MINUTES OF THE SENATE AND ASSEMBLY JOINT COMMITTEE ON TAXATION Sixty-eighth Session January 26, 1995 The Committee on Taxation was called to order at 1:45 p.m., on Thursday, January 26, 1995, Chairman Bob Price presiding in Room 119 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Sue Lowden Senator Ernest Adler Senator Kathy Augustine Senator Ann O'Connell Senator John Regan Senator Rhoads Chairman Bob Price Ms. Jeannine Stroth Mr. Morse Arberry Ms. Maureen Brower Mr. Peter Ernaut Ms. Joan Lambert Mr. Mark Manendo Mr. John Marvel Mr. Roy Neighbors Mr. Brian Sandoval Mr. Michael Schneider Mr. Larry Spitler COMMITTEE MEMBERS ABSENT/EXCUSED: Senator Randolph Townsend GUEST LEGISLATORS PRESENT: Assemblyman Thomas Batten Assemblyman Genie Ohrenschall STAFF MEMBERS PRESENT: Mr. Ted Zuend, Deputy Fiscal Analyst Mr. Kevin Welch, Deputy Fiscal Analyst OTHERS PRESENT: Ms. Janice Wright, Deputy Exec. Director/ Dept. Of Taxation Ms. Yolanda Gonzalez, Director Department of Taxation Ms. Lucille Lusk, NV Concerned Citizens Ms. Barbara McKenziew, City of Reno Mr. Scott Dickinson, NAIB Chairman Price called the meeting to order at 1:45pm, and announced there would be a joint meeting of the Senate and Assembly Taxation Committees on February 13, 1995 in Las Vegas which will be toward the end of the two week adjournment. It will be teleconferenced and held in the new state building, at 6:00pm. Mr. Price stated we had some representatives from the Nevada Tax Commission with us today and asked if they would introduce themselves for the benefit of the new members of the Legislature. Mr. Norman Glaser, Chairman of the Tax Commission, began by introducing the members of his commission and gave a brief background on the expertise of each. He listed the members as Commissioners Keith Ashworth, Barbara Smith Campbell, Candace Evart, Harley Harmon, Diane Ursick, Valerie Cook Scott and John Marvel, Jr. He explained the composition of the Commission as consisting of eight people; no more than four from any one county - no more than four from any political party. Mr. Glaser stated they were happy to be here today. They tackle many tough problems, however, they recognize their role as being one of regulators in implementing legislation that the legislature has passed. He explained they have had some problems with the recently-instituted combined audit and, over the course of the next few months, the Taxation Committee will be hearing more about those issues. Mr. Glaser introduced Ms. Yolanda Gonzalez, Director of the Department of Taxation who has taken over from Perry Comeaux; she has been with the Department for a little over a year. He requested Ms. Gonzalez to introduce her staff. Ms. Gonzalez began with her key personnel starting with Ms. Janice Wright, Deputy Executive Director and Woody Thorne from the Budget Office, her second Deputy Director. She explained the Department has three divisions. They are the Executive Division and the Compliance Division which has been bifurcated into the Revenue and Audit sections. She introduced her Chief of Revenue, Larry Scott and his Assistant Chief, Bonnie Vivant. From the Audit Division, she introduced the Chief of Audits, Jerry Rodrigue and the Chief of the Department of Assessment Standards, Dave Pursell. The Assistant Manager, Delia Johnson was introduced as being the one everyone speaks to when they call the Department of Taxation. She added the one person who has been extremely helpful to her in trying to understand some of the laws of the Department of Taxation has been her Deputy Attorney General, John Bartlett. Commissioner Glaser had requested a presentation on the revenues they have collected at the Department of Taxation and, as a result, Deputy Director Janice Wright is present to go over those figures. Ms. Wright told the members that, in doing her research, she came up with the very first report of the Nevada Tax Commission to the Legislature in 1913, and in going through this she found they had the very first meeting of the Nevada Tax Commission on April 3rd of 1913, in Carson City. She explained one of the reasons they created the commission was due to problems that some counties were being assessed at 100 percent and some counties were being assessed at 20 percent of full cash value and while those counties had a lower assessment, they would pay a lower tax rate. What was happening was the Legislature was running out of money; the state general fund did not have enough to fund all the services. They created the Nevada Tax Commission as they wanted to make sure there was some equity in property tax assessments. It became necessary that there be a staff of people who would go out to the county assessors, look at the property assessments and determine whether all the counties were being assessed in the same fashion. That is the same procedure we are using today. The Division of Assessment Standards is now able to take all 17 counties and do an exhaustive review of a sampling of