Did Pot Tax Dollars Fail To Help The Clark County School District?

-By Valerie Miller

This legislative session, Jesus Jara is going to make his case about school funding to Nevada lawmakers. The newest superintendent of the Clark County School District makes the point that the success of local schools translates into prosperity for all parts of the community.

“Everybody wins when schools succeed,” Jara maintains.

“I believe we are the economic engine,” he said during a recent public meeting in Henderson. “The first thing employers ask is, ‘How are your schools?’”

Jara won’t sugarcoat the answer to that question. “We have a lot of work to do, and we have to work quickly,” he adds, “because our kids only have one time in school.”

The session in Carson City will be a key:

“In the legislative session, the first priority is to fix the funding formula,” Jara said in a recent interview with Vegas Legal Magazine. “The second priority is for the money that is allocated, to be used in the most effective and efficient way for our children.”

The disparity in student achievement is one of the major issues Jara is trying to address in the district of 322,000 students.

“There is a 40-percentage point difference between our highest-achieving student and our lowest-achieving student,” Jara notes. “Twenty percent of our students don’t feel safe in school, and 20 percent of our students don’t come to school on a regular basis.”

Jara is drafting a strategic plan, “Focus 2024,” to help address some of the problems facing the school district. But one thing many education advocates agree on is that the Clark County School District does not have adequate funding. The state’s school-funding mechanism, the Nevada Plan, was developed in 1967.

“The Nevada Plan was established by the state. That is the minimum required funding for education,” explains Jason Goudie, who is CCSD’s chief financial officer. “That established a ‘bucket’ of funds for education.”

Into the bucket goes slot tax, state sales tax, one-third of property taxes, and “what’s left over comes (to the schools) from the state’s general fund,” Goudie notes.

Not surprisingly, over the years many proposals to boost school funding have been floated in Nevada. But everyone remembers the most-recent one:

Flash back a few years ago, to 2016: A bombastic billionaire, and reality TV star, named Donald Trump was predicted to lose his presidential bid in a landslide to Hillary Rodham Clinton. (Of course, everyone knows how that one turned out). But, here in Nevada, the hottest local contest was arguably not between a Democrat and a Republican. Instead, Nevada voters had to decide whether or not to legalize recreational marijuana.

The great pot debate had Nevada residents taking sides. Should the Silver State risk the potential crime – and other problems — that opponents said would come with legalized cannabis? Opponents pointed to statistics that they claimed showed that legalizing recreational marijuana resulted in an uptick in crime in some states like Colorado.

Not to be deterred from their goal of making pot legal in Nevada, proponents of recreational cannabis offered up a feel-good idea: Use the extra tax money from marijuana sales to help the state’s schools.

The idea of aiding schools with tax money from legal pot sales likely won over some of the voters on the fence. The measure – Question 2 — passed on Election Night in November 2016. This victory paved the way for marijuana dispensaries to begin opening in Clark County – and all over the Nevada – in July 2017.

In under nine months, more than $263 million worth of taxable marijuana had been sold in Nevada.

And Nevada schools are now projected to get at least $26 million more in wholesale-tax revenue from marijuana in 2019.

So, what could go wrong with this noble plan of offering schools this added money? Well, there were flaws in this plan, critics say. More than a year and a half after the first dispensaries opened in Las Vegas, the additional tax dollars provided to the Clark County School District haven’t been a windfall for the schools, district officials say.

Jara points to the state’s way of funding education in explaining the failure of the marijuana tax to boost schools. As Jara notes, any extra money the school district gets from pot-tax dollars just results in fewer dollars the state will give the district from other sources.

“That’s what I was talking about when I said a ‘leaky bucket,’” Jara says of the school district’s budget. “The money went in, and then it went out. A complicated Leaky Bucket.”

Part of the overall public confusion, about what happened to the money from “marijuana tax,” is due to the complicated nature of how the state handles the schools’ budgets. Add to that the fact that there is more than one “marijuana tax” generated, and the head-scratching increases.

