Eleven Republicans and 10 Democrats will take up the state's business in the Senate and will work with a heavily Democratic Assembly and a Republican governor.

Sen. Warren Hardy of Las Vegas recognizes that some compromises will need to be made and looks forward to serving as chairman of the Senate Government Affairs committee, vice chairman of the Commerce and Labor committee and as a member of the Legislative Operations and Elections committee. In previous sessions, he served on the Transportation committee and in 1991, served a term in the Assembly.

Hardy, who has a Bachelor of Arts from UNLV in political science, has a background in the construction industry and is president of the Associated Builders and Contractors.

Hardy talked with In Business Las Vegas about the upcoming session and issues to be faced by the Legislature.

This is the third of three Q&A features involving prominent players in the legislative process. Lobbyist Sam McMullen and Assembly Speaker Barbara Buckley appeared previously.

Question: Some of the pundits can't wait for the 2007 Legislative Session to begin because they want to see an Assembly dominated by Democrats who are pushing for new education programs, a Senate that may best be characterized as fiscally conservative and a governor that has pledged no new taxes or fees work together. Will it be possible to get anything done in this session?

Answer: It's not just the pundits that are looking forward to it. It will. At the end of the day, especially in the Senate, we work pretty well together. I think Barbara Buckley is going to be a good speaker. I think Barbara Buckley is a smart lady and I think that she understands that it takes two houses and a signature from the governor to get something done. Are they going to be contentious issues? Yeah, they are. All-day kindergarten is going to be something that we're going to have to have some serious discussions about. I don't know anybody necessarily that opposes the concept, but it is very expensive. Is it the best expenditure for our educational dollars. I don't know. I think a lot of the data shows that it is not, so we're going to have to have a discussion. I personally am going to have to see some empirical data that it's the best expenditure of our dollars. And once we establish that, then we're also go to decide if we're putting the cart before the horse. Right now, if we do all-day kindergarten, we'd be putting 50 to 60 kids in a classroom, we've got to take care of the teacher shortage first as well. So there are a bunch of issues with what they've identified as their No. 1 issue that I think the questions are unanswered.

You're one of the most respected and influential members of the Senate. How would you characterize your rapport with Gov. Gibbons and Assembly Speaker Barbara Buckley?

I get along very well with all of them. I'm one of the few guys that has served with Jim in the Assembly, I know Dawn and Jim very well, like them both. I think that Jim's a smart guy. I find myself at the same end of the political spectrum with him fiscally and he's an easy guy to work with. He understands how the legislative process works. He's got very strong ideas and very strong philosophical views and he also understands how the process works. Same with Barbara Buckley. Barbara Buckley represents the other end of the political spectrum, but I recognize that she was put there by her constituents to represent that point of view and I respect that and I have respect for her as a person because she's somebody who believes in what she's talking about. She's not testing the political winds. She believes that the positions she takes are in the best interests of the people of the state of Nevada. I don't think that's always true, but she believes that's the case and a person like that is easy to respect and easy to work with. When we do have disagreements, they're political disagreements, not personal disagreements, so I look forward to working with both of them.

Do you sense a willingness for compromise among the key players in the session?

You know, that's one of the tragic things that's occurring politically nationally, probably to a lesser degree that it could creep into state politics is the polarization. It's just becoming impossible to take middle-of-the-road positions without getting killed politically by your constituency and that's too bad. But I think most people who are in leadership understand that compromise is the only way to advance legislation when you have each house made up of a different party. I think we saw that in 2003 with the tax package that at the end of the day, people worked together to achieve a two-thirds majority. Nobody thought that was going to be possible. But we had something in common and that was that we all felt it was necessary that we achieve it with a two-thirds majority. I think we have something in common now and that is that we want to do what's best for the people of the state of Nevada and we'll meet in the middle.

What do you consider to be the pivotal issues confronting the 2007 session?

This is an interesting session. This is probably the first time since I've been involved in the process, which goes back to '91, that I haven't been able to easily pick out two or three issues that are going to be key. I think the surplus, depending on what it's going to be, has the potential for being a big issue. I think you've got what I identify as a legitimate function of government - I call it educate 'em, medicate 'em and incarcerate 'em, that is education, mental health and public safety - to be legitimate functions of government. I think the Democrats agree that those are legitimate functions of government. So I think there will be some debate, but I think you'll find general agreement that we ought to do a better job of funding education, a better job with mental health and a better job with public safety. Once we get beyond that, I think there will be some appetite by the other party to expand the function of government. I think there will be some resistance on our part to expand the function of government. So that has the potential to be, if not a major issue, an important philosophical debate. I spoke to a group the other day and said that this session will be a battle for the philosophical soul of Nevada. Do we fund the proper functions of government appropriately, which I think we all agree we should, or do we expand the function of government? I think we'll resist that in the Senate. That could be very interesting.