properties and determine the equity levels and assessment levels in each county. The other taxes the Tax Commission regulated in those days were primarily railroads and mining properties - those were the two big items. It was not until 1955 that the Nevada Legislature adopted the Sales and Use Tax Act and the voters approved that in 1966. Prior to that time they were not collecting any sales tax. At that point in time, the legislature dramatically changed the role of the Department of Taxation and the Nevada Tax Commission. She distributed copies of a written presentation, (Exhibit C) on the Sales and Use Tax percentages which included graphs for visual clarity. This written report was gone over at length by the members of the Committee with added emphasis by Ms. Wright. The Department of Taxation is charged with the responsibility of collecting a number of taxes; as provided in the Exhibit, the total revenue collections for Fiscal 1994, was about $1,683,953,996 which is about a 19 percent increase over prior year collections of about $1,414,642,901. That increase is partially accounted for by the fact that there are several new taxes that are currently being collected by the Department of Taxation. The Taxation Department is taking an active role in looking at the organization of their Department in order to make their functions as efficient as possible in order to serve the State of Nevada and the businesses therein. In so doing, they work closely with the Nevada Taxpayer's Association and the Nevada Tax Commission. She invited questions from the committee on the presentation thus far. Senator O'Connell asked what the breakdown on the new car rental tax was, inasmuch as that was a new tax from last session; Ms. Wright deferred to Larry Scott the Chief of the Revenue Section. Mr. Scott indicated he did not have those figures as the revenue was collected by the Department of Motor Vehicles. Mr. Zuend, fiscal analyst for the Taxation Commitee replied with the following information. The revenue from fiscal year 1994 was $1.83-million dollars but that covered less than a six month period of time. He added that would be brought up during the discussion of the Economic Forum Estimates estimating that the tax will be from $5 1/2-million dollars in Fiscal `95 and $5.75- million in Fiscal 1996 and up to $6-million in Fiscal 1997. Those are the Economic Forum estimates of that levy. Mr. Marvel asked Ms. Wright about the insurance premium tax of $77-million dollars asking if that was just a one year collection. She advised him that was one fiscal year's worth of collections and at this point they would be using the Economic Forum on the projection which will be provided during the presentation later in today's meeting. Mr. Zuend responded by giving the on-going amount for fiscal 1994 is estimated at $84-million, four hundred fifty-nine thousand dollars for this fiscal year as this is the year we get the extra payment. That, however, does not include the extra payment. In the Economic Forum report, because it was a one time revenue, it was itemized separately and that one time is equal to $35- million, four hundred seventy-three thousand, so if you add the two together, it is around $120-million for the current fiscal year. Senator Regan pointed out to Ms. Wright that the local media in Washoe County is complaining greatly about the under-collection of the Business Tax and asked if those complaints had reached her office yet. Mr. Wright responded by stating that information resulted from the recent audit conducted by the Legislative Counsel Bureau audit staff. That audit determined there was a lack of collection or payment on behalf of a number of businesses of the business license tax. The circumstances of that audit also brought out that at the time the business tax was enacted, there were inadequate programs developed by the Department of Taxation. She explained that at one time there was no funding for any kind of computer program for first year so they did the best they could by sorting through three different categories, i.e., all the people who were registered with the Department, all the people who were registered with the Employment Security and SIIS and they tried to do a melding of those mailing lists to contact businesses. She confirmed she had heard from people who have said, "I had no idea there was anything like a business tax," so they are now coming up with better methods to find those businesses but there was no question there had been an inability on the Department's part to discover and determine the amounts that should be paid by each business. Senator Lowden inquired about the position of the Department in regard to collecting the new tax we are going to see on charities and churches specifically as to where they are in collecting those fees. Ms. Wright advised her that in the past few weeks she has been working with the Nevada Taxpayer's Association putting together information that would be easy