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Call to Arms in Nevada

February 12, 2010

Daniel Klaich tried. He really did.

When the lawyer and longtime administrator at the Nevada System of Higher Education became chancellor of the higher education system last spring, he vowed to take a more constructive and positive tone than had his predecessor, Jim Rogers, a broadcasting magnate who used a series of weekly Web messages to engage in high-profile verbal warfare with the state's governor and other political leaders.

It wasn't that Klaich, who served as executive vice chancellor under Rogers, disagreed with the substance of his boss's views, which typically focused on how the state was shortchanging education with shortsighted budget setting and putting its economic future at risk as a result. Klaich just subscribed to the "catch more flies with honey than vinegar" approach, and hoped that reasoned arguments, civil personal relations and powerful data would more effectively persuade Gov. Jim Gibbons and other politicians that slashing spending on higher education was a bad idea.

But with the state now facing a hole of more than 20 percent in its budget, and Gibbons steadfastly insisting on resolving it with budget cuts -- while forswearing any tax increases -- Klaich struck a different tone on Monday, using blunt language to sound the alarm in a manner reminiscent of his predecessor.

If the system imposes cuts of that magnitude, he wrote in his latest weekly memo, "Nevada public higher education will no longer be competitive with any state in the U.S., let alone the Western states. Our main competition for students, faculty, and businesses needed to diversify our economy will be with Third World countries."

"If you want to continue to live in a state that consistently ranks in the bottom of every education and quality of life measure, then by all means, sit back and watch your state burn," Klaich wrote.

"However, if you dream of a Nevada where you have pride in the quality of our life, then join me in doing something about it. Nevadans need to step up to the plate and pay for what we value, and we must hold our elected leaders accountable for their actions and stand by them when they do what is right. Now, it is time to do what is right for Nevada's future and not what is right to get re-elected in a sound-bite society," he wrote, in a not-so-veiled criticism of Gibbons's "no taxes" vow.

In an interview Wednesday, Klaich said he hoped that he had stayed on the high road, remaining polite and avoiding bluster. But the chancellor acknowledged that he had "reached a level of frustration that 60 years of professionalism or legal training were not able to cover up."

Several recent developments got Klaich to the boiling point. Like heads of other public agencies, Klaich had been asked by Gibbons to prepare a series of alternative budgets for possible cuts of 1.4, 3, 6, 8 and 10 percent this year, on top of the 24 percent cut that the Nevada System of Higher Education took in the last legislative session.

While Klaich worried about the impact on quality and access that cuts of that magnitude might have, especially given continuing growth in enrollment at Nevada's public colleges, he knew that higher education would have to do its part to cut spending. "I have never, ever said that higher education should be exempt from budget cuts; given where we are today, I don't think that's a responsible position," he said. And while the budget cuts of up to 10 percent would inevitably be painful for college employees and their students, "you could manage your way through those kinds of numbers with various techniques and some cuts.... You could stay with the 'Let's tighten our belts, let's cut our budget' " approach.

That changed on Jan. 22, when the Nevada Legislature's Economic Forum, which is responsible for producing budgetary forecasts for each state biennium, revised its projections for the current 2009-2011 biennium to envision not the $350 million deficit that would necessitate a 10 percent budget cut, but a $900 million deficit that would require state agencies to cut about a fifth of their budgets without additional resources .

Gibbons's response to the news, in his State of the State address this week, was to call for a special session of the Legislature this month, and to reiterate that he would not abide by any increase whatsoever in taxes to help close the budget gap.

Under Nevada law, the governor has the authority not only to call a special session but to set and restrict its agenda. The idea that Gibbons would bring lawmakers together and direct them, in a matter of several weeks, to make a set of decisions that could do severe damage to "institutions that a number of us have spent the bulk of our adult lives building up ... is the point at which I stop, and I say No."

Klaich's memo included a drastic set of actions that he said could be necessary if the higher education system is forced to cut its budget by another 20 percent (roughly $110 million), on top of the one-day-a-month furloughs, 700 job cuts, and other reductions it has already made. The system, he said, could cut salaries by 20 percent or add more five furlough days each month, increase tuition by 50 percent, or close entire campuses, among other steps.

The Nevada chancellor is sensitive to the reality that he may sound like yet another higher education official looking to taxpayers to sustain his institutions, but suggests that the picture in a low-tax state like Nevada, which has no income tax, is far from typical. "What I don't understand is completely taking off one entire side of the [budget] equation," as the governor has done.

"If we raised our sales tax by one quarter of one percent we would raise about $88 million. For the average Nevadan earning $50,000 and spending 10 percent of his or her earnings on taxable sales (remember that most food items and household maintenance expenditures are not taxable), the additional taxes would amount to $12.50 PER YEAR!" he wrote. "That is a couple of Happy Meals or a lunch for two at Panda Express once a year. Can anyone really argue that this is the difference between a family making it or sinking?

"If we raised the upper rate on the modified business tax from 1.17 to 1.27 percent only on those larger businesses being taxed, we would raise about $24 million in additional revenues," Klaich added. "A business with a payroll of $1 million would pay additional taxes of $750 per year or a little more than $2 per day. If that is the margin of a profit in a business that size, then it has much greater problems than Nevada's tax structure."

Klaich has a long way to go before he approaches the pique and passion of his predecessor. But with much at stake in Nevada, his days of pure politesse appear to be over.

 

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