Featured on this issue’s cover along with fellow Republican Derek Armstrong , Majority Leader Paul Anderson spent the 2015 Legislative session trying to build bridges and put out fires in an often-divided caucus. In the end, he was a key player in getting Governor Sandoval’s revenue and reform deal across the finish line. Anderson has been a Republican member of the Nevada Assembly since February 4, 2013.
E. Thompson: On a scale of 1-10, how satisfied are you with the outcome of the session, if not the legislative sausage-making process itself?
Anderson: Well, I’m elated with the outcome. What we were able to accomplish was substantial.
E. Thompson: Substantially bad, according to the more conservative members of the Assembly Republican caucus. The word “accountability” was thrown around a lot in tandem with the tax package. Are you satisfied that there is enough accountability in place? Or is there more that needs to be done?
Anderson: Oh, I think there’s always more work to do. It’s difficult when you have a budget as big as it is to not have some areas that you could improve upon, and that’s just part of the process. But I think the reality is that with each of the new categorical spending accounts themselves, we have good accountability measures, as well as with third-party audits. I don’t think that’s ever been done, at least to my knowledge, in any type of Nevada spending or investment program, and that’s absolutely key.
E. Thompson: Can you offer a specific example of where third party auditing was added?
Anderson: The Victory School funding, for example, where the money that goes in is grant-funded directly. The Clark County School District applies to the Department of Education for a grant to turn a school into a Victory School. That money is then allocated based on a business plan, with specific milestones for how success is measured, and a third party auditor is then hired to come in and evaluate that and report back to the legislature. And that’s true for almost every piece of those new spending measures.
E. Thompson: Regarding the commerce tax, or gross receipts taxes in general, walk me through where you stood after the election and coming into the session and as the weeks rolled on.
Anderson: I think that, for me, the concern wasn’t so much about a gross receipts tax itself, it was that we didn’t have the data to show that such a tax could be stable. The critical investments that we wanted to make prompted me to ask, why are we going to pass a new tax if we aren’t even sure whether it’s going to produce the results? And would that then force us back into a special session a year from now or six months from now, in which we’d have to redo the whole thing because we weren’t able to afford the investments we committed to now.
E. Thompson: And that concern’s still a concern right now, is it not?
Anderson: Not near as much, because what we’ve built in essentially is the Modified Business Tax (MBT) as the backstop. So if the gross receipts tax doesn’t produce to expectations, the MBT will cover the expenses.
E. Thompson: You’re referring to the higher MBT rate across a broader spectrum of businesses, and the MBT credit?
Anderson: Right, right. The MBT will perform, as Derek and I designed it, to kind of fill, you know Gov. rec, and a little bit below Gov. rec is where we ended up, a little less than $108 million based on what we cut out of the recommended new spending. The fact is that that commerce tax could perform very poorly – which certainly it will have some performance – but it could perform very poorly and we would still be able to fund the budget that we passed.
E. Thompson: Did you get any irate calls from anyone who’s going to be affected by the commerce tax now that the floor is at $4 million?
Anderson: Well so, you know, my business works with businesses, and I have about 250 active clients. I have 62 that are locked in contract clients that I deal with on a daily basis. And I discussed all this with just about all of them. We had kind of a town hall call. I’m a member of the Las Vegas Executives’ Association, and we had a town hall call, and we just walked them through what the parts and pieces of the puzzle were, and not one of them said ‘this is the worst thing I’ve ever seen’. But not everybody was happy with it.
E. Thompson: Go on.
Anderson: But I pay all these same taxes personally. So in my business, I pay the MBT. And I will pay portions of the commerce tax. I’m just maybe, barely above the threshold. And as I looked at it, and others looked at it, the accountability measures were critical for everybody. No one wants to see more money dumped into the black hole we call the Distributive School Account”, right? Even as I knocked on doors before the election, I found that people were willing to come out of pocket for education. But where does it go, people want to know? Where does it get lost? We often have no idea, right? And so I think that, with the checks and balances in the superintendent’s and Governor’s education plan, that’s what gave me a little bit of solace. As long as we have that accountability, and as long as we know we can have a predictable revenue base moving forward, including some growth, I can live with this.
I sat down with my father-in-law who is a business owner as well, along with about 10 or 12 other businesses that represented about 1,000 different employees, and we just ran all the plans against those books with their CFOs. And that commerce tax deduction was key in reducing— I mean the tax burden overall was a little bit increased still, but it was better than they had expected it would be under the original plan, SB 252.
E. Thompson: How different was the outcome of the session from what you expected coming in on day one, in light of the Republican sweep in November?
Anderson: I was optimistic, honestly.
E. Thompson: Were you?
Anderson: Yes. While we walked into something that was kind of a quagmire, initially, we had, I think, a plan and some ideas that needed to move forward. And regardless of the caucus politics, there were enough of us that saw the bigger picture of what we were trying to accomplish here, and I think, you know, the governor certainly was a leader in all that and making his goals well known. So I came in optimistic, even though I admit that I was asking, not too long ago, are we going to close on time?
But I always felt good about the possibilities, and I felt that ultimately people around the state would be proud of what we were able to accomplish. And it may not be realized for four or five, six years, right? You may not see major immediate impacts…
E. Thompson: Right, and if you guys made a big mess, we may not know about it for four to five years, as well.
Anderson: [laughs] Well, I did have a bill this session that fixed a mistake I made last session so….