to understand, very simple and very brief. Initially, they mailed out letters to all accounts who were considered religious or charitable; we have between 3,000 and 3,700 of those businesses or organizations. They sent out information explaining there had been a change due to the fact that the original Sales Tax Law in 1955 said any sales that was made by those entities were not included in the language of the statute, but any sales made to those entities were considered exempt. This statutory language was reviewed last session and a question arose to whether or not it meant that, in addition to purchases made by exempt entities, should sales by those exempt entities also be considered tax exempt. There was a great deal of discussion and the Legislature eventually decided to approve A.B. 731. What that bill did was put the question on the November 1994, ballot to ask the voters, "do you believe the sales that are made by religious or charitable organizations should be considered tax exempt?". Sixty-eight percent of the voters said no. She feels part of that had to do with the fact that people are tired of seeing their tax base shrink with more and more exemptions so they voted no. They seemed to be saying, "don't keep shrinking our tax base - let's broaden our tax base". The Department took the initiative to contact the charitable organizations with the new requirements but the people said they did not want to start keeping records, but the law has been on the books since 1955 and that law says, that purchases made by exempt entities are not taxable but it does not say that sales made by them are also tax exempt. They are now passing out a four page document which explains how this new law came about, how the voters made their decision at that time and how they must register now. She went over the requirements of the statute and how the Department has offered to assist any group with complying with the law both in paying the fees as well as completing the forms required. Senator Lowden asked if the members of the committee could get copies of the document she had been discussing, included as (ExhibitD). The secretary was instructed to make those available. Mr. Manendo expressed the concern of several of his constituents on the uncollected business taxes and appreciates the opportunity to hear some ideas from Ms. Wright; as a freshman, he is sometimes in a quandary as to how to answer those questions. Ms. Wright pointed out that many times voters are confused as to the appropriate way to comply with the laws so she feels education is the best way to eliminate the confusion. Mr. Manendo expanded on his concerns and asked if the Department has made any type of study or breakdown on who has paid a portion of the amount owed, or if they paid half as compared to a business or someone who did not pay at all. Ms. Wright explained that the Legislative audit does have that information in it, but she has not had an opportunity to obtain a copy. She volunteered to make an analysis for Mr. Manendo and get that information to him. Senator Augustine stated she feels the ballot question on this issue was very poorly written and believes if the people had understood what the question really meant, it would never have passed. However, at this time, she inquired as to how they came up with a fee structure to register people; she did not see any provision for charging a fee in the law. She is aware of the $100 minimum security level for tax exempt organizations but what is the maximum. Ms. Wright explained the maximum is three times the monthly tax liability, so the business will give the Department an estimate of what they are going to owe in taxes and it would be three times that amount. The reason it is three times is, as a retailer when you collect money from a sale, you do not need to report that until the end of the next month; then they have the following month when the Department has to do the returns. That is what they call a roll and they input all of those returns and develop the distribution from that. The process takes three months and that is why the maximum is three times the monthly liability. The $3.00 filing fee is not associated with anything having to do with the religious or charitable organizations; that has been an ongoing fee that the Department has been authorized to charge, merely for the paperwork transaction of registering a business or an exempt entity and has absolutely nothing to do with any of the other fees that might be charged by the agency. This is a long term filing fee that has been in effect for years. The $100 minimum is an amount that would be charged as a minimum security of any business person who comes in and wants to open a new business but does not know how much he would owe until he had some idea of how much he would make and, as a result, they have established a $100 minimum; this is the amount they use in charging security. As they see that individual business coming in with monthly