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(Originally posted at 5:04 p.m.)
Legislators are turning to another bit of fancy financial footwork to limp to the end of the fiscal year on June 30.
While officially there is no deal cut for Monday and Tuesday's special session to deal with the $340 million shortfall, the state's mining association has been asked by lawmakers to pre-pay a years worth of mining tax, according to a lobbyist with knowledge of the proposal and a legislator involved in the talks. Both would speak only on condition of anonymity because the deal isn't finalized.
But the mining association has reportedly agreed to the deal.
Last year, the state's portion of the mining tax was about $38.3 million.
Mining, which has been one industry doing well thanks to high gold prices, has been a target of those who want to go after exemptions that they pay.
Prepaying the mining tax is a short-term solution, one that was done away with years ago. But it would help with cash flow now, and buy legislators more time to come up with a long-range solution. Or so the theory goes.
Gibbons said "we have a consensus approach" for a special session. He said he'll announce the proclamation, which will provide some details of how to make the $340 million shortfall, tomorrow at 10:30 a.m.
"I've given my word to leadership of assembly and senate to make sure various caucuses comfortable with plan," he said. "Once we do that, we'll give you every detail you want."
Still on the table is a loan of up to $160 million from a local government pool of money to meet operating costs. It could be backed by $187 million in general fund reserves.
Yet legislators should take comfort that they are simply following historical precedent, even if none of it is recent. Today, we wrote about the 1881 loan the state legislature took out from school accounts to fund an insane asylum and operating budget.
But state Archivist Guy Rocha has found an even more direct parallel.
In 1912, the third special session in state history, Governor Tasker Oddie called a special session for the express purpose of taking out a loan to supplement the state's general fund.
In his message to the Assembly and Senate on Feb. 23, 1912, Oddie said:
"I have convened your honorable bodies in extraordinary session... The General Fund in the State Treasury is exhausted and that, to enable the State to transact its business on a cash basis, provision must be made by the Legislature to borrow a sum sufficient to meet the emergency."
The more things change...
Considering that the mining industry is handed everything they want from the state by having an incredibly low tax - they should be happy to pre-pay.
Judy & David
Mining is the 16th largest industry in the State of Nevada. This industry would be even less important to the State if they would have to pay a pre-pay tax. You see if today the Division of Minerals reports that there are 72 million contained (not recovered) gold ounces available for development in the State of Nevada this estimated total is defined as measured and indicated which can be mined under existing economic and operating conditions. Economic conditions are very unstable currently with gold, oil, steel, chemicals, blasting agents, housing, labor prices swinging to new highs and lows in less than 6 months. The risk of investing 100's of millions of dollars of capital (if you can get investors to do so during the current recession) to continue mining gold or developing new gold mines is very risky and adding additional taxes (or pre-paid taxes) as you propose will cut the 72 million ounces of known reserves down to a much lower value. Look at what is happening to the copper industry in Arizona. The lower the reserves are, the less ore is mined, the smaller the workforce required, and the less taxes that can be collected from the Mining Industry and the 14,470 Nevadans working for mines. Then the current 90% of sales and use taxes paid by mining that goes directly or indirectly to Clark and Washoe counties' general budget, education and expenditures will be reduced tremendously and the significant role mining plays on the rural Nevada revenue will be reduced (and will be then funded by Clark and Washoe counties). This doesn't sound like the right solution for the State budget problems either. What about the top 5 Nevada industries? Is there some room to tax real estate, accommodation/food services, construction, government or retail trade? Probable not. Not during this current recession. What is the solution? Budget cuts, hiring freezes, salary reviews? Yes, to all of the above and an overall sales tax increase. Hopefully, people will be buying to generate this sales tax. Individuals are able to budget whats left of their incomes, the State must do it too!