Brad’s LA Times piece follows his RGJ op-ed posted last week, Is Nevada a pro business state?  Here he uses the same sources to gauge Nevada’s ability to capture some of that out migration. On the broader Forbes rankings, Nevada falls close to the bottom 36th in business friendliness. While in the tighter Fraser rankings our state is 8th.

What’s encouraging about Nevada is the number of pro bono efforts to promote the state and recruit diverse businesses. John LaGatta has started Financial Intangible Assets Enterprise (FIAE) to retain and recruit office type businesses, like licensing or equipment leasing to Nevada. There’s an ad hoc entrepreneurial tech incubator idea being discussed by a couple of folks from our Hayek group, Mark Pingle and Gene Humphrey among others. We see another ad hoc China effort forming with Daisy and Pascal Serro, Tom Gurnee, Harvey Fennell and others. And, we have to give a hat tip to Tim Ruffin for his pro bono video which I have renamed “Gotta love Reno.” BTW, it now has Chinese subtitles and is posted on China’s equivalent of You Tube! Great to see community economic spirit in action.

Getting back to Brad’s two op-eds, the real ironic edge for Nevada, particularly the Northern part, is its proximity to California. This is something that needs to be explored and exploited if we are to diversify our Nevada economy.

Note the support for the energy/research park concept was stronger the closer the respondents were to Yucca. Clark County voters, labor unions and teacher union members all expressed strong support for the new industry and jobs NEP will bring.

Hopefully, the timid politicians will now become leaders in this effort to improve our Nevada economy. Check out and support the pro bono efforts of the folks at NV4CFE.org. If interested citizens get behind this it can become a reality, sometimes we need to push the politicians.

It’s good to have him in our group.

Nevada’s employment bubble exploded in the recent recession with a loss of 417,000 jobs, 27% below the historic trend line. The states largest employers gaming and construction both suffered with construction declining 68% below trend. Booming Nevada was and is an employment bust.

One of the points little understood in the main stream media reporting is that the Legislature and Governor are only dealing with the General Fund which is only 35.7% of state revenue. This is what all the budget fights are about. The balance of the funds are beyond state control and in some cases, as with Federal Funds, really exacerbate the states budgetary problems. Medicaid, one time stimulus unsaved both hurt more when reduced or eliminated.

Education both higher and K-12 account for fully 53.5% of the appropriations. The other big chunk is Human Services at 30.6% of General Fund appropriations; this is greatly influenced by Federal mandates particularly Medicaid.

Bottom line, the Governor’s budget at $6.13 Billion is only $212,339,021 less than the prior biennium budget. That 3.35% reduction is what all the complaining is about. Anyone for camping out in front of the Legislature in protest?

Andrew was good enough to take questions and hear comments on his state presentation and to a limited extent on his new job as Reno City Manager. We thank him for the excellent evening and wish him all the best in his new and challenging position in Reno.

Nevada’s near monopoly on legalized casino gambling fueled an economic boom that made it the fastest growing state for five straight decades. The associated business development and population in-migration supported a construction boom, making Nevada’s construction sector larger than that of any other state.

However, Nevada no longer has the “only game in town.” Proliferated Indian gaming and legalization in other states have especially hurt Northern Nevada gaming, and world-class gambling in Asia means Las Vegas is also no longer immune to competition.
Moreover, the recession has decimated Nevada’s construction industry. An economic storm has blown Nevada from the top of the economic heap to the bottom. The state is in need of an economic makeover, a hard reality Nevada must face.
Economic diversification has been the clarion call of Nevada policymakers for decades — easier said than done. Most diversification efforts amount to “two birds in the bush,” laudable but iffy. We suggest it is time to consider a “bird in the hand,” a more certain route to diversification and to shoring up Nevada’s fiscal house.

A fundamental entrepreneurship dictum is “problems create opportunities.” Disposing of nuclear waste has long been a significant national problem. As a result, there is a tremendous entrepreneurial opportunity for Nevada.
President Obama has indicated nuclear power will remain an important part of U.S. energy policy despite Fukushima. Nevada should not ignore the Yucca opportunity because of unfounded fears, special interests nor political pandering.

The choice of Yucca Mountain in 1987 as the preferred long-term storage site for nuclear waste put a bird in Nevada’s hand. To date, most Nevada policymakers have preferred not to have this bird in Nevada’s backyard. The “not-in-my-backyard” argument played well when the gaming and construction bushes were supplying so many birds, but times have changed. Pursuing Yucca has advantages, economically and politically.

Economically, Yucca Mountain, merely as a storage facility, would provide substantial long-term employment, state tax revenues and some of the illusive diversification Nevada has been seeking. Wise negotiation could increase these benefits by moving the facility toward becoming a reprocessing center and a focal point for nuclear research dollars.

