Carson City judge sides with GOP in tax fight; Dems say they'll appeal

Nevada Democrats promised Tuesday to appeal a state judge's ruling in a lawsuit by Republicans on a question crucial to the beleaguered state budget: Whether lawmakers in 2019 improperly approved two funding measures without a constitutionally required two-thirds majority vote.

"Senate and Assembly Democrats wholeheartedly disagree with yesterday's court decision, which would lead to the loss of nearly $100 million in education funding for our schools," Senate Majority Leader Nicole Cannizzaro and Assembly Speaker Jason Frierson said.

They said they will seek an expedited appeal to the Nevada Supreme Court and a decision before Feb. 1, when the next legislative session starts.

In his ruling, Judge James Todd Russell in Carson City predicted his decision would be appealed, the Las Vegas Review-Journal reported.

But Russell said voters decided in 1994 and 1996 to require a two-thirds vote in the Legislature to increase taxes of any kind, and the intent and the language were clear.

"An affirmative vote of not fewer than two-thirds of the members elected to each house is necessary to pass a bill or joint resolution which creates, generates or increases any public revenue," the judge said in court. His written ruling is expected in coming days.

The challenge by the Senate's eight Republicans involved bills that extended an existing modified business tax rate past its original July 2019 end date and a $1 fee paid by motorists that was due to end last July. Together, the measures were projected to generate more than $110 million.

However, state tax revenues have plunged since March amid business closures and a sluggish return to activity due to the coronavirus pandemic. Lawmakers have made immense cuts to healthcare and education spending to balance a projected $1.2 billion shortfall in the state's $4.5 billion annual general fund budget.

Nevada has no income tax and its budget relies heavily on sales taxes and tax revenue from the gambling, hospitality and live entertainment industries.

Democrats consider the two-thirds tax vote the primary obstacle to diversifying revenue streams and avoiding cuts to state services.

Senate Republicans sued in July 2019 after they lost 13-8 party-line votes that were short of the two-thirds mark.

The bills were voted down when they initially came before the Senate as tax measures requiring a two-thirds approval. They passed minutes later, with the two-thirds requirement deleted.

Senate Minority Leader James Settelmeyer, R-Minden, told the Review-Journal outside court that adoption of the bills was wrong at the time because Republicans were shut out of discussions.

Settelmeyer did not immediately respond Tuesday to telephone and text messages seeking comment about the planned appeal.

"We weren't as Senate Republicans saying we were against taxation," Settelmeyer told the newspaper. "We weren't saying no, we're saying we needed to have a discussion. And we had to be involved in it."

The modified business tax increase was enacted by the Republican-led Legislature in 2015 and signed by GOP Gov. Brian Sandoval to fund education initiatives.

Ritter reported from Las Vegas.

Sam Metz is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.