Brookings Mountain West Publications Publications (BMW)

9-2010

Envisioning Nevada’s future: Goals & strategies for advancing our quality of life

Nevada Vision Stakeholder Group

Moody’s Analytics

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Prepared for the Nevada Vision Stakeholder Group by Moody’s Analytics

September 2010

NEVADA VISION STAKEHOLDER GROUP �� Vision Statement

A Vision for Nevada and Its Citizens

The people of Nevada enjoy a magnificent natural landscape and caring, inviting communities. We are diverse, independent, optimistic, entrepreneurial, and determined to succeed.

Every Nevadan receives encouragement and the opportunity to attain the highest level of educational excellence.

Nevadans of all ages—from children to seniors—are able to meet their needs for food, shelter, health, and culture and to enjoy the state’s recreational resources. We are safe and connected— through communications and transportation—to our communities and the rest of the world.

Our public policy and business climate provide the economic foundation for our overall quality of life and: »» Encourage innovation and broad-based economic resiliency and vitality; »» Leverage our unique market strengths; »» Attract investment and talent; and »» Balance sustainable growth with responsible use and conservation of our natural assets.

Our governance is efficient, effective, inclusive, and accountable. We monitor results and demonstrate measurable progress. We respect each other's points of view.

“Home” means Nevada, “Home” means the hills, “Home” means the sage and the pines. Out by the Truckee’s silvery rills. Out where the sun always shines. There is a land that l love the best, Fairer than all I can see. Right in the heart of the golden west “Home” means Nevada to me.

In 1933, the Legislature adopted “Home Means Nevada” as the official state song. Mrs. Bertha Raffetto of Reno wrote the song to honor the state. NEVADA VISION STAKEHOLDER GROUP �� Members

Nevada Vision Stakeholder Group

Members Robert E. Lang, Ph.D., Brookings Mountain West and Department of Sociology, University of Nevada, Las Vegas (nonvoting), Chair Peter C. Bernhard, Cleveland Clinic Nevada Doug Busselman, Nevada Farm Bureau Federation René Cantú, Jr., Ph.D., Latin Chamber of Commerce Community Foundation Douglas D. Dirks, Employers Holdings, Inc. Paul Dugan, Washoe County School District, retired Alan Feldman, MGM Resorts International Marsha Irvin, Andre Agassi College Preparatory Academy Boyd Martin, Boyd Martin Construction and Associated General Contractors, Las Vegas Chapter Thomas A. Perrigo, AICP, City of Las Vegas Robert Lee Potter, American Federation of State, County, and Municipal Employees Terry J. Reynolds, The Reynolds Company Susan Rhodes, LASW, National Association of Social Workers, Nevada Chapter Brian Rippet, Nevada State Education Association, Middle School teacher, Zypher Cove Katy Simon, Washoe County Keith Smith, Boyd Gaming Corporation Donald D. Snyder, The Smith Center for the Performing Arts Denise Tanata Ashby, Nevada Institute for Children’s Research and Policy, University of Nevada, Las Vegas Cedric D. Williams, North Las Vegas Fire Department Sylvia Young, FACHE, Sunrise Hospital and Medical Center

Alternate Members Janelle Kraft Pearce, Las Vegas Metropolitan Police Department, retired John Packham, Ph.D., University of Nevada School of Medicine Devin Reiss, Realty 500 Reiss Corporation and Nevada Association of Realtors Jacob L. Snow, Regional Transportation Commission of Southern Nevada Contents

EXECUTIVE SUMMARY: Facing the future PAGE 1

ECONOMY PAGE 13

ENERGY & environment PAGE 24

TRANSPORTATION PAGE 34

EDUCATION PAGE 44

Health & Well-being PAGE 60

PUBLIC SAFETY PAGE 79

APPENDIX PAGE 90

ENERGY & Health & ECONOMY Environment Transportation EDUCATION Well-being Public safety

NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010

EXECUTIVE SUMMARY �� Facing the Future

Facing the Future evada’s severe downturn has brought to light many of the long-term challenges facing the state. Not only is its economy subject to painful swings, but Nevada’s primary drivers— consumer services (primarily Ngaming, hospitality and housing) and resource extraction—will provide less support than they have in past business cycles. Less economic vitality will make it harder to offer Nevadans the quality of life they expect.

The importance of the economy to quality of life is equally clear—quality of life is a hollow promise without a healthy and supportive economy. Similarly, a proper fiscal structure—both in terms of spending and revenues—is critical to delivering on a quality of life promise.

