EXPLANATION

The Nevada Constitution currently prohibits the State from investing its money in any company, association, or corporation, except for corporations formed for educational or charitable purposes. The proposed amendment would enable the Legislature to authorize the prudently managed investment of State money subject to the following conditions:

1. That the investment is for the economic diversification or development of Nevada or for the creation of new high-quality employment opportunities in Nevada;

2. That the State can expect a reasonable rate of return on the investment, adjusted for the relative degree of risk;

3. That any legislation authorizing such an investment must be approved by a two-thirds vote of each house of the Nevada Legislature and also by the Governor;

4. That the State’s participation must be made in cooperation with knowledgeable private investors on terms that are the same as or more favorable than those of the private investors; and

5. That revenue received from these investments may be reinvested under the same conditions.

ARGUMENTS FOR PASSAGE

The restrictions under the Nevada Constitution, which were established based on conditions existing in the 1800s, have prevented the Legislature from considering laws to permit managed investments. Capital investment is needed to diversify Nevada’s economy, contribute to the growth of high-quality, job-creating businesses, and improve the standard of living for Nevadans. Emerging competition in other states threatens Nevada’s long-term economic stability. Nevada must remain competitive with other states in providing the necessary financial tools to attract the types of businesses and industries that would diversify the State’s economic base and improve the standard of living for its residents.

The proposed amendment allows the Legislature, with the approval of two-thirds of its members in each house and the Governor, to authorize investments in economic diversification projects. The amendment requires that each proposed investment be structured so that the State can expect to achieve a reasonable rate of return.

ARGUMENTS AGAINST PASSAGE

The State of Nevada should not use tax dollars for investment in private companies, associations, or corporations. Traditionally, the State of Nevada has left any risk of loss associated with investments involving private businesses to private investors.

The State of Nevada may already invest in educational or charitable organizations and is authorized to provide other financial incentives to encourage economic development.

FISCAL NOTE

Financial Impact - Cannot be determined.

The proposal does not require any investment to be made. The amendment would simply permit the Legislature to consider proposals for investments subject to the terms and conditions in the amendment. Until specific legislation is enacted authorizing an investment, there would be no fiscal impact.

FULL TEXT OF THE MEASURE

Senate Joint Resolution No. 12 of the 69th Session–Committee on Finance

FILE NUMBER 129

SENATE JOINT RESOLUTION—Proposing to amend the Nevada constitution to allow the investment of state money to stimulate economic development.

WHEREAS, Emerging competition in other states and federally regulated territories threatens the long-term growth of the State of Nevada in its vital gaming industry; and

WHEREAS, Financial programs necessary to ensure business expansion and high-quality job growth do not currently provide the business sector of this state with adequate access to the types of money and capital essential to support the growth of a diversified economic base; and

WHEREAS, The Nevada constitution currently contains restrictions, based on conditions existing in the 19th century, that have prevented the Legislature from considering legislation similar to laws enacted in several other states which would permit prudently managed investments in public-private partnerships and corporations designed to provide needed sources of capital for high-quality, job-creating businesses and low-cost housing programs within this state that cannot feasibly obtain such financing from existing private financial markets in an easily accessible and efficient manner; and

WHEREAS, The State of Nevada must remain competitive with other states in providing the necessary financial tools to attract the types of businesses and industries that would diversify the economic base of this state and improve the standard of living for the residents of this state; and

WHEREAS, The benefits to be derived from an effort toward strong economic development throughout this state may be jeopardized if current restrictions in the Nevada constitution are not replaced with more flexible and contemporary standards that both protect public investments in economic development projects and provide access to the type of financing needed to stimulate the growth of businesses and industries throughout this state which will provide the high-quality jobs, increased property values and enhanced standard of living desired by Nevadans; now, therefore, be it

RESOLVED BY THE SENATE AND ASSEMBLY OF THE STATE OF NEVADA, JOINTLY,That section 9 of article 8 of the constitution of the State of Nevada be amended to read as follows:

[Sec:9.The]

Sec.9.1. Except as otherwise provided in subsections 2 and 3, the State shall not donate or loan money [,] or its credit [,] to, or subscribe to or be [,] interested in the Stock of any company, association, or corporation . [, except]