“Marijuana tax fills up the ‘bucket,’ but there is no additional funds going to education,” Goudie says.

There is the 15 percent wholesale-pot tax, which was in the ballot Question 2 that voters approved in 2016. That money is earmarked for schools. In addition, then-Nevada Gov. Brian Sandoval successfully lobbied for another 10 percent retail-sales tax on Cannabis, which is sometimes also called an “excise” tax, recalls Michael Schaus, the communications director of the Nevada Policy Research Institute.

“One of these (taxes) went into the (state’s Distributive Schools Account or) DSA. The other one went into (Nevada’s) ‘Rainy Day Fund,’” he adds.

The wholesale-pot tax goes into the DSA, while the retail-marijuana tax goes into the ‘Rainy Day Fund.”

Sandoval’s 10 percent pot-retail tax was projected to generate about $60 million. The lawmakers took $60 million from the ‘Rainy Day Fund” and put it in the DSA for the schools in July of last year, explains Richard “Tick” Segerblom, the former Nevada lawmaker who sponsored the marijuana dispensaries bill. However, the retail-tax revenue came in higher than anticipated at $90 million, and the whole $90 million went to the ‘Rainy Day Fund.”

So, the extra $30 million retail-tax revenue is just sitting in that fund, at the moment.

“The ‘Rainy Day Fund’ made $30 million from the (retail-pot) tax. That’s 50 percent interest on the $60 million loan,” Segerblom muses.

“I know a lot of folks are unhappy about the (retail-tax) money going into the ‘Rainy Day Fund,’” Schaus agrees.

As for CCSD’s total DSA allocation, the district’s CFO Jason Goudie puts that number as being between $70 million and $100 million. Not all that money is from the marijuana wholesale tax, however.

The wholesale-pot tax revenue was around $25 million, which was put the state’s schools account, or DSA, in July 2018, Segerblom relates. He predicts another $35 million will go into the DSA from pot-wholesale tax this July – which is about $10 million more than predicted.

Meanwhile, the money from the DSA is given to the state’s school districts. Yet, the Clark County School District’s $2.4 billion operating budget for the 2018-2019 school year has changed little from the school year before.

“When the (schools) got the money from the marijuana (wholesale tax), it was no windfall for the schools,” Schaus continues. “It didn’t increase what the schools were going to receive, as it just reduced what the state had to devote to schools, from other sources.”

In other words, that’s the “leaky bucket” CCSD Superintendent Jesus Jara discussed with the audience members, during a CCSD Town hall meeting in Henderson on Jan. 14th. Later, in an interview with Vegas Legal Magazine, Jara explained that the marijuana wholesale-tax money the school district receives simply “supplants rather than supplements” what CCSD gets from the state of Nevada in the DSA.

To recap, what the schools are getting is money from the marijuana wholesale tax, and the retail tax (which was later orchestrated by Sandoval). For reasons not everyone agrees on, $30 million in extra retail-pot tax money is still sitting in the state’s “Rainy Day Fund.”

Bottom line, Schaus says is, “The money (distributed already) didn’t really help the schools.”

Segerblom disagrees, saying that the pot-tax money doesn’t appear to make a difference because it is budgeted into the overall school budget.

“They may not have realized that it was there,” Segerblom says of the school districts, “because the state added it to their budgets.”

Did other Problems also thwart Schools in getting more Pot-Tax Money?

Now a Clark County Commissioner, Segerblom says Nevada voters did get what they voted for in the fall of 2016. He maintains part of the issue is that the legal-pot sales exceeded what they were expected to be initially. That meant the retail-sales tax estimates were lower than they should have been.

“At the end of the day, they put in (the schools’ budget) what (schools) were supposed to get, but the (estimates) were too low,” he explains.

