The Supreme Court, in a 32-page ruling, said lawmakers can’t use what critics call “legislative cannibalism” to siphon money from a local sewer district to pad the state budget last year. Similar tactics were used by the first term Republican governor to balance his $6.1 billion budget for the 2011-2013 biennium.
In a statement issued late Thursday, Sandoval said the ruling “has far-reaching implications for how Nevada governors and legislatures will do business from this day forward.”
“The ruling raises questions about certain assumptions in the proposed executive budget, despite some having been used in the past,” Sandoval said. “As a former federal judge, I am cognizant of the legal issues. As governor, I am forced to deal with their ramifications and I am responding by reworking the state budget.
“I will announce a revised plan on Friday,” he said.
Sandoval’s statement came about two hours after administration officials, legislative leaders and attorneys huddled behind closed doors to discuss the ruling handed down earlier in the day.
“Things are spinning. There are a lot of implications,” said Sen. Sheila Leslie, D-Reno, as word of the ruling decision through the legislative building.
In its unanimous order, the Supreme Court said that taking money from dedicated funds to pay general costs amounts to an unconstitutional tax.
The ruling stems from a 2010 special session, before Sandoval’s term began, when the Legislature siphoned $62 million from the Clark County Clean Water Coalition, a wastewater treatment project near Las Vegas, to help plug an $805 million state budget hole.
The coalition includes the Clark County Water Reclamation District and the cities of Las Vegas, Henderson and North Las Vegas.
Clark County District Court Judge David Barker ruled in December the budget move was “tantamount to legislative cannibalism” but legal because the money was taken from a political subordinate to the state.
Supreme Court justices reversed that finding.
“We recognize that the Legislature is endowed with considerable lawmaking authority under ... the Nevada Constitution,” justices said. “But that authority is not without some restraints.”
The opinion, written by Justice James Hardesty, said the constitution “prohibits, among other things, local and special laws for the ‘assessment and collection of taxes for state ... purposes.’”
Sandoval’s budget relies in part on diverting some property and hotel room tax money from Clark and Washoe counties and money in counties’ school bond reserve accounts to help pay for state government.
In all, the total could amount to more than $400 million.
“This obviously calls some things into question,” said Assembly Speaker John Oceguera, D-Las Vegas.
Senate Majority Leader Steven Horsford, D-Las Vegas, said legal staff needed to time to decipher the ruling before lawmakers decide how to proceed.
“What we are going to do, we are going to listen to the advice of our legal counsel,” he said. Horsford said leadership planned to meet again with the administration, though it was unclear when.
Democrats this week abandoned ideas to tax services and change the structure of business taxes to raise $1.2 billion. Instead, they’ve refocused their efforts on getting enough Republican support to extend about $720 million in temporary taxes imposed in 2009 that are set to expire June 30.
Republicans have shown little or no inclination to extend the taxes. Sandoval has said he’s against lifting the sunsets to keep the taxes in place, though Thursday’s developments could change that. He’s also said he would veto any bill that contains a tax or fee increase.
During oral arguments earlier this month, a lawyer representing the coalition and a lawyer representing the governor, treasurer and state controller argued that the coalition is a utility company charging fees above and beyond the cost of service. Money from this type of “utility fee” becomes municipal property that then becomes fair game for a state sweep in emergencies.
But lawyers from the Clean Water Coalition said they were singled out, and the taking of the money amounted to an unconstitutional tax.