Nevada’s consumer and hospitality industries will feel downward pressure on their revenues as aging baby boomers scramble to make up for low lifetime savings. The state’s gaming industry faces new competition across the U.S. and abroad. And in rural Nevada, the growth of primary resource industries will be modest, since commodity prices (other than for gold) are not expected to return to their recent peaks for several years.

The state’s long-term growth is still expected to exceed the national average. Nevada’s relative cost advantages, its hospitable culture, and its vast natural beauty will continue to attract migrants, mitigating shifts in demand for its core industries. Yet population gains, while still significant, will not match the trend of the last 30 years. Residential, retail and hotel construction will therefore no longer be a primary driver of regional growth.

Nevada’s slowing growth potential is troubling because, even during the state’s boom years, many of its residents’ needs were not being met. For example, a wide range of educational yardsticks suggests Nevada could do a better job of teaching its children and training its workers. Tight state and local budgets notwithstanding, now is the time to make the structural changes and investments Nevada needs, lest its obstacles become insurmountable in the years ahead.

While Nevada’s challenges were put into sharper focus by the recession, these issues have been known and discussed for many years. State and private agencies have developed numerous strategic plans, with the goal of providing public services more efficiently. There have also been numerous studies related to the state’s economic structure, but little has been done to act on their findings. It is time for us to address the issues directly, to act on them and to achieve meaningful progress in the six focus areas detailed in this report. It should also be recognized that there is interdependence and crossover among the six focus areas.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 1 EXECUTIVE SUMMARY �� Facing the Future

Stakeholders larly true within the NVSG because of the Coast to support its transportation and lo- diverse interests and viewpoints represented. gistics industries. In accordance with State of Nevada Sen- The group’s overall vision for Nevada revolves Complementing the goal of diversi- ate Concurrent Resolution No. 37 of the 2009 around a “triple bottom line” principle of fication is a modern, well-maintained Legislative Session, the Interim Finance Com- economic development, environmental sus- transpor­tation system that will in- mittee’s Subcommittee to Conduct a Review of tainability, and equitable opportunity for the crease the connectedness of communi- Nevada’s Revenue Structure appointed the Ne- citizens of Nevada. Economic development is ties throughout the state and strengthen vada Vision Stakeholder Group. The group was the bedrock of progress and the reason living ­Nevada’s links with the Intermountain created to assist in developing five-, 10-, and standards continue to rise. Environmental West. New industries must also be devel- 20-year strategic plans for improving Nevada’s sustainability captures the commitment to oped in conjunction with suitable water quality of life. Facilitated by Moody’s Analytics, responsibly and efficiently manage the state’s conservation practices. the group’s primary task was to look broadly at natural resources. Equity embodies a pledge Diversity will add well-paying jobs in the most important goals for Nevada’s future to ensure that all Nevadans have a share in high value-added industries that can help and to identify the key investments and struc- the state’s future. Nevada stay competitive in a changing tural changes needed to achieve them. The discussion of the stakeholders’ vision global economy. Such jobs require a wider Although the group included several policy is organized around six subjects, correspond- array of skills and increased workforce experts, detailed policy analysis was not its ing to broad policy areas that are essential quality, in turn demanding more from edu- aim. Discussions covered a wide range of to enhancing Nevadans’ quality of life and cation and training systems. To produce topics, from the structure of the economy to fostering a fertile business environment workers for growing, prosperous indus- education, healthcare, energy and the envi- throughout the state: tries, graduation rates from high school ronment, public safety, and transportation. »» The economy through graduate school must rise. The Stakeholders came from many backgrounds, »» Energy and environment commitment to education must start in representing Nevadans’ diverse interests. »» Transportation early childhood, particularly for those Business leaders joined representatives of or- »» Education from lower-income families, and continue ganized labor, philanthropic groups and public »» Healthcare and well-being with a focus on hiring qualified teachers servants. The members brought a wide range »» Public safety and keeping students engaged. of perspectives, from academic to practical, A healthy community means providing representing educators, researchers, builders There is considerable overlap among not only educational opportunities for all and farmers. Nevada’s regional diversity was these subject areas. For example, a suc- but also a clean and safe environment evident, with members from both urban and cessful economy requires plentiful energy, and a wide range of cultural and recre- rural areas. Given the group’s range and broad a strong transportation network, and a ational opportunities. A healthy population consensus, its recommendations for the future healthy environment. Similarly, a secure, remains the foundation, producing impor- are relevant and critical for the state. well-educated and healthy population needs tant objectives for improving Nevadans’ The stakeholders had the advantage of a growing economy. access to healthcare while increasing ef- meeting outside the legislative process. ficiency to contain costs. Thus, the group could set goals and make Greater educational attainment and recommendations without considering po- Goals improved public safety would make Ne- litical trade-offs or other constraints faced Determining how Nevada can reach and vada more attractive to households and by policymakers. This freedom helped gen- sustain a desirable quality of life was the firms, leading to stronger and more stable erate a wealth of creative ideas, both large task of the NVSG. Members of the group economic growth. Income gains associated and small. Some of these innovations may identified a number of broad goals along with growth in turn would improve the per- not receive the attention they deserve be- with specific objectives and strategies to formance of the state’s systems of educa- cause of current legislative or constitutional achieve them. tion and public safety. barriers that can be removed only through Among these broad goals is the need to structural reform. Yet Nevada’s needs are diversify Nevada’s industrial structure serious enough to suggest that such reforms in a way that will reduce volatility in its Key themes be on the table for discussion. economy, employment and public services. While the NVSG’s goals are as diverse Nevada’s infrastructure and resources can and wide-ranging as the state itself, several be leveraged to attract clean energy pro- common themes emerged from its discus- Quality of life ducers and other high value-added indus- sions regarding strategy, and these are woven Quality of life can mean very different tries. Nevada can also take advantage of its through its recommendations. Four such things to different people. This was particu- position near growth markets on the West themes are:

