Known as the “Save Our Schools” Initiative, it is a statutory 3 percent room tax increase proposed by voters in 2009 promising to increase funding for Nevada’s K-12 public school system and help attract and retain teachers. The tax was levied only in Clark and Washoe Counties, and was to be distributed to all Nevada school districts on a per pupil basis starting in 2011.
Who sponsored the IP 1 Room Tax?
The initiative was led by a unique alliance of casino industry leaders (Wynn Resorts, Harrah’s Entertainment and Station Casinos) and teacher unions as a response to education budget shortfalls due to the recession.
How did the initiative become law?
IP 1 advocates gathered 130,000 voter signatures to submit the initiative to the Legislature. Due to the overwhelming public support, the 2009 Legislature approved the initiative language, thus enacting IP 1 as written. IP 1 became law in March 18, 2009.
How were funds raised from IP 1 to be used?
To ensure IP 1 actually increased public school funding, the law states that monies “supplement and not replace other money appropriated to fund K-12 public schools.” Revenues were to be transferred into a new Supplemental Fund Account. Districts would have received additional per pupil funding from the separate account, in addition to ongoing funding via the Nevada Plan.
The law also states that the revenue raised from the room tax should be used to “improve the achievement of students and for the payment of salaries to attract and retain qualified teachers and other employees, except administrative employees.”
Where are those funds now?
In 2011, when IP 1’s funds were to be distributed to districts, the legislature decided to use the funds to fill budget holes rather than supplement or increase funds, stating that Nevada was still recovering from the recession. However, even as the economy improved, the legislature continued this ritual in 2013, 2015, 2017 and 2019 legislative sessions, shifting room tax funds to balance the budget.
Has the legislature addressed this?
During the 2017 session, a bill to revert the money back into the Supplemental Fund died in committee. The Legislature is aware that it is not fulfilling the intent of the IP1 initiative.
During the 2019 legislative session the Senate Finance and Assembly Means and Ways Committee voted unanimously to supplant IP1 dollars once again.
What has been the result?
Although it was touted as an effort to increase funds for education, not all of the tax dollars from Marijuana sales were going to education as advertised.
A 10% tax on retail marijuana sales that was proposed by the Governor during the 2017 legislative session to support education was instead diverted to the state's rainy day fund in a last minute move during the legislative session.
How much was being diverted from education?
It is estimated that close to $60 million in marijuana tax dollars went to the rainy day fund over two years instead of going towards education.
How was it advertised to raise money for education?
Nevadans voted to legalize marijuana in November by passing Question 2, which laid out a system for home use of marijuana. Included in the ballot initiative were funds to the state from licensing and fees as well as a 15% tax on wholesale marijuana sales. In the arguments in support of the law, proponents said "Let's regulate marijuana and generate tax revenue for schools."
Why don't marijuana tax dollars increase funds for education?
There is no requirement that the new revenue from Marijuana taxes actually increase money to schools, and many believe the new revenue will lead legislators to simply allocate less from other revenue sources. In other words, more money in the front door means more money flowing out the back - a "zero sum game."
What this means for students?
Since there is no guarantee that marijuana tax revenue won’t be supplanted districts will continue to struggle to keep pace with operating costs and with meeting the needs of Nevada children. For example, Clark County School District had to pull funds from its own rainy day fund to make up for budget shortfalls. Districts across the state are continuing to operate with budget deficits, increased class sizes, and insufficient resources to meet the needs of all students.
Note: SB543 the bill to modernize the funding formula eliminates the State Supplemental School Fund Account created by Initiative Petition 1 (2009), where the three percent increase in room tax revenue was deposited, and should have been distributed directly to counties based on enrollment. Instead, the revenue will now be directly deposited into a newly formed School Education Fund where all education funds will go before distribution. All marijuana related taxes will also go directly into the SEF, whereas previously only some marijuana revenue supported education.