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WHY THE STATE OF EMERGENCY ON MARIJUANA?

7/18/2017

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Sometimes Nevada can be, well, uniquely Nevada.
Perhaps this’s why, in this major fire season and after great amounts of snow and flooding from the melt, a state of emergency was declared.  A state of emergency because recreational cannabis dispensaries are running out of weed!
No doubt the tax-and-spend folks are already licking their chops on how to spend all the additional revenue recreational cannabis trade may generate.  Imagine also the sales of Twinkies and Doritos at convenience stores and the sales taxes they’ll produce.  It would be terrible not to see that commerce soar until next year.
All joking aside, we understand the will of Nevada voters, but the ballot question was passed authorizing a start date for recreational sales of January 1, 2018.  That would allow plenty of time to put proper structures into place, both for regulatory systems and for tax collection.
So, how from where we started by the way we came did we ever end up where we’re at?
First, the initiative itself included an option for the state department of taxation to implement an early start program beginning July 1. The drafters did this for both the industry and government. Existing medical license holders wanted a chance to corner the recreational market and the early start program gave them an exclusive window to do so. The state, of course, wanted money.
But the legislators intervened to, uhm, well it’s often not clear what they’re trying to do.  Their decisions will actually hamstring the industry by making two big changes. First, they levied a ten percent retail excise tax in addition to the 15 percent wholesale excise tax and $15,000 fees per license included in the initiative. Consumers still have to pay regular sales tax as well, and all standard business taxes (modified business tax, commerce tax, etc.) apply.  Also, local governments added huge licensing fees of their own.
Because marijuana companies are ineligible for business expense deductions on their federal corporate income tax, they pay taxes on gross receipts, a high number. So, dispensaries now find they can't make money despite sales exceeding their already lofty projections.  With regulated prices soaring, customers are going to need some really good stuff to justify buying legally.
The second legislative change was to alter the tax structure on medical sales to match that on recreational sales. Thus, medical product prices now include markups of 15 percent of wholesale sales instead of the previous two percent. That makes inventory management easier because dispensaries don't have to separate product anymore.  However, it means people are paying tons of taxes to get medicine for degenerative conditions like cancer, epilepsy, muscular dystrophy, etc. That seems like a heartless thing to do just to get a sliver more revenue (most customers are recreational).
Meanwhile, some reporters have been selectively quoting from the initiative and misrepresenting the transportation issue. The facts are that the initiative says liquor distributors have exclusive rights to marijuana distribution unless the taxation department determines there’s an insufficient number of them. In that case, taxation could license the marijuana companies for distribution.
After no liquor distributors applied, taxation went that route. But at the eleventh hour a handful of liquor distributors challenged those regulations in court on the premise that there was no regulatory basis for taxation to make that determination. So, taxation passed emergency regulations that laid out a process for it to make the legal determination of a shortage to facilitate its earlier regulations.
After a district judge’s ruling in favor of the liquor distributors, the state appealed to the Nevada Supreme Court.  Meantime, taxation -- motivated by the high state revenues from recreational sales -- decided to allow medical dispensaries to start sales to recreational customers as well as medicinal users.
While sales were great, with no distribution mechanism in place the dispensaries had no way to restock.  So, the dispensaries are running out of weed.  Cheech and Chong’s worst nightmare, sure.  But also a problem for the few medical customers as well as recreational users.
Hence, the state of emergency, an event on the same level as a teacher shortage, snow storm, or wildfire.  No doubt recreational customers now need a toke really desperately.
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Warrick Dunn:  An Athlete We Can All Look Up To