2 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 EXECUTIVE SUMMARY �� Facing the Future

»» Workforce development Energy & Environment Public Safety »» Connectedness and collaboration »» Secure better access to federal land for »» Establish a second National Fire »» Utilization of federal resources renewable energy development ­Academy to serve the needs of the »» Adoption of information »» Promote new water conservation tech- western U.S. technology solutions nology for application in the state and »» Promote agency collaboration to re- for export. duce substance abuse to include reha- Other important themes highlighted by bilitation options. members of the NVSG include youth inter- Transportation vention and prevention programs, ­expanded »» Build Interstate 11 between Las Vegas home- and community-based programs,­ and Phoenix and seek another round Measuring progress ­early-childhood development, ­efficient use of federal support to eventually extend For the NVSG’s efforts to be of lasting use, of resources, and accountability. the highway to Reno. progress toward Nevada’s goals must be mon- »» Build high speed rail between Las itored through quantitative performance mea- Vegas and southern California. sures. Tracking performance allows the state to Key strategies make midcourse corrections or adopt alterna- The NVSG proposed an array of strategies Education tive strategies where needed, promoting flex- that would help the state achieve its quality »» Increase the share of adults with at least ibility and a focus on long-term outcomes. of life goals. The following key strategies were a high school diploma or its equivalent. Each stated goal or objective in this report proposed by the group for each subject area: »» Allow public universities to retain a larger includes a performance metric, with five-, 10- share of tuition and differentiate tuition and 20-year benchmarks. In most cases, the Economy for different schools and programs. near-term goal is simply stabilization, with »» Expand public-private research capabil- measurable progress expected in 10 years. ities and technology transfer through Health & Well-being After 20 years, the successful implementa- increased venture capital funding and »» Expand enrollment in Medicaid and tion of these strategies will advance Nevada’s use of federal grant money. CHIP programs to expand access to ranking significantly among its relevant peer »» Attract growth industries by reviewing healthcare in the near term. group of states. The following pages include the state’s incentive system and im- »» Promote investment in healthcare two key metrics with benchmarks for each proving upon its already-accommoda- information technology to lower costs subject area. Additional metrics and bench- tive regulatory environment. and improve efficiency. marks can be found in the focus chapters.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 3 EXECUTIVE SUMMARY �� Facing the Future Key Metrics ECONOMY

Increase Industrial Diversity Attract Venture Capital Funding Industrial diversity index, U.S.=1 Venture capital funding, $ mil 0.6 U.S. avg (excl. CA) 0.5 Utah

0.4 Arizona Oregon 0.3 Nevada Goals for Nevada: 0.2 Idaho 2015=$100 mil 2009 0.1 Montana 2020=$200 mil 1999 2030=$300 mil New Mexico 0.0 90 92 94 96 98 00 02 04 06 08 15 20 30 0 100 200 300 400 500 600 700 Source: Moody's Analytics Source: PWC/Venture Economics/National Venture Capital Assoc. MoneyTree Survey

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 Nevada’s economic volatility, the result of overreliance on a few highly Venture capital funding is a good proxy for capital investment in a cyclical industries, needs to be addressed through industrial diversifica- state or industry. Venture capital dollars usually flow into fledgling tion. The diversity index measures progress toward this goal. Diversity high-skill, innovative firms and industries. By increasing venture can be achieved by attracting industries that can be vertically integrat- capital and expanding the use of federal grant money, Nevada can ed with existing industries, reviewing the state’s incentive system, and expand private-public research and technology transfer, helping the streamlining the process of transferring federal lands to the state. The state to attract high-growth industries. By 2030, the goal for Ne- 20-year goal aims to narrow the gap in diversity between Nevada and vada is for venture capital investment to reach $300 million, which the averaged diversity measures of Arizona and New Mexico by half. is about half the average for states (excluding California) in 1999.