or quarterly returns, they can calculate the correct amount and make adjustments. They would not ask for less, however, after three years of recording, the entire amount is refunded back to the business. Senator Augustine questioned the acceptability of retaining that fee for three years on a charitable organization. Senator Augustine then posed another question having to do with the estate tax and why the revenues have increased almost 25 percent from 1993 thru 1994. Ms. Wright explained the purpose of the estate tax and how the amounts change depending upon the number of deaths and the amount of the estates. There is no systematic trend to estate taxes. She expanded her information by providing the figures for the current fiscal year to date, as being almost $15-million in just part of the fiscal year; if this trend were to continue by the end of this fiscal year, the receipts would be considerably higher than the prior year. Senator Adler brought the discussion back to the business tax by stating that some of the counties he represents are requiring proof of payment of the business tax upon renewal of the business license; he asked if that were a uniform method used by other or all counties. Ms. Wright indicated she did not know if that were uniform or not but she offered to have that information obtained. Senator Adler added that seemed to be an easy way to pick up on the information on who is paying and who is not, without doing an audit. Joining in the discussion was Mr. Larry Scott, Chief of Revenue, who advised those present there is a local government statute that they try to coordinate with to make certain that people are registered with the Taxation Department prior to being issued a local government business license. He went over some counties that he was aware of who have been working in conjunction with their Department. He added that NRS 243 or 244 is a local government statute that does require the county to check with the Taxation Department. It is currently being enforced. Mr. Neighbors, referring to the `horse' tax asked if there was any other tax that costs more to collect than they receive. Ms. Wright responded to his question by explaining that the system of collecting taxes in Nevada is primarily the honor system. It does not cost the Taxation Department anything to collect the horse tax; that tax is collected upon the taxable transaction in the sale of the animal by the individual retailer. When the animal is sold, the seller reports it on his or her normal tax form, just the way they would do when they sold any other kind of animal. So there is not a cost connected with that tax other than the cost associated with collecting any kind of tax. There being no further questions from the Committee, Chairman Price thanked the members of the Nevada Tax Department for their presentation. Second item on the agenda was the "Forecast of Future State Revenue by the Nevada Economic Forum". This presentation was handled in tandem by Mr. Dan Miles and Mr. Ted Zuend both Fiscal Analysts from the Legislative Counsel Bureau. Mr. Miles informed the members their purpose today was to go over the revenue estimates of the Economic Forum, give them an idea of what is in there and how they proceed in going about their duties of projecting state revenues. He stated in past sessions they had a revenue estimate from the governor's staff, a revenue estimate from their staff and other revenue estimates throughout the area from other people and as a result, the legislature was often in a position of having to try to determine which estimate they might be able to rely on. In order to eliminate that problem, the Economic Forum was established for the purpose of creating an official forecast; a forecast that everyone will use allowing everybody to use the same numbers. Additionally, it provides some structure and stability to the revenue estimating process; it allows outside people to influence the revenue estimate - that is non-state people - obtain some expertise from outside individuals in establishing the estimates as well as the economic criteria. The Economic Forum is a five member commission; Diane Ursick, a member of the Nevada Tax Commission is the Chairperson of the Forum. It is a panel of five economic or taxation experts within the state and they have a technical advisory committee that is assigned to them. The forum consists of the Budget Director, the Assembly and Senate Fiscal Analysts, Chief of Research for the Employment Security Division, Vice-chancellor of Finance for the University system, the State Demographer and also the Chairman of the Local Government Advisory Committee. Each of them has some staff who work in conjunction on providing information for the Economic Forum. The Economic Forum is required to provide an initial revenue estimate by December 1st preceding each legislative session. That is the estimate which the Governor uses and the estimate upon which the legislature gets to work, pending