Plus, you have a chief executive who sees things more your way.

I think he would probably come down on our side on that one, which is helpful from our perspective. But again, we have to recognize that there are two houses of the Legislature. But I think that that's a philosophical point that is going to be very prominent in this session, depending on the size of the surplus.

Which of the prefiled bills or proposals that have been aired before the session are most likely to win approval?

You know, I can't point to any specific that I can say, "Yes, this is going to happen." I do think that we'll do more in education, probably more in mental health and more in public safety with available revenue. What I would like to think there would be some consensus on at least starting us down the road towards deciding what we're going to do about the transportation shortfall. That's not an issue we can ignore much longer, we've got to address that. I think in this session we can arrive at some consensus about how we begin to address it will be helpful. It's not something we can continue to ignore. At some point we have to begin the process of solving the problem or we're going to leave ourselves with problems.

Which are the least likely to win approval?

I haven't heard of anybody wandering that far off the reservation. I think generally legislators are getting a lot more serious about putting forward legislation that is well thought out. A 120-day session is tough and we don't have the time to deliberate like we should. So I think legislators are giving it a lot more thought. I haven't gone over the BDR (bill draft review) list in great detail, but everything I've read about so far are reasonable that ought to be deliberated over.

Are there any black clouds on the horizon for the business community?

Regulation is always a concern. That's one of the threshold issues I ask for on every piece of legislation that might affect us. What kind of regulatory burden is this going to put on our businesses? We have a fairly favorable tax climate here and I think we can preserve that and protect that and part of protecting it is to make sure we don't overregulate. That'll be something that we have be aware of on every piece of legislation - what is this going to cost to regulate?

How do you think the wants of business - for education, transportation or energy needs - would be received by lawmakers?

First of all, I think there is a very well respected lobby from business. Across the board, I think their ideas are listened to carefully. I think it's important that we as a Legislature give a lot of consideration to how our proposals impact business and I think generally both houses, both parties believe that. I helped push legislation a couple of sessions ago to require a business impact statement if the government proposes any ordinance or regulation. That passed overwhelmingly in both houses so we've got a very business-friendly Legislature and we listen carefully to what business and industry has to say. I think the important thing is that they're unified. I think the Legislature will do a good job - everything else being equal, let's make sure. The tax issue was another example in '03. There were a lot of us that said, "OK, we need additional revenue and it's going to impact business. All things being considered, let's give business tax impact relief." And that was a big part of the debate, because most businesses came forward and said, "Yes, we realize that we need to put more into the tax base, but how do we do that without impacting or impacting as little as possible." The Legislature, I think, did a pretty good job with that.

Many business leaders talk about the need for a well-educated work force and a diversified economy, yet these same leaders oppose tax increases or fees that are needed to pay for it. How can that conflict be overcome?

I think there's a natural disconnect there. What's the old saying? "Don't tax me, don't tax thee, tax the guy behind the tree." If you talk to those responsible for economic development in our state, they'll tell you that the issue isn't our tax structure. People aren't concerned about that. People are concerned, however, that we don't have the level of higher education, program or system they'd like to see. I think we made great strides in the last years in correcting that. That's a real part of any business. You've got to be able to have an educated work force, you've got to have an environment that people are going to want to relocate their families and anybody in charge of economic development will tell you that. It's a bigger issue than what the tax structure looks like.

Do you think all-day kindergarten will be a tough sell to business?

I do. I think it is because people want answers. They want empirical evidence that, yeah, that's part of the solution. It's a lot of money and if we're going to spend that much money, we need some pretty hard evidence that it's really going to be effective. Again, class-size reduction. I think we nailed class-size reduction through the third grade and then we decided to undo it. We undid whatever good we did by having 60-to-1 in the classroom so that's an issue that's got to be addressed. I do think it's a difficult sell, just because I don't think the studies and evidence are out there yet that it's worth the expense.

Gov. Gibbons has made it clear that he has no appetite for raising taxes or adding fees. Do you expect lawmakers will look to new revenue streams, approve unfunded mandates, cut spending elsewhere or ignore the governor's wishes and increase taxes and hope they have the votes to overturn a veto?