Politically, developing Yucca Mountain offers an alternative to two that are unattractive. Should Nevada be cutting government services that support economic development and diversification at this time? Proponents say no, but the tax increases necessary to fund the services would work against any diversification effort. Developing Yucca provides a path for maintaining some valuable government services without tax increases.

As economists, we are trained to count costs and benefits. Developing Yucca Mountain would not provide Nevada with a free lunch. There are risks and challenges with any entrepreneurial venture. There will be costs and risks. But, it is unprofessional to ignore the benefits and potential, which is the tendency of NIMBY adherents.
It is time to reconsider the development of Yucca Mountain.

Thomas F. Cargill and Mark A. Pingle are professors of economics at the University of Nevada, Reno.

It was truly mind-boggling to see the commissioners in mid-agenda item take off one hat, put on another, then take that off only to return to the original hat. The statute requires that each District be a separate taxing jurisdiction and that taxes collected for that district be segregated and held for the fire protection and emergency service specifically for that district.

Last night the Washoe County Commissioners represented the two special districts and the overall county in which they exist. The residents of each district in attendance knew enough to know that no one was representing their interests. The logical result was competing public statements from residents of each district as to how to best serve…….themselves! Of course, the smallest district with the least number of residents was most represented and they, most adamant that they deserved the best protection, even to the detriment of the most populated areas Sure can’t blame them.

And the County Commissioners, used to dealing with the pot of other people’s money as they saw fit from time to time were surprised at the attendance and what seemed like the interminable public comment. People actually expect their taxes to be spent within their district! The nerve of them. And on top of that the wanted EMS and fire service in time frames that has some slim chance of preserving life and property.

And much to everyone’s surprise, after 15 years, the commissioners actually hired a consultant to drive through an area within one of the districts they represent and also within the county they represent. The area, ArrowCreek, is a common interest community of over 1100 homes and sites, and two nearby elementary schools. (Common interest communities pay full county property taxes but get few or no county services. This dirty little scam is referred to at the Nevada Plan.) The consultant found this to be a relatively high-density area, with nearby schools and adjacent to other similar density areas. The consultants determined that ArrowCreek should not have the RURAL designation it now has under the Commissioners own Master Plan! It should be classified as SUBURBAN!  You guessed it, RURAL requires much less protection than SUBURBAN. The Commissioners other dirty little scam has been to take full fire taxes from this area yet provide no effective fire service to the area.

Solutions? Repeal the statutory conflict of interest, NRS 473.040 and replace it with elected, non-compensated fire-boards within each district, ASAP! ALTERNATIVELY, for the county, adjacent fire protection districts and cities within that county consolidate all under one elected, non-compensated board of directors. Here that would be Washoe, Reno, and all fire districts within including TMFD and SFPD. Any so-called regionalization via contract short of that will not work. We will be back to the dirty little internecine scams with attendant conflicts of interest and bickering!

Hat tip to the County Commissioners for being open to “thinking outside the box,” and being willing to consider full consolidation. By the way, thanks for your service and I wouldn’t want your job!

Here’s some recent foreclosure data for Reno and Las Vegas:

One in sixteen homes in Reno is in foreclosure; and one in nine homes is Las Vegas is in foreclosure, that’s 11%!

The unemployment rate in the state is 14.6%

Yet Reid rejects a Nevada Energy Park plan for nuclear reprocessing and generation which would not only bring thousands of jobs to the state but create a Nevada Permanent Fund, much like Alaska’s, that would pay each family an annual dividend of over $2,000! Harry is sending jobs and money to other states.

Oh, if that’s not enough, Harry now wants to ban prostitution! Yep, kick another industry out! Makes no sense at all. At least these folks work for a living, something Harry who had fed at the public trough for too many years, doesn’t understand!

Maybe Harry just got religion or something. If that’s the case, the gaming industry should start to worry. After all he may next consider gambling a vice!

The public union bosses should apologize to their members for getting this idiot elected. It’s the members who are suffering, not the fat cat bosses.

We were disappointed to learn of your support for Senator Harry Reid in blocking the Yucca Nuclear Repository. You proposed an amendment that would have defunded the project entirely. Many citizens of Nevada are pleased your amendment was defeated by voice vote.

As many informed citizens believe, Yucca could be an important resource to Nevada, every bit as important as the Alaska Pipeline was and is to Alaska. The proposition to convert Yucca to Temporary Storage, Nuclear Reprocessing, Energy Research and Development and eventually Nuclear Power Generation is a treasure available to Nevada that no other state has. With it Nevada can create a new industry, thousands of new jobs, and a more diverse economic base. With it Nevada can resolve its structural state deficit. And, most importantly, with it we can create a Nevada Permanent Fund under which each family in the state would receive an annual dividend eventually approximating $2,500 per year.