any changes. The Forum has an opportunity to revise estimates by May 1st and they have to make a decision as to whether they will have to make revisions by that time. Probably around March they will be making that decision. All the parties involved, that is the Governor, the Legislature and all the agencies involved have to use the revenue estimates provided by the Forum. That Forum has to actually forecast the revenue for the coming three years; the year we are currently in, and the two years of the biennium that the budget is based on that the governor has submitted to the legislature for consideration. The law provides that the Forum can ask any state agency for help, information or services and they have to comply with that request. Mr. Miles distributed a booklet entitled, "Forecast of Future State Revenues" under date of December 1, 1994 (Exhibit E) and a one page handout under the title, "LCB Fiscal Division/ Comparative Revenue Data/ 2% Sales and Gaming Percentage Fees/ Fiscal Year 1995" (Exhibit F). These exhibits were perused by the members of the committee and responses to their concerns were given by both Mr. Miles and Mr. Zuend as well as explanations on various aspects of the reports. Mr. Miles called attention to page 5 in the booklet and explained they wanted to make certain that everyone understands that the forecast is as they think it will be; it is not optimistic nor pessimistic. They did make an effort to be a little more conservative in the out-years as when you look two and a half years down the road it is obviously more difficult to predict what is going to happen, particularly in the area of revenues. The total revenue forecast for the State of Nevada General Fund is $1.2-billion four, for fiscal year 1995-96 - that is the first year of the coming biennium and almost $1.3-billion for FY 1996-97 - the second year for which this legislature has to provide a budget. The total is under $2.5- billion for the biennium which is an 8.1-percent increase over what is expected to be received in the current biennium and was actually received last year in 1993-94 and what is expected will be coming in by the end of this fiscal year 1995. The real growth in that scenario is higher than 8.1 percent because in their projections based on existing state law revenue estimates it was estimated to come in 1995. That lowered the percentage increase looking at 1996 and 1997 to 8.1 percent. The real growth factor is 11.7 percent when you exclude the one time factors that we will receive in 1995. That leads to the other one-timer and that is GASB 22; GASB is the Governmental Accounting Standards Board and they have issued Rule 22 which requires a change in the way we accrue our sales tax and it will be a one time change. Once we are on the new accrual method it will remain the same forever and would not have any affect after that. In this year, 1995, we will accrue one more month of sales tax in the FY 1995, what that does is creates higher revenue in 1995, a higher fund balance when you cut off on June 30th, but does not mean we are going to get money faster it just means we are accounting for it quicker or on a different basis. Ms. Lambert suggested Mr. Miles expand a little on the $74.2- million, the Acceleration Insurance Premium Tax that changes the accounting procedures, its effect on the surplus and revenues in future years. Mr. Miles asked the members to go to page 10 in the booklet, under FY 1995 near the bottom of the page is what the Economic Forum set out as one-time adjustments to 1994-95 revenues. He referred to the line just above that and pointed out sub-total general fund revenues in the 1995 column of $1-billion, 156-million; a 7.4 percent increase that is the revenue projection, under normal circumstances of the economic forum. In addition because of these one-time things that would occur under existing laws and now under the new rules of GASB, we would have three one time items that affect the revenue for this year. That is the GASB 22 for Sales Tax which is worth about $36-million. The controller also determined that the Casino Entertainment Tax needed to be accrued which is about $2.4-million one time and then the insurance acceleration or the pre-payment that was instituted one time would be worth about $35.5-million this year. Those total $74.2-million which goes into the revenue stream this year and would increase the fund balance on June 30, 1995 by $74- million. They are one time only and as you go through time, they do not affect the revenue stream in each fiscal year afterwards but they do go into fund balance at this point in time; if you do not spend that money, it would remain in the fund balance and keep your fund balance $74-million higher. If you do spend it or if the bill passes that cancels the acceleration there would be a reduction in the fund balance for June 30, 1995. There are some charts available that show what happens there. In response to a question by Senator