7/11/2017

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Many of our readers have probably not heard of Warrick Dunn, former running back for Florida State University and the National Football League’s Tampa Bay Buccaneers and Atlanta Falcons.
Dunn had a great college career, winning a national championship with the Seminoles in 1993. He followed his college success with a very good twelve-year career in the NFL.  He made the Pro Bowl three times, although his successes were overshadowed by the likes of Shaun Alexander, Adrian Peterson, and Corey Dillon.
However, his most important legacy is the Warrick Dunn Charities and Homes for the Holidays.  Started in 1997, when he was a rookie running back in Tampa, the charity builds homes for single parents and their children, makes the down payment on them, and secures financing for them.
We don’t think people should be held up as role models just because they’re famous athletes.  But we’re happy when they become role models via exemplary behavior.
James remembers Dunn’s legacy because he was a Buccaneers season ticket holder during this time, and he found it quite impressive for a rookie running back to launch such an effort just a couple of months into his NFL career.  He became a Dunn fan, not only on the playing field, but also in the community.
Dunn, now retired as a football player and a minority owner of the Atlanta Falcons, provides a ten percent down payment and arranges an interest-free mortgage for the homes he has built.  To date, only one family has lost their home in the 20 years since he started the charity.
From his charity website wdc.org, we read the following:
“Warrick Dunn Charities has awarded millions in home furnishings, food and other donations to single-parent families and children across the nation to combat poverty, hunger and ensure families have comfortable surroundings and basic necessities to improve their quality of life.”
Many athletes have started charitable organizations during their careers, and many have done great things for their communities.  However, Dunn has been making this difference since he inked his first professional contract.
Why?
Because of his mother, Betty Smothers.  She was a Baton Rouge police department corporal, who was killed in 1993 when Dunn was a freshman at Florida State.
Betty Smothers was a single mother raising Warrick and his five younger siblings when she was ambushed and killed working a second job as a security guard.
Warrick was the first member of the family to get to the hospital. At only 18 years old he was tasked with identifying his mother at the hospital, and subsequently making all the funeral arrangements.
He then assumed the responsibility of raising his five younger siblings. 
In 1997, Dunn was picked in the first round of the NFL draft by the Buccaneers, and he started his charity.  Why?  Because one of the dreams his mother was never able to fulfill for him and his five brothers and sisters was the dream of homeownership.
As Dunn said in a USA Today article December 13, 2016, “Home ownership is the quickest way to grow wealth in this country.”
At the time of that article, his charity had presented 153 homes to single parents in 15 different communities, including Tampa, Atlanta, Tallahassee (home of Florida State), and his hometown of Baton Rouge.
Although Warrick Dunn Charities and Homes for the Holidays are his most visible works, Dunn was also instrumental in raising over $5 million for victims of Hurricane Katrina.  He made an open letter appeal in the September 12, 2006 issue of Sports Illustrated asking fellow players to donate $5000 each to the victims.
In the letter he said, “A city that has given our league and our sport some of its best moments is in ruins. An entire region is in pain, a region filled with people who have paid to see us play, who have bought our jerseys, who now have nothing. What will it say about us -- not as football players but as human beings -- if we don't give back?”
So, help others and give back to your community to the extent you can.  Help the less fortunate.
Be like Warrick Dunn.  People will look up to you.
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Happy New Year: The State’s Last-Minute Spending Frenzy

7/4/2017

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On June 30 Nevada ended its 2017 fiscal year, and we observed yet again one of the more annoying problems in state government:  the annual last-minute spending frenzy.
In Nevada, any fiscal-year budgeted monies not spent by a state agency by June 30 are fully reverted back to the general fund.  So, we see a substantial uptick in spending in the last week of a fiscal year. Why?  Because many of the folks running the agencies, instead of considering the value of saving taxpayer dollars, realize that if they don’t spend remaining funds before the end of the fiscal year, they’ll be gone from them forever.
This prompts some remarkable purchases at the end of the fiscal year.  It never ceases to amaze us how many painting projects get ordered in June, new carpeting for agencies, or massive supply orders, or whatever.  All in the name of spending every dime before it reverts to the general fund.
It’s a poor way to run an enterprise, and it should be frustrating to all Nevadans, especially those who know how things work in business and for the families paying taxes to support state spending.  In the private sector, saving money against budget is often rewarded with bonuses and raises.  There is no such reward in the public sector, only the perceived punishment of losing the remaining budgeted funds.
Families don’t budget on fiscal years.  Instead, any money they save at any time means there’s that much more for their needs and wants in the future.  It’s the ideal incentive to balance present and future spending.
This problem doesn’t arise in every state agency.  For example, the Controller’s Office takes pride in saving money against its budget every year.  In our first full fiscal year we cut spending by 13 percent from the amount allocated to us by the legislature and governor based on the request of the previous controller.  To date, we’ve returned over $1-milllion to taxpayers from our small agency.  And there are other examples of such restraint.
How can we fix this?  We need to change the rules.
In the next legislative session, we will propose a bill to change this feeding frenzy mentality.  It will change the rules from 100 percent reversion of unspent monies to the general fund to a formula in which a certain percentage of those funds will be retained by the agency in an account for it.
The money placed into this budget account for the agency would be like a savings account: a state agency rainy day fund, if you will.  Responsible agency leadership can make good strategic use of these monies, and the system would reward good leaders for saving.  What a novel concept!
In the long run, efficiently run agencies could use these funds for initiatives to modernize systems, for emergency funds, or for whatever reasonable needs that may arise.  This system would give agencies more flexibility in long term planning by wiping out the use-it-or-lose-it mentality that exists today.
A percentage of the monies saved would still be returned to the general fund, and we would also designate a small portion of those saved monies to the state’s general rainy day fund to prepare for the next economic downturn.  We are considering a formula of 50 percent back to the agency, 40 percent back to the general fund, and 10 percent to the rainy day fund.
Nevada’s economy has experienced moderate growth the past few years and state spending and revenues have risen significantly faster than the growth of our economy.  But the current pathetic national economic expansion is quite long in the tooth and another recession is possible.  We don’t expect another Great Recession, but even a modest national economic downturn can be amplified in our tourist based economy.  That can cut state revenues rather sharply.
Over the long term, sending more money to the state’s general rainy day fund and giving frugal agencies continuing funds of their own can go a long way toward state services not being reduced or eliminated in times of economic turmoil.
Incentivizing savings can also go a long way toward state government efficiency.  And we’ll continue to explore other savings ideas going forward.
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    *Opinions expressed here may or may not reflect the views of the Lyon County Republican Central Committee. 

    Author

    Ron Knecht has served as Nevada Controller, a higher education regent, legislator and economist. He can be reached at RonKnecht@aol.com.  
     

     

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