News - July 26, 2019 - by Ray Hagar

The Senate Republicans' lawsuit to void two tax bills they contend needed a two-thirds vote to be approved by the Legislature will be ultimately be decided by the Nevada Supreme Court, Senate GOP caucus leader James Settelmeyer said.

And that trip to the Supreme Court means the proceedings will get expensive, said Settelmeyer, who said he is ultimately responsible to pay the tab.

"It is not cheap to sue the government, especially because they have their own lawyers," Settelmeyer, a Douglas County rancher, said on Nevada Newsmakers Thursday. The Carson City law firm of Allison MacKenzie will represent the GOP senators.

"I am the one who signed my name to the case," Settelmeyer said about his financial responsibility. "Three businesses have joined us but I am the one who is ultimately responsible for paying the bill. So that is why (I say) obviously, if anyone wants to help, send a check to the Senate Republican Caucus or my campaign account because it has to be funded."

The Senate Republicans are suing because they contend the Democratically-controlled Legislature of 2019 illegally passed extensions of the payroll tax and a DMV transactions fee.

The tax extensions needed the two-thirds majority votes because of the Gibbons tax-restraint initiative that voters approved in 1994 and 1996, Republican senators said. The Gibbons' mandate -- spear-headed by former Gov. and U.S. Rep. Jim Gibbons, R-Sparks -- demands super-majority approval for any bill that “creates, generates, or increases public revenue in any form.”

Democrats, who control both houses in the Legislature, contend the two-thirds requirement was not needed. The bills simply extended current tax rates on the two revenue streams, not increase them. For the payroll tax bill (SB 551), a planned tax decrease was blocked. The Legislative Counsel Bureau, the Legislature's legal arm, issued an opinion backing up the Democrats' assertions.

"The key here is the (Nevada) Constitution," Settelmeyer said. "They (Democrats) should have brought it in as a two-thirds bill, had discussions and negotiations and show us a legitimate need for the money.

"They didn't do that," he continued. "They chose to thwart the will of the people, to say the Constitution was written in pencil."

The Senate GOP's motion has been filed in the First Judicial District of Nevada in Carson City. No hearing date has been announced, Settelmeyer said. Yet District Court is only the first stop to the process.

"I pretty much guarantee this will end up in the Nevada Supreme Court," Settelmeyer said. "Let's face it, whatever side wins or loses will want to appeal this to the Nevada Supreme Court for resolution. Because it is constitutional issue, it automatically goes to the Supreme Court upon appeal. There is no question of it going to the appellate court system."

Democrats controlled both houses during the 2019 Legislature by a wide margin and the LCB gave them the legal opinion they wanted to hear, Settelmeyer said.

"Traditionally, when you go to legal counsel, you ask them to find an opinion that satisfies what you are looking for," he said. "So do I believe that the majority party had the ability to go to them (LCB) and seek an opinion that is favorable to what they wish? Yes."

Settelmeyer called for the LCB to include 'partisan" opinions in its findings.

"I think there needs to be partisan legal counsel on both sides in a situation like this," he said. "When you have one house controlled by one party and the other house controlled by another party, these discussions in the past went away because (GOP Senate Majority Leader) Bill Raggio would say to (Democratic Speaker of the Assembly) Barbara Buckley, 'Don't even try that.' And then, counsel would have to opine the other side of the legal discussion. This time, it seems that only one legal opinion led the day, because obviously we made the case that no, this requires a two-thirds vote as it has in every single time in the past and therefore it should require two-thirds again."

Democrats passed SB 551 and SB 542 -- the bills in question -- without a two-thirds vote in the Senate, falling one vote short of the super-majority. Assembly Democrats had a two-thirds majority in the lower house and easily passed both bills.

It would have taken just one Republican to switch sides to give the Senate Democrats the two-thirds margin. No member of the GOP caucus sided with the Democrats, however, despite strong lobbying efforts from Gov. Steve Sisolak and other prominent Democrats.

"Everyone in the caucus was very solid. They were not going to violate the Constitution," Settelmeyer said. "We were not going to disrespect the voters in the state of Nevada, who require that we get a two-thirds vote to raise taxes. They (caucus members) were adamant. Nope. It was not happening.

"There was no question of keeping together," Settelmeyer said. "They were always firm, always solid. Constantly, the governor or other individuals tried to pick off votes but it just never happened. They'd come to the caucus meeting saying, 'this person called,' or 'that person called me.' But we are not breaking the Constitution. If they want to change the Constitution, go back to the voters of the state of Nevada. Don't try doing an end run."

If the Senate Republicans win the lawsuit and the current rates of the two taxes in question are lowered, the state's school system will not be impacted, Settelmeyer said.

Democrats had no real need to extend the current rates of the payroll tax and DMV fee because state surplus fees are not being used.

"That is proven because there is more than $175 million extra in that ending fund balance (in the state budget and not counting the required 5 percent EFB) that they did not allocate to anybody," Settelmeyer said. "If they needed more money, why didn't they allocate the $175 million that is just sitting there?"

Gov. Sisolak recently said school funding is not in jeopardy if Republicans win the lawsuit. The two tax extensions will earn the state about $98 million over the two-year budget cycle, according to a story by Amelia Pak-Harvey in the Las Vegas Review-Journal. If the Republicans win the suit and that money goes away, the state has additional money in at least two different budgets to fill in the gap, Pak-Harvey reported.

“I remain absolutely committed to taking action if necessary following the court’s decision to ensure our schools continue to receive the total amount of funding approved by the Legislature for the … biennium,” Sisolak said in a recent statement.