I would be very surprised if there was a proposal to raise taxes in the session. I do think with the transportation issue there might be some discussion of redistribution of current revenues. The governor's task force recommended that the sales tax associated with some sales be earmarked toward transportation. I think those are appropriate discussions. I think our tax policy ought to reflect who uses services. There are some who feel like taxes should be based on your ability to pay. I don't think that's true, I think they ought to be based on who's using the services and I think those kinds of discussions about redistributing certain taxes to more reflect the users is appropriate. But that's the extent of our tax discussion this time. I just don't see anybody proposing any major taxes. I think there was some appetite - I certainly had an appetite - with the huge surplus to look at reducing taxes across the board. I didn't have any appetite to undo the diversification we achieved in 2003, but if we're in fact collecting more than we need, at some point we ought to lower the taxes so we're not collecting a surplus going forward. That surplus isn't going to be as large as it appeared at this point so I don't think that's going to be a part of the discussion.

Hotel room taxes have to be a tempting target to pay for some of the proposals under consideration, considering the growth in visitation and average daily room rates. Yet the tourism industry says it needs the money for marketing to stay ahead of ever-increasing competition. Are room taxes fair game as a "new" revenue source?

I don't think they should be. Part of what we have to consider as legislators is whether or not we're overtaxing or whether or not we are too dependent on one given industry. Part of the problem in '03, some of us were willing to talk about some adjustments in taxation because we were too dependent upon one sector of the industry. We could do that years ago - we could have 70 percent of our revenue come from gaming because they represented 70 percent of the need or 70 percent of the population. That's not true anymore. They're still paying a significant portion of state tax revenue now, but as a segment of our population, they're significantly lower. So I don't think anyone would want to make it worse if we grew more dependent on gaming revenue. Our own economic well-being depends on a very diversified, fair tax base that's not too dependent on one sector of the economy and that's something we have to guard against. So from that perspective alone, I don't think we'll go there.

We've heard a lot about "one Nevada" and the need to unify the state and put north-south bickering behind us. What's your assessment of the state's North-South relations?

I think the North-South rivalry is a lot more talked about and focused on in the North than it is in the South. I think it's gotten better over the years. It certainly was at an all-time high 15 years ago when we had the fair-share distribution and that certainly stirred it up a little. I sense that it's less of an issue now than it's been any time since anytime I've been involved in the legislative process. I think we work well together now.

Should northern and southern residents of the state be treated equally or should consideration be given for Southern Nevada's greater population and tax base?

Well I think so. I think state dollars ought to be fairly distributed based on where the population is and that's true across the board on higher education and other issues. It hasn't always been fair, but we're more aware of it now and we're trying to do a better job with it.

Do you think the governor was talking out of both sides of his mouth by urging "one Nevada" while choosing a slate of administrators and department heads dominated by northern appointments?

I don't think he was talking out of both sides of his mouth, I think that's where his relationships are. I think it's something that he has to be very cognitive of and very careful about. But there's a lot of history of people from the northern end of the state that do think about what's going on in other parts of the state just as there are people in the southern part of the state that are thinking globally. That needs to be the priority, to put in the best talent possible. I am not privy to any of the inner workings of his decision-making process. I don't think it's unusual when the governor is from that end of the state that that's where his relationships are and that's where he leans more heavily. There's no doubt in my mind that he wants to put the best people in and that he should be given the opportunity to appoint the people he wants to appoint and then demand that they perform. If that is not the case, then we can step in and make our case that it's not occurring

Give some of your assessments of these issues: Education programs?

At some point, we're going to have to start having some meaningful discussion about a fair merit pay system. I've talked to the teachers' union about this. Republicans are not going to accept a huge increase in education spending without some accountability. The sooner we get to meaningful discussions about how we do that, the better. I think on the Republican side, it's incumbent that don't focus too much just on test scores. I don't think that's the answer either. It's part of it - probably a pretty big part of it. But at the end of the day, it's not fair to judge teachers exclusively on test scores when there are socio-economic issues and other reforms for students. But let's have a discussion. What is a fair way to judge the performance of teachers? I'm open to that. I'm willing to listen to every idea out there, but at some point before Republicans are going to be willing to spend a lot more on education, we're going to have to address that issue. But once that issue is addressed, I haven't heard anybody in my party say we don't need to do more to improve the quality of education in this state. That's a threshold issue. The sooner we get to dealing with it, the better. I hope we get meaningful discussions out of this session.

When you talk about improvement, where does that need to occur?

The performance of the kids. At the end of the day, that's the only measuring stick that really matters. Certainly a big factor is the quality of teachers in the classroom, but we have to do something to address the teacher shortage. I think we have to have meaningful discussions about how we attract teachers, whether that means pay — I think that's part of it. We also have to have meaningful discussions about being able to pay more for entry-level, maybe not so much for 30-year veterans. I think now the collective bargaining agreements require that whatever raise is given across the board. That may not be the most effective way to do it. In business, if you're having problems at the entry level, you raise the salary for entry level. We need to have meaningful discussions about that. It needs to be a comprehensive analysis of how we deliver education services, whether we're top-heavy in the school district. Those discussions have sort have been off-limits. At some point, we have to put everything on the table and say we're going to look at every single topic comprehensively.