E. Thompson: I wondered time and time again this session… if the uber-conservative caucus, that group of 9, 10, 11 Republicans in the Assembly, if they had carried themselves differently, if they had played their cards a little smarter, or if they had been a little more open to listening even if not agreeing, do you think they could have gotten more out of this session than they got? Could they have been successful in either getting the commerce tax piece taken out of the deal altogether, or maybe getting everyone to agree, okay, we won’t extend the sunsets forever, we’ll just do it for two more years? Or were the governor and his supporters so set on what was going to happen, including passing some kind of new business tax, that it really didn’t matter what that caucus did or said?
Anderson: So initially when we came in and we all started hearing about the governor’s tax plan, there wasn’t a lot of support for it, right?
E. Thompson: Right.
Anderson: When you come in with what was essentially a straight gross receipts tax, there wasn’t a lot of support for it, even though you saw a lot of businesses stepping up in general support of more funding. Most of the testimony we heard was, ‘we support the investment, we support the increase in expenses,’ and as that was going on, never did the governor draw a line in the sand and say, this is it, this is how it’s going to be. And I think that was critical. I think it was a lesson learned from 2003, right? We openly talked about that early on. There was general agreement, going in this time, don’t push anybody into any corners, because then we’re all just going to end up in a stalemate. Nobody’s going to talk to each other. We’re all going to dig in. And that’s going to be the end of the game.
So from day one, that was sort of the nuanced discussion, don’t dig in, don’t draw lines, keep the discussion going. But when it comes to the uber-conservatives that you mentioned, the keep-on-talking approach, it doesn’t work, because their stance is an ideology for them. And it’s hard to get past that, right? It’s hard to get to a conversation about, what’s the big picture? What are we trying to accomplish and what impact do we want to have? On education, on the systems that need improving? With that caucus, any conversation was about nothing more than essentially continuing the status quo.
We could have done a $6.9 billion budget. We could have done the exact same thing we did last time. Status quo, no change, just roll up inflation. But why even come up here for that? Why even come up here if all we’re going to do is status quo? And in the situation that we were in, the shift in responsibilities from being in the minority party to having to govern… that was a very big different position to be in. We had to learn very quickly how to govern, and that means you have to make the hard decisions. It’s very easy to press the ‘no’ button and walk away. But in my view, that would have been the easy way out.
E. Thompson: How interesting is it that it took a Republican governor and a Republican -controlled legislature to finally raise taxes and fund education reform in Nevada? And why is that?
Anderson: I think that when you’re a Republican in the minority, you generally use taxes as leverage, as the political answer, right? You say, okay, I’ll give a little bit of revenue on this if you can give me some reforms on that. This time, though, we had both options on the table from the start, and we got tremendous reforms across the board. Everything from construction defect reform, to collective bargaining, to tort reform. I mean, we were not just nibbling around the edges, some of these Republican-driven reforms are significant. And the fact that we could do both, accomplish the reforms and accomplish the revenue for the investment that we needed, I think, was certainly unique.
E. Thompson: Who gets the credit for that?
Anderson: I think we all have to take credit for it, right? We all participated, the gang is 63 and the governor’s office, we were all working in tandem to accomplish this, right?
E. Thompson: Well, not all. Did you – after the budget passed, in the hours before the big vote on the tax deal, were you worried?
Anderson: Yeah, I was a little nervous.
E. Thompson: But then there they were, 30 votes.
E. Thompson: There are some conservative lawmakers right now, today, in this building – I’ve talked to a few of them this morning – who are very upset, not just about the tax package, but also because they think you guys gave away the farm on some things. They are asking, why did Republicans give up so much ground that had been gained, like on the prevailing wage reforms? Some stuff got walked back from what was signed, sealed and delivered early in the session. Why did that happen? Were the walk-backs just to be conciliatory and say to the Dems, okay, we all want to end happy, here? Or was it part of the deal, part of what had to be done? Because the conventional wisdom is that it’s not too hard to get Democrats to agree to more spending on education.
Anderson: Well, some of that . . . I would say, one, there was not really much of a walk back. The prevailing wage . . .
E. Thompson: In your mind, that wasn’t that much? To go from excluding school construction projects from prevailing wage rates altogether, to just reducing those rates by ten percent?
Anderson: No, well, the deal we got was better than just excluding school projects from prevailing wage because we got complete reform. We got a ten percent discount on all school construction, and we still exempted costs on building charter schools, and we got reforms in there that will keep the rates across the board a lot closer to market levels. Essentially, what was agreed upon was, if we put schools back in, then we need – and I want to be clear, this wasn’t part of the end game grand bargain, it was a desire to have full prevailing wage reform, and not to just change one piece of it – so we said, okay, let’s renegotiate this. If we add schools back into the mix, and say all school construction gets an automatic ten percent discount off of the prevailing wage, and then the way we calculate prevailing wage is changed across the board, that is a greater savings to taxpayers.
E. Thompson: Okay, and the trigger?
Anderson: Right, so we raised the trigger, too, that’s right. We raised the levels.
E. Thompson: Speaking of schools, there are teachers in Clark County right now, union members, Democrats, having a cow over the conversation that’s happening about possibly breaking up the Clark County School District. Correct me if I’m wrong, but where we’re at right now is that there is a bill that passed that says we’ll look at it and collect some information.
Anderson: That’s pretty much it.
E. Thompson: And it can be walked back if everyone decides it’s a bad idea?
Anderson: It’s not a done deal. It will be in the hands of the Clark County Commission.
E. Thompson: Any parting words before you go back to your life?
Anderson: Amazing experience. Unique.