned a Michigan-based firm to study Nevada’s business landscape and identify areas of economic growth. The 39-page report — which has been shared with legislative leaders, among others — pinpoints “four key clusters that have shown promising growth and could become important areas of competitive advantage for Nevada.”

They are: business services, distribution and electronic commerce, transportation and logistics, and aerospace vehicles and defense.

The report’s debut hints at the power struggles over policy and the state’s pandemic recovery plan that may play out in Carson City this year. Gov. Steve Sisolak on Monday unveiled his recommended budget for the next biennium, which restores some K-12 cuts made last summer but will likely fall short of the previous cycle . The Governor’s Office of Economic Development, meanwhile, is expected to release an updated economic development plan before the Legislature convenes Feb. 1.

So what compelled CCEA to jump into the economic diversification arena as well?

“If this report does anything, we would like to see it be part of a discussion that sets policy that leads to legislation around how we can diversify the economy,” said John Vellardita, the union’s executive director.

It’s unclear how that sentiment has been received by outside forces. The governor, Assembly Speaker Jason Frierson, Senate Majority Leader Nicole Cannizzaro and GOED officials did not respond to a request for comment.

The CCEA-commissioned report repeats what has become a major pandemic storyline in Nevada: Unemployment skyrocketed to 30 percent in April because of coronavirus-related shutdowns that crippled the state’s dominant hospitality sector. While jobless rates have fallen, recovery has been slow, punctuated by ongoing COVID-19 surges and stymied tourism levels.

The downturn reignited calls for greater economic diversification, an effort that began after the recession pummeled the region’s economy a decade ago. The CCEA report — completed by Anderson Economic Group — looks specifically at what existing industries are ripe for expansion in Nevada.

“Now is the time to stop thinking about diversification and start thinking about what industry has sprung up here in the last decade,” said Brian Peterson, director of public policy and economic analysis for the Anderson Economic Group. “How can the state reorient its economic development strategies to start supporting those individual clusters rather than attempting to garner new clusters?”

Here’s a closer look at the four emerging clusters identified in the report:

• Business services is a wide-ranging category that includes companies that support other business operations, such as computer or architectural services, job placement and ground transportation. Employment in this industry grew by 53 percent between 2012 and 2019. The report notes that Nevada has competitive advantages for data centers, call centers and corporate headquarter facilities.
• Companies that fall within the distribution and electronic commerce cluster do as the name suggests — buy, hold and distribute products. Examples include Amazon, Walmart and eBay distribution centers in Nevada. Employment in this cluster increased by 33 percent, though many jobs don’t require a postsecondary degree and pay is often below the median wage.
• Air, rail, bus and freight services fall under the transportation and logistics cluster, along with support businesses related to maintenance, security and inspections, among others. Employment doubled during that 2012 to 2019 period, led by significant job growth in Douglas, Storey, Clark and Nye counties. The jobs vary in the amount of education and skills training needed, but the report says many offer wages higher than the state average.
• Of the four clusters, aerospace vehicles and defense is the smallest (about 5,200 employees), but it has grown the fastest in that same time period. These businesses manufacture aircraft, space vehicles, guided missiles and related parts as well as navigation equipment. Nevada’s military bases and drone-friendly legislation have provided a competitive advantage, according to the report, which also notes there’s not a standard career path given the constantly evolving nature of the new industry.

Overall, these industries are relatively established in the state, have a high employment concentration and are growing faster than others, Peterson said, explaining their designation as emerging clusters. But he cautioned singling them out as the only economic opportunities or even as long-term career paths.

“We're not saying that people need to go into these clusters and work in these clusters for the rest of their career,” he said. “I think, you know, you might start out at a low-paying job in a warehouse and distribution center, but there's opportunities for growth there because the cluster itself is growing.”

Plus, about half of Nevada’s high school graduates don’t immediately enter college, meaning there’s a sizable share of young adults looking for entry-level jobs with some skills training but not necessarily a postsecondary degree. That’s where the second half of the report comes into play. It recommends policymakers support Career and Technical Education (CTE) programs that could help prepare students for jobs in these industries. 

It also encourages efficient transportation networks, affordable housing in areas where jobs are quickly growing and a review of state incentive programs for economic growth.

The union paid Anderson Economic Group a six-figure sum for completing the economic analysis, said Vellardita, who defended the decision to hire an out-of-state firm.

“We think there’s some very qualified entities here in Nevada, but Nevada is small and people have accounts. They have relationships,” he said. “The issue of conflict emerges more times here than elsewhere.”

Education funding strategy

One thing the report doesn’t do is project how much additional tax revenue the identified industries could generate.

Vellardita said the report is simply meant to jumpstart discussions about legislation that could strengthen economic diversity. Separately, the union is pushing Sisolak and the Democratic-controlled Legislature to move forward on tax reforms that over time would improve education funding statewide. 

The 2019 Legislature passed Senate Bill 543, which created the new Pupil-Centered Funding Plan for K-12 education. The Commission on School Funding has been meeting regularly during the interim and examining both the optimal funding level as well as how to achieve that in the long term through tax reforms. The advisory group is expected to make recommendations during the upcoming legislative session.

Two initiative petitions backed by CCEA that would raise the state’s gaming and sales tax received enough signatures to qualify for the 2022 ballot. That sets up a tricky situation for the Legislature, which is constitutionally guided to take action on qualified ballot initiatives within the first 40 days of the session. If the measures aren’t approved by lawmakers, they’ll be placed on the 2022 ballot for voters’ consideration.

In a sense, the ballot initiatives are a bargaining chip for the union.

“We’re not wedded to these revenue streams, but we do know the importance of them creating an incentive — leverage — to move a conversation along to see if we can get something done in 2021,” Vellardita said.

If an alternative revenue-generating option emerges during the session that CCEA supports, the union won’t run any campaigns regarding the ballot initiatives in 2022, Vellardita said. The union has asked the Commission on School Funding to consider property tax reform as it ponders revenue streams for boosting K-12 education. 

The big question is whether there’s political will among the governor — who faces a reelection campaign if he decides to seek a second term in 2022 — and state lawmakers to make any tax changes this session at a time when the state’s still reeling from the pandemic’s financial woes.

“If this governor was to propose some kind of revenue, we clearly would be there listening and probably supportive of course depending on what it is,” Vellardita said. “Do we see it at this moment? We haven’t seen any signal.”

Sisolak’s budget recommendations for the next biennium were not built around any new tax streams, though his State of the State address on Tuesday should shed more light on policy priorities. 

“This budget reflects the reality we are currently in — where we are now,” Sisolak tweeted Monday. “Tomorrow's State of the State address represents where Nevada is going.”