Transportation and infrastructure needs and toll roads or HOT lanes?

I think that all needs to be on the table. All of them. With the exception of the fuel tax, I thought the recommendations of the governor's task force were pretty good and ought to receive our full consideration. I don't think the gas tax portion of it is feasible at this point because of what's going on with gas prices nationally. But everything else should be on the table. It's one of the two biggest challenges we've got fiscally in this state.

State employees' retirement programs?

It's got to be addressed. It's a difficult, difficult political issue. I think Gov. Guinn deserves a lot of credit for trying to tackle the issue. I frankly think, unless somebody comes up with a much better idea, his solution wasn't far off. You certainly don't want to impact current employees and you shouldn't. They took their jobs in good faith with the understanding that it would be a benefit going forward at that level. I do think, however, that if we do impact benefits is that we need to look at our pay structure. Part of the reason we were able to attract a good quality employee was the retirement package and if we're going to reduce that, we need to look at the salaries. But that's something that's more in our control, dealing with salaries. The benefits package of PERS has got to be changed. Whether or not we come up with a solution this time, we've got to start the process.

Ethics and lobbying reform?

It kind of surprises people when we talk about ethics that I think government has become more transparent, not less so, thanks largely to the media and I think the media does a good job of keeping an eye on things. I'm open to anything that will make the process more transparent and more open, however, at the same time we have to be very, very careful that we don't move ourselves away from a citizens' legislature. Everybody has to make a living outside the Legislature and a citizens' legislature is something that is worth protecting. We don't want a situation where people can benefit unduly from their position on the Legislature, but we have to understand, too, that people have to make a living outside the Legislature, and that there are going to be conflicts. I think its incumbent upon us as legislators to declare and abstain when appropriate and I think, overwhelmingly, legislators do. I think there obviously are some exceptions to that, but overwhelmingly I think most legislators follow the law and abstain when it's appropriate and disclose when it's appropriate.

Should campaign disclosure policy be amended and should LLCs be a shelter for disclosing contributions?

I think if there's an area that we can do more, that's probably the area. I think it's a little bit problematic that one organization can put $300,000 into a race in the last 30 days and not have any of that disclosed. We should consider more, if not outright banning of corporate contributions, we should do more in that regard, absolutely.

Are there any clean-ups needed on some of the initiatives approved by voters in the November election: The smoking ban?

I think the ability the people have to vote directly on initiatives and ballot questions is one of the most important rights that we have. If you talk to other states that don't have that right and it's a mess. You've got to have that as a check and balance. At the same time, we have to be careful that our laws aren't so wide open that Nevada is the place where everybody comes to do initiatives because it's cheap, it's easy and that has happened consistently in Nevada and that's something that we have to guard against because ultimately it does violence to the democratic process. I think for the most part, the system has been used appropriately. The imminent domain issue concerned me a little bit because it became a ballot question before the Legislature was done dealing with the issue. I think there's nine pieces of legislation dealing with the Kelo ruling. I personally have a piece of legislation that makes it illegal to take property from one private person and give it to another private person. So the Legislature's not done acting on that. I think the initiative process should be used when the Legislature has failed to act or refused to act. People say, "OK, enough's enough, we're going to take this matter into our own hands." But let the Legislature work through it first. In that particular case, the Legislature didn't have an opportunity. On the smoking ban side of it, the Legislature probably did have an opportunity and obviously didn't act in accordance to what the people wanted so the people took it upon themselves. But it also illustrated one of the big problems with the initiative process, that the deliberations don't occur. I can guarantee you the reason it hasn't gotten to the legislative process is that most of us will ask the question, "Is this the proper function of government for the Legislature to tell business whether they should or shouldn't have a smoking section?" That's why it hasn't gotten through the Legislature because of that philosophical question, not because we think second-hand smoke is a good thing. It's the bounds of government. We saw that the unintended consequences aren't fleshed out as well in the ballot process as in the legislative process.

Minimum wage?

That's another one of these philosophical things. Sen. (Bob) Beers — and I agree with him — calls it the Entry Level Job Reduction Act. I think you see everywhere that that's what happens. And that's something that should be left to the business community. They will pay wages that are necessary to attract employees and I think, historically, that's proven true in Nevada where we're primarily a service economy.