Adler, Mr. Miles referred the members to page 8 of the booklet, half way through the insurance premium tax you can see the forecast for this year is $84-million, plus the $35-million and then the forecast for next year is $89-million and $94-million. But the forecast for next year and the year after would not change whether that bill passes or not. It is just a one time adjustment. Mr. Marvel asked what type of method they have in place for the fourth calendar quarter they have for 1994 for Sales Use Tax and Gaming Tax. Mr. Miles responded that for the businesses done through the quarter, they would normally get those figures mid-February. They do have six months of collections; that is business done June through November, not July through December and the quarterly reports they see based on business done. Senator Augustine called Mr. Miles attention to A.B. 778 which did not come out of Taxation but went back to Commerce in the Assembly last session and the fact that they did not want that to be just a one time assessment. There was an amendment put on A.B. 778 that would require the pre-payment year after year. Her inquiry went to what happened to that amendment. Mr. Miles advised her that what A.B. 778 did was change the payment cycle - it speeded up when the payments were due so that in FY 1995 you would get two quarterly payments that would have normally come in the next fiscal year in 1996. That revenue helped balance 1995, as it was looked at back in the 1993 session. That payment cycle would then remain in effect forever so they would go to that payment in March or June. Senator Augustine pointed out they would be paying that tax and the way she is taking Mr. Miles statement that would not be the case. The way it was presented to the committee, it was a one-time prepayment tax when in fact it was going to change the whole cycle so that it would always be prepaid. Mr. Miles agreed she was correct. Mr. Miles was questioned by Mr. Spitler as to when we learned about GASB 22 - how far advanced was that accounting cycle announced; was it about a year ago? Mr. Miles explained it was even less than a year ago. He explained GASB 22 had been discussed for a number of years and the governmental accounting standards board went halfway with it. The original GASB 22 would have not only required these revenues to be approved but also expenditures to be fully approved which in most states have caused deficits. Therefore, the expenditure side has been put aside temporarily and they went ahead with GASB 22 which just affected the revenue side of the equation. Mr. Spitler pursued his request by stating that it is truly a windfall in this situation and was advised that it is true. The taxpayer, in this case, the retailer or the person collecting the tax will not pay to the state any sooner. On business done in June, they will still pay the taxes by July 31st, what GASB 22 said was, "if the monies even though the state receives them after the end of the fiscal year, if they are in the hands of the taxpayers, in this case the retailers, and they would come in soon enough to satisfy some of the obligations of the higher fiscal period, have to be approved. Mr. Spitler reiterated that in terms of planning our budget, we took the full $74-million and just said it perspectively as though it would be an additional $74-million to whatever ending fund balance we had and built the next biennium budget on that increase for the governor's budget this time. It is totally infused, not considering it as a one shot windfall or anything but building it programmatically across the two year period. Mr. Miles disagreed with that concept whereby Mr. Spitler then asked if the Governor's budget identifies $75-million alone somewhere. Mr. Miles explained that in the revenue side - that is they used the Economic Forum Revenue forecast and that $75-million comes into this fiscal year and becomes a part of the fund balance. The Governor then proposes to spend that fund balance down to almost $90- million through various appropriations and capitol improvements and a large infusion into the "rainy-day fund." Mr. Spitler stated there would be a direct tie in the future biennium because, as he pointed out, if you go $74-million into the base now which is a windfall and would be unfunded two years out from now, you would have to have a rainy-day fund of $74-million as you would not have the windfall two years from now to do the biennium forward from the one we are working on. Mr. Miles reiterated he knows, without question, it is a one time windfall and they are spending it on one time items. Mr. Spitler had no further questions in that area. Chairman Price recognized a question from Ms. Lambert who explained she was asking the same question as Mr. Spitler but she wanted to make certain she understood the concept. According to her concept, we are getting 13 months of revenue this fiscal year and 11 months next fiscal year; Mr. Miles informed her that