On the occasion of our 20th anniversary issue, we asked former governors of Nevada to answer the following question:
“What measure passed by Nevada’s Legislature since 1986 will have the greatest long-term effect on Nevada’s business community?”
Legislators Deserve Praise for Restraint
Robert List (1979-1983)
Recognizing that Nevada has been the fastest-growing state in America for the past 20 years, with its accompanying vibrant and thriving business environment, one might guess that the credit for such a robust economy should rest with the state Legislature’s enactment of business-friendly and people-friendly statutes. After all, those 63 individuals who serve in our State Senate and Assembly review and act upon a multitude of measures which, for better or worse, impact the health of businesses large and small, the incentives which attract or deter investment capital for expansion of existing businesses, and enable or drive away those companies who consider moving their operations here.
In reality, the legislators’ best contribution toward our continuing vigorous and positive climate of business opportunity lies not in the enactment of NEW legislation, but rather in their NOT making major changes to the model that has worked so well for the private sector for so many years. In short, our Legislature deserves enormous credit for not messing up a good thing.
While there have been minor adjustments and fine tuning, our tax system remains one of the most hospitable in the country for entrepreneurs, large and small, and for individual Nevada citizens. This is, of course, fundamental to our prosperity. Nevada remains an island of opportunity for capitalism, for free enterprise and for the imaginative Nevadan seeking a climate conducive to those willing to take the risks associated with private enterprise.
Surely the most important natural resource upon which we rely in this arid state is water. The Legislature has resisted the erosion of the authority of the professionals who are most knowledgeable, and has respected the proper role and necessary authority and freedom of the State Engineer, and of the officials of the local entities responsible for the allocation of water, including the Southern Nevada Water Authority, in securing and delivering this precious commodity.
Our legislators have also resisted the temptation to interfere in the balance of shared responsibility between local and state agencies in the critical arena of planning and execution of our transportation facilities. We are all the beneficiaries of their restraint. The same is true in the basic areas of land use planning, housing, education, energy, and in the sensitive field of environmental management, enforcement and compliance, each of which can be a major factor in strategic business decisions.
Finally, the Legislature has maintained its traditional strong financial support for both the vital capital expenditures and the operational funding for our public schools and our system of higher education, which constitute the basic lifeline for our state’s businesses, their owners, employees and their families.
My hope is that each of us may recommit our energies to assure the continuation of this phenomenally wonderful environment of opportunity.
Bringing in Citibank An Important Step
Richard Bryan (1983-1989)
In the 1980’s Nevada was severely impacted by the effects of a national recession. State revenues plunged, hiring freezes were enacted and state support for school districts and other essential state services was reduced. As a newly elected governor, I was concerned that we would not be able to meet the state payroll.
Most Nevadans were shocked. Nevada had escaped the impact of national recessions in the post-World War II period. It had become conventional wisdom that Nevada’s economy was recession-proof. Diversification of Nevada’s economy had been a goal for some time, but it now took on a new sense of urgency.
In 1984 it came to our attention that Citibank was interested in locating a credit card processing center in the West. Citibank’s first choice was New Mexico, but the state Legislature had defeated legislation that would enable Citibank to locate there.
The Nevada Development Authority – ever alert for a new business opportunity –contacted Citibank. Accompanied by representatives of the NDA, I traveled to New York City to meet with Citibank’s CEO, Walter Wriston. Nevada would be required to amend its banking laws. A regular legislative session was months away and Citibank was anxious to proceed. Nevada would have to act quickly or risk losing an opportunity to further diversify its economy.
I agreed to call a special session of the Nevada Legislature to make the necessary legislative changes if Citibank would establish a credit card processing center in Southern Nevada. Wriston quickly agreed. A special session was called and the necessary legislation was enacted.
That fall, as I drove out West Sahara Avenue in Las Vegas to participate in the groundbreaking, we traveled over a dirt road. There was nothing but desert as I looked to the West. Today, Citibank employs more than a thousand Nevadans and is surrounded by business parks and residential communities.
Citibank, one of the world’s largest financial institutions, had come to Nevada. We were at last on the radar screen for Fortune 500 business relocations. In the years to come, Household Bank and others would follow. Major companies that would never have considered Southern Nevada today have located facilities here. Southern Nevada’s population has more than tripled and we have the most vibrant economy in the nation.
It began with a piece of legislation.
Workers Compensation Reform Vital
Bob Miller (1989 to 1999)
In the early 1990s, the state of Nevada was faced with an absolute crisis in its workers compensation system. Workers compensation insurance was provided through a state-run monopoly, with the exception of a few large businesses that had been allowed to leave the system and self-insure. In 1992, I commissioned an independent financial exam of the workers compensation fund, which revealed that the fund had an approximate $2.2 billion in unfunded liability, an amount roughly equal to the entire state biennial budget.
Nevada businesses were faced with a workers compensation system that had:
the highest rates in the western United States;
benefit costs that greatly exceeded the national average;
a claims frequency rate much higher than the national average; and
a claims severity rate much higher than the national average.
The system, which had been run by a board of directors appointed by the governor, was clearly heading for a train wreck – one which threatened the economic well-being of the entire state of Nevada.
Legislation was enacted disbanding the board of directors and giving the governor direct oversight of the operation of the system. I appointed new management, and directed that they institute internal controls and reforms to begin operating in a much more efficient manner. Additionally, we proposed a series of reforms which began bringing the crisis under control.
SB 316, introduced during the 1993 legislative session, imposed deductible payments on employers for workers compensation claims made, reduced and froze certain benefit levels and implemented managed care for the control of delivery of medical services. Other bills sought to reduce costs and to eliminate fraud.
During the 1995 legislative session, modifications enacted included the opening of the workers compensation program to private insurers, refinements to managed care provisions, adjustments to certain injured worker benefits, imposition of a premium tax effective in 1999, and tweaks to the authority of the attorney general’s office to investigate and prosecute workers comp fraud.
By the end of my governorship in 1999, it was obvious that SIIS was on the road to recovery. That session, the governor and the Legislature determined it was time to get the state out of the business of writing workers compensation insurance, and to get the risks and liabilities associated with the provision of workers compensation coverage off of the state’s books. That legislation became effective on January 1, 2000, and Employers Insurance Company of Nevada, a Mutual Company was born.
The impact of the legislative reforms and the ultimate privatization of Nevada’s workers compensation insurance system have been very positive for Nevada’s businesses and economic climate. The rates charged employers for industrial insurance have dropped significantly. (One study cites a 23 percent rate decrease from 1999 to 2005). During a time when surrounding states have seen steady and significant increases, Nevada’s rate decrease is especially notable. Benefit levels have increased significantly and claims frequency and severity have declined.
These positive impacts can only help Nevada to attract and grow businesses. One need only look to the experience in California, and the numbers of businesses fleeing that state because of skyrocketing workers compensation rates, to understand the direct influence the workers compensation system can have on a state’s business economy.