This concept has been overwhelmingly endorsed by several knowledgeable business groups, both in Reno and Las Vegas. It has been endorsed by every social service organization to which it has been presented. And it has been endorsed by every conservative political action group that has heard it.

We believe your amendment seems somewhat out of touch with current thinking.We have formed a group, the Reno Hayek Symposium, which is a voluntary group of conservatives in Northern Nevada. We are in conversations with our friends in Las Vegas to develop a comparable Hayek Group.

We hope to be able to support you in future elections. But, with all due respect, a word of caution is necessary: emulating Harry Reid in blocking the one uniquely available resource open to Nevada, is not the way to gain that support.

Sincerely,

“The budget that Mr. Cuomo unveiled this week closes a gaping deficit with major budget reductions, calling for spending cuts in state hiring, education, health care, aid to universities and payments to cities. The plan would balance the Empire State’s $135 billion budget without a dime of new taxes or borrowing. Remarkably, if his budget passed, the state would spend $3.5 billion less than it did last year.”

“These cuts are impressive on their own, but Mr. Cuomo’s real conceptual breakthrough is to expose the rigged-game of “baseline budgeting.” This is a gambit by which spending increases automatically each year even before a Governor submits his budget. The “baseline” grows each year due to spending formulas that legislatures build into the law even before they take a single vote.”

Guess what? The United States, the State of California, the State of Nevada and many others use baseline budgeting! That’s right. The budgets are in deficit before they are submitted. Most if not all of those less than adequate, so-called public services have automatic ups built into their continuation.

Courageous political leaders proposing a zero-based look at these bureaucracies are accused by the left leaning media of “cutting” education, healthcare, tree-hugging or whatever. But with government growth at most levels out of control, cut they must.

As the Journal editorial points out, the Republicans should sieze the opportunity in Congress to start the budgetary reform. And soon.

I speak of an op-ed in today’s edition of that bastion of elite journalism, the Reno Gazette Journal, by Tom Harris and Elliott Parker. Harris is a professor of “resource economics” and more frighteningly “director of the University Center for Economic Development.” Parker is a professor and chairman of economics at UNR’s College of Business.

The article, What is the effect of taxes on state economies? compares Nevada’s GDP growth to the “share” of GDP “provided by state and local governments” during the past 45 years and concludes that Nevada’s small government did not cause it to be the fastest growing state! No correlation here. Yeah, how about that?

Being economists, however, they struggle and find a strong correlation between real GDP growth and and “lagged growth rate of its state and local government!” Whew! I was worried about that.

Perhaps our good professors don’t realize that Nevada’s state and local government spending has grown more than the population growth plus inflation with little to show for it save deficits and unfunded liabilities. Or perhaps they aren’t aware of the slight deficit problem here caused to a great extent by public employee unions at the local level. Or perhaps they don’t read the Wall Street Journal which published the following chart in discussing spendthrift Illinois and the great migrations away from the tax, borrow and spend fools in state governments.

Anyway, back to the article, our authors continue searching for a reason for the non correlation in one case and strong correlation in the other. “One way to look at it is that state and local governments provide essential public goods that cannot be adequately provided by the private sector, such as roads and education. While higher taxes might create some disincentives for private investment and growth, many of these public goods are necessary investments for the private sector to function.”

I love that “essential public goods that cannot be adequately provided by the private sector.” And they use education as an example, later stating that “without good public education, the private sector lacks the educated work force it needs.” Nevada public education is at the bottom of the barrel and the more money we throw at it the worse it gets. Oh, but our professors are in the education business, a business whose prices dramatically outpace inflation and in truth outpace value delivered.

But what’s the point of the article, well it’s an exposition of the Keynesian multiplier. You know the one Obama rolled out for his stimulus billions. Government spends a dollar which creates $1.50 in GDP. It’s as if that dollar comes out of thin air. In truth that dollar is taxed currently or borrowed and repaid with later taxes (grandchildren look out!). In either case there has been a misallocation of what could have been productive capital.

Ah, but our good professors use the Keynes multiplier in reverse, a dollar reduced in state or local government spending will diminish GDP by $1.62! “Firing a school teacher means less money is spent by that teacher on rent, food and other goods!” They fail to mention that the teacher might be deadwood kept on in tenure by the infamous teachers union which accounts for a significant portion of the current deficit and unfunded liabilities. But the real sin is that the dollar saved by firing that non productive teacher might have been invested and produced $10 dollars in GDP.

Finally they elevate the sin to the level of a crime in discussing the multiplier effect. “Economists teach this to every first-year student in macroeconomics, and estimates from real data consistently find it to be true.” This of course is not true, not even a half truth as Obama has demonstrated.

Besides, if this were true we should all go to work for the government, since there is no “essential public good” it doesn’t seem to have its hand in.