The Nevada State Supreme Court building in Carson City.
The Nevada Supreme Court on Thursday ruled Senate Democrats’ extensions of the Modified Business Tax and DMV technology fee unconstitutional because they failed to receive a two-thirds vote.
Democrats cited an opinion by the Legislative Counsel Bureau Legal Division saying the two-thirds supermajority didn’t apply in this case because lawmakers weren’t passing new tax increase legislation but simply removing the sunset that lowered primarily the higher MBT rate.
Removing the sunset on the higher MBT rate was intended to pump about $100 million into K-12 education budget. The DMV technology fee was expected to raise $6.9 million a year.
But both passed on a party-line 13-8 vote — one vote short of two-thirds.
“Based on the plain language of the supermajority provision, we conclude that it applies to the subject bills because they create, generate or increase public revenue,” wrote Chief Justice Jim Hardesty. “Because the bills did not pass by a two-thirds majority in the Senate, those portions of the bills that would require a supermajority vote are unconstitutional.”
That opinion upholds the ruling by Carson District Judge Todd Russell, who reached the same conclusion.
Senate Minority Leader James Settelmeyer, R-Minden, said the opinion makes clear that, “Democratic leaders knowingly violated the Nevada Constitution.”
Senate Majority Leader Nicole Cannizzaro, D-Las Vegas, and Assembly Speaker Jason Frierson, D-Las Vegas, framed the ruling as partisan obstruction to protect, “the bottom lines of some of the largest corporations at the expense of Nevada schools.”
Gov. Steve Sisolak issued a statement simply committing to work with lawmakers on the budget implications of the decision.
But in the wake of the Economic Forum projections that added $909.7 million to total General Fund revenues this year and the coming biennium, there is money to cover what the MBT and DMV bills were expected to generate.
Several retail groups joined the GOP in the lawsuit and helped cover its legal costs, including the Nevada Retail Association, National Federation of Independent Businesses, Nevada Franchised Auto Dealers and the Nevada Trucking Association.
In 2015, the Legislature passed a bill that would reduce the Modified Business Tax rate if tax revenues exceeded fiscal projections by a certain amount. The Department of Taxation confirmed in 2018 that revenues had indeed exceed that amount, triggering a sunset that would reduce the payroll tax effective July 1, 2019.
But the Nevada Senate introduced SB551 in the 2019 session, eliminating that sunset to raise an additional $98.2 million in funding for K-12 education.
In addition, the 2015 Legislature passed a $1 technology fee on every DMV transaction to pay for a new computer system. That too was to sunset during the 2019 Legislature.
But the Senate introduced SB542 extending the fee until June 30, 2022. The fee was projected to raise $6.9 million a year.
Republican senators led by Settlemeyer filed suit to overturn the extensions as unconstitutional and the district court agreed.
This week, the high court unanimously agreed.
The opinion says the state and Legislature’s arguments that the bills “did not change but maintained” current revenue levels were unconvincing.
But the opinion rejected the GOP senators’ claims that they should get attorney’s fees and other costs because the actions of Democrats don’t qualify for legislative immunity. The opinion states the senators are entitled to immunity because they are covered when they perform legislative functions including passing legislation.
