School bond reserve bill met with opposition from officials

A plan to reduce school bond reserve requirements for counties and take the money freed up for the state's general fund drew protests from local officials.

"Please do not destroy the trust of the voters by using this money for purposes not authorized by them," Douglas County School Board President Sharla Hales told members of the Assembly Ways and Means Committee on Tuesday. "Please don't jeopardize the safety and education of our students by pulling money from it's intended and authorized use."

Assembly Bill 561 would change the requirement that school districts have a full year of reserves to make bond payments. The requirement would be to cut 10 percent of the full year's payments for Washoe and Clark, 25 percent for the other counties.

State Budget Director Andrew Clinger said that will generate about $151 million a year for the state.

Hales said the proposal would cripple efforts to upgrade schools which are 40 years and older and violate the promise the district made to voters when they approved the bonds in 2008. She said voter support for future bond projects would be destroyed and the district's bond rating damaged.

Washoe County School District Government Affairs Director Craig Hulse said taking the money, "would basically take us out of the bonding business until 2016."

School officials also objected to plans that would take the Governmental Services Tax from Clark and Washoe saying that pot of money is what they use for emergency repairs such as a leaking roof or damaged boiler.

In Washoe, that comes to about $3 million a year for emergency repairs and, without it, Hulse said the district would have to take it from the General Fund operating budget.

Clark County School District Chief Financial Officer Jeff Weiler said taking the reserves would have dire consequences.

"Taking away these debt reserves puts us basically in the position of raising taxes or pushing debt service out more years," he said.

Ways and Means Chairman Debbie Smith, D-Sparks, said she too believes taking the reserves would damage public support for future bonds. She said an issue she was involved with in Fallon passed by just 257 votes.

"If we do this, we would never again be able to pass another bond issue," she said.

AB561 makes a series of financial changes designed to increase state funding and balance the budget.

In addition to school bond reserves, it contains a laundry list of revenue generators including continuing the lower Modified Business Tax rate for small businesses and a proposal to securitize the insurance premium tax.

Even Clinger was unenthusiastic about the latter, which would sell an investor a piece of the state's insurance premium tax revenue in return for a one-time payment of $190 million. The state would pay off the debt over a four-year period at about $53 million a year - the $190 million principal plus more than $20 million in interest and fees.

"What do we get for that," asked Assemblywoman Maggie Carlton, D-Las Vegas. "I don't see the benefit.

"We get $190 million in FY12 to balance the executive budget," Clinger said. "This is certainly not our first choice in how we balance the executive budget, but we felt it necessary given the fiscal constraints."

AB561 also contains the provisions removing the sunset on lowered business taxes for smaller businesses. For big business, the tax was doubled last year. But in a trade off, smaller businesses saw their rate cut from 0.63 percent of payroll to 0.5 percent. The changes were to sunset July 1 with all businesses going back to 0.63 percent but small business leaders protested that was a tax increase on them.

Sandoval wants to keep the small businesses at the lower rate when the higher big business rate drops back down. Doing so will cost about $8.4 million a year.

The committee took no action on the bill.