ENERGY & eNVIRONMENT

Increase Water Use Efficiency Increase Alternative Energy Production Public water withdrawals, gallons per capita per day Geothermal and solar electricity production, % share of U.S. 350 Nevada U.S. 12 300 10 250 8 200 6 150 4 100

50 2

0 0 85 90 95 00 05 15 20 30 90 92 94 96 98 00 02 04 06 08 15 20 30 Sources: USGS, BEA, Moody's Analytics Source: Energy Information Administration

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 A broad measure of municipal water conservation is the volume Nevada is gradually adding renewable energy generation capacity, of gross water withdrawals per capita per day. In order to enhance but despite having considerable potential, the state’s market share Nevada’s national leadership in resource conservation and technol- of renewable power is rising very slowly. The NVSG believes secur- ogy, the Nevada Vision Stakeholder Group recommends promoting ing better access to federal lands for renewable energy development water conservation technology for use within the state and as an could raise the state’s share of solar, geothermal, and wind energy export. The NVSG proposes the establishment of a statewide water production by 50% over the next 20 years. use goal of 209 gallons per capita per day by 2030.

4 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 EXECUTIVE SUMMARY �� Facing the Future Key Metrics Transportation

Increase Connectivity With Mountain West Increase Alternative Transportation Usage Interstate highway centerline miles per 1 mil residents Workers commuting by means other than driving alone, % 450 28 Nevada Mountain state average Nevada U.S. 27 400 26 350 25 300 24 23 250 22 200 21 150 20 99 00 01 02 03 04 05 06 07 08 15 20 30 04 05 06 07 08 15 20 30 Sources: Census Bureau, Bureau of Transportation Statistics Source: Census Bureau: American Community Survey

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 Nevada boasts a high-quality road network, but transport links to The share of commuters who find alternatives to driving alone high- neighboring communities such as Phoenix and southern California lights the travel choices available to workers. The 20-year goal is to need to be improved. The NVSG proposes the state improve high- match or exceed the share of commuters using alternative means way links between Las Vegas and Phoenix and eventually extend in Montana, the current leader in the Mountain West. In 2008, the route north to Reno. The NVSG also recommends pursuing the ­Montana’s share was 27.2%. development of a high-speed rail service between Las Vegas and Southern California.

Education

More Children in Early Education Programs Increase High School Graduation Rates 3- to 4-yr-olds enrolled in school, % Averaged freshman graduation rates, public secondary schools, % 50 85 Nevada U.S. Nevada U.S. 80 40 75 30 70

20 65 60 10 55

0 50 07 08 15 20 30 03-04 04-05 05-06 06-07 14-15 19-20 29-30 Sources: Census Bureau: American Community Survey, Moody’s Analytics Source: U.S. Department of Education

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 The American Community Survey documents three- and four-year- The averaged freshman graduation rate examines the number of olds who are enrolled in school programs. Nevada lags the national high school graduates in a given year compared with the number average. Numerous factors influence parents’ decisions to enroll of entering students four years earlier. This indicates how success- children in such programs, including their employment status and ful the school is in having students complete their schooling. The the cost of the programs. Nevada’s goal is to cut its gap with the measure has limitations, as it does not account for students who national average in half by 2015, match the current U.S. average in changed schools. The state’s goal here is to cut its gap with the 2020 and lift into the current top third of all states by 2030. national average in half by 2015, match the current U.S. average in 2020, and lift into the current top third of all states by 2030.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 5 EXECUTIVE SUMMARY �� Facing the Future Key Metrics Health & Well-being

Lack of Health Insurance Healthcare Revenue From Federal Sources % of population under 65 with no health insurance Federal health-related revenue, as a % of state general revenue 25 2.0 Nevada U.S. 1.8 Nevada U.S. average 20 1.6 1.4 15 1.2 1.0 10 0.8 0.6 5 0.4 0.2 0 0.0 99 00 01 02 03 04 05 06 07 08 15 20 30 50s 60s 70s 80s 90s 00s 15 20 30 Source: Census Bureau Source: Census Bureau