was not correct - it will be ongoing, the collection cycle will change by one month. There is no downside to that; it is just a change in the way we collect it. Mr. Neighbors wanted to clarify a couple of points and reminded the members that as part of that prepayment last time, it required the State to pay about $1.8-million to the insurance companies in interest. Assuming this is repealed, what happens then. Mr. Miles explained that he assumed the bill repeals that provision also, however, that was taken into consideration by the Economic Forum's forecast for the regular insurance premium tax next year and the year after. They deducted the annual interest payment that would go back to the insurance groups. Mr. Neighbors then brought up a previous comment Mr. Miles made in regard to Sales Tax which has him a little confused - the county and local governments are under the `modified accrual system' (expenditures were made and cash was received.) Is the State handling the Sales Tax in a different manner than that? Mr. Miles acknowledged he was not familiar with counties and cities but he does know the school districts are in the same position as the state is in GASB 22, they will get an extra month of Sales Tax that will accrue into 1995 - that is the school districts will but he' is not certain about the counties and cities. Mr. Spitler was interested in learning if the State was going to take that money away from them and then acknowledged that Mr.Miles was the wrong person to be asking. He feels we should ask that of the budget department because if it is true that the school districts, under GASB 22 gets the same windfall, is the budget department going to take that funding away. Or will they count it against them on the Distributive School Account (DSA) or another mechanism that we give them. Under current law all that money would go to the school districts. First of all the Sales Tax goes to the school districts but because there would be more sales tax available in 1995, the state's obligation to meet guaranteed support would be reduced, thereby increasing the reversion from the DSA back to the General Fund. That is grossly unfair to the school district because that means the windfall is higher than $74-million. Clark County alone would be in the neighborhood of $40-million and if the State benefits from this new GASB 22 why should not the school districts benefit. He assured the members that is the question he will be asking as he feels that is wrong. In his opinion, the school district should get that money and the state should not be taking it away from them. Mr. Miles attempted to clarify what the Governor's budget does by stating it includes the increased reversion out of the DSA coming back into the general fund, going into the surplus of the general fund. Then the Governor proposes to reappropriate that money - or at least a part of that money to the rainy-day fund to secure the DSA in future years. There is also a $29-million appropriation directly back to the school districts for whatever they choose to spend it on. Mr. Spitler restated his position that the school districts should be able to benefit from the windfall of GASB 22 in the same manner that the State is going to; he added we have strapped the school districts long enough and he feels if the State decreased based on the $40-million Clark County should get, we are just saying to the school district, the State is going to take all the benefit as opposed to saying the school district should get some. Mr. Miles stated for clarification the total GASB 22 for Local School Support Tax (LSST) for school districts statewide is about $40- million, not just Clark County. Mr. Spitler interjected that Clark County would receive the lion's share - or about 58 percent. The Chair recognized Senator Adler who asked if the counties are under GASB 22, what does that do to their overall tax picture for that year in terms of tax caps and moving other numbers around. Would there be any impact on them? Mr. Zuend responded by explaining that if the counties-cities chose to recognize GASB 22, they would be in the same position as the State by having a larger ending fund balance than they otherwise would have. They could theoretically spend for one-shot items and then they would continue under the GASB 22 rule in "out" years but they would basically be spending their surplus this year or any year they chose to implement GASB 22. It does not affect tax caps as it is not property tax we are talking about; it is basically sales tax so it gives them a bigger end balance if they so chose. There being no further business, the meeting was adjourned. Respectfully submitted, ______________________________ Nykki Kinsley, Committee Secretary _____________________________ _______________________________ Bob Price, Co-chairman Senator Sue Lowden, Co-chairman ____________________________________ Jeannine Stroth, Co-chairman Assembly Committee on Taxation January 26, 1995 Page