Segerblom estimates around $60 million went into the schools (DSA) account from retail-pot taxes – via an advance from the ‘Rainy Day Fund.”  But more money should have been put in.

“They kept the (extra) $30 million in the ‘Rainy Day Fund,’ from the (retail) pot tax,” says Segerblom. He clarifies that he did not draft the tax-distribution portion for the ballot measure legalizing marijuana dispensaries.

Segerblom, who jokes that his nickname is the “Grandfather of Pot,” wishes the $30 million in extra marijuana retail-tax money had gone directly to the schools, instead of being left in the ‘Rainy Day Fund.’

“It’s not a huge amount of money, but the way the schools were, the kids needed it,” he laments.

New Nevada Gov. Steve Sisolak could lead a legislative effort to get that $30 million moved from the ‘Rainy Day Fund’ to the schools.

But does Segerblom think that is likely to happen?

“No,” he answers, “because they are stingy, and want to keep that money in the ‘Rainy Day Fund.’”

Besides, Sisolak’s plans to raise the amount kept in the ‘Rainy Day Fund’ makes the money move seem more unlikely, according to Segerblom.

A Sisolak media representative said the new governor was unavailable for comment due to scheduling demands, including the 2019 Nevada Legislature, which convened in February.

Segerblom doesn’t get to vote on the matter anymore, as he is no longer a Nevada legislator. But that doesn’t stop him from having a wish list.

“If it was up to me, I would have called a special session (of the Nevada Legislature) to give the money back to the schools.”

Can the Local Schools get a higher amount of Marijuana Tax Money?

NPRI’s Schaus says it is possible the schools could receive the extra $30 million from the retail tax on pot, which is now kept in the “Rainy Day Fund.” But it will take somebody spearheading the effort.

“I think it would pass a vote, but somebody would have to bring it up,” the NPRI communications director opines. “It was just easier to throw the money in the ‘Rainy Day Fund,’ and figure out what to do with it at a later date.”

Segerblom says part of the problem also lies with the fact that the marijuana wholesale-tax revenue is distributed to all the school districts in Nevada. More of the revenue is generated in Clark County, but the money is divided between counties – even to those counties that do not have pot dispensaries. Segerblom thinks this is unfair.

“It should just go to the school districts where the (dispensaries) generate the money,” he argues.

Also, the 10 percent pot-retail tax was not earmarked for the public school districts initially, Segerblom explains. “It was for charter schools, and the ESAs – Sandoval wanted to use it for the Educational Savings Accounts.”

But Jara says in overall funding per student, the Clark County School District is on the bottom.

“(CCSD) is the lowest-funded district – per pupil – in the state,” the superintendent states. “There are 17 school districts (in Nevada), and we are last.”

“More Taxes aren’t Always the Answer.”

Whether it be school taxes, cop taxes or road taxes, NPRI’s Schaus says: “The devil is in the details. More taxes aren’t always the answer.”

You can count on politicians to ruin a good idea, he adds.

“Overall, school funding has been going up over the years, but not very much, in spite of the taxes that politicians impose,” Schaus points out. “That’s because everybody seems to have their hooks into it.”

Amanda Morgan, the legal director for the education advocacy group Educate Nevada Now, agrees that accountability for past taxes needs to happen before new taxes are added on.

“How do we fund schools in the state?” She asks. “We are 45th in the country … We have a 50-year-old school-funding formula. And we have a lot more students who don’t speak English and a lot more students living in poverty.”

The marijuana-tax money would help some – if the schools could actually get the funds directly. “But the ‘bucket’ leaks,” Morgan concedes.

Morgan is up in Carson City for the 2019 Nevada Legislature, as well.

Jara said more fiscal responsibility is also needed at his new school district.

“I think if we add more money, and keep things the same way, the same things will happen.”

Valerie Miller is an award-winning Las Vegas Valley-based journalist. She can be reached at (702) 683-3986 or valeriemusicmagic@yahoo.com.