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 Expanding rates of health insurance coverage among the non- By restricting eligibility for programs for which Nevada receives Medicare eligible population would help to achieve two important federal assistance to insure children and the poor, a greater share of goals: expanding Nevadans’ access to quality healthcare services state healthcare expenses must be paid by state residents. Nevada and containing overall healthcare costs. In response to and with the should set out to raise its share of federal healthcare funding to assistance provided by current federal programs and federal health 1.8% of revenues by 2030, bringing it more in line with other states. insurance reform, a target of reducing those without any coverage to just 6% by 2020 would bring Nevada in line with projected na- tional averages.

public safety

Promote Low-Crime Environment Minimize Substance Abuse Property crimes per 100,000 population Illicit drug use in the past month, %, 12 yrs and older 4,400 10 Nevada 4,200 Nevada U.S. 4,000 9

3,800 8 3,600

3,400 7 3,200

3,000 6 00 01 02 03 04 05 06 07 08 15 20 30 03-04 04-05 05-06 06-07 15 20 30 Sources: Census Bureau, Federal Bureau of Investigation, Moody’s Analytics Sources: SAMHSA, Moody’s Analytics

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 According to the Federal Bureau of Investigation’s Uniform Crime Data from the Substance Abuse and Mental Health Services Ad- Reports, the property crime rate includes incidences­ of burglary, ministration’s survey show the level of substance abuse in Nevada. larceny-theft, motor vehicle theft, and arson. The goals are to ex- Lowering that level will improve the quality of life for families and tend recent improvement in 2015, to halve the gap with the nation communities as it reduces the state’s crime rate. Because Utah’s by 2020, and to meet the current U.S. average by 2030. substance abuse rate is the lowest within the Mountain West, Ne- vada’s goals focus on narrowing its gap with Utah. The goals are to extend recent improvement through 2015, halve the gap with Utah by 2020, and meet that state’s current average by 2030.

6 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 EXECUTIVE SUMMARY �� Facing the Future

Key Themes

Workforce development Nevada needs to develop a skilled and flexible workforce that can thrive in the 21st century economy.

A skilled and adequate workforce raises prove employee training and retention rates not only to train the local workforce but also the productivity and competitiveness of in light of labor shortages in these fields. to attract new jobs and funding. Links among employers in the state and encourages other Many of the growth industries that Ne- the private sector, state and local educational firms to relocate to Nevada. A more educat- vada wants to attract also require a skilled institutions, and federal facilities could also foster ed workforce creates more economic value, workforce, including workers with math, sci- such initiatives, again illustrating how connect- leading to stronger income growth and bet- ence and engineering degrees. edness can help shape a future vision for Nevada. ter overall household well-being. Making Building on current strengths in the workforce A highly educated and skilled workforce is training and educational opportunities avail- and the economic structure of Nevada is key to an absolute necessity for the development of able to all Nevadans advances equity across diversifying the state’s economy. For example, a sustainable energy industry. Greater edu- the state. Nevada has developed world-class expertise in cational attainment and higher incomes also To meet Nevada’s healthcare and educa- public safety and security. New regional or na- lead to better health, longer life spans, and tion goals, it is particularly important to im- tional training centers could use such expertise improved public safety.

Connectedness and coordination Increased collaboration between public and private sectors, among communities within the state, and with other regions and the federal government will foster growth, access, and efficient resource allocation.

Given Nevada’s widely dispersed com- Connectedness applies to energy as well advantage of federal resources. Sometimes it munities and markets, internal and external as transportation. For example, Nevada is as simple as helping smaller communities connectedness is a key factor in its quality­ has ample resources to develop renewable learn about grant opportunities and acquire of life. energy, but connections are needed to link the skills needed to take advantage of them. An improved transportation infrastruc- energy resources to markets within the state Public-private partnerships and collabora- ture within Nevada and between the state and elsewhere. Nevada’s renewable energy tion across agencies and levels of govern- and its major trading partners would further producers must have a sufficient transmission ment are important on many fronts. Com- economic development, help sustain the infrastructure available to export energy to munication across agencies is particularly environment, and promote equity among high-demand markets outside the state. Such important for the effective governance of its citizens. Opportunities for improvement connections would cross federal lands, illus- rural communities. Community-based al- include highway development between trating the necessity of collaboration among ternatives to institutional elder care, mental Reno and Las Vegas as well as between Las federal, state and private entities. health/behavioral care, incarceration, and Vegas and Phoenix. Connections between Coordination among different levels of parole can greatly improve efficiency. Nevada and southern California could also be government and the private sector can short- Private firms and households also need strengthened with alternative transportation en distances and equalize opportunities. This to work with the government to ensure that options such as high-speed rail. The highly can include communication and training for public educational institutions produce the developed airport infrastructure already in state agencies, local governments and com- skills required by businesses, and to nurture place guarantees long-term links with the munity groups so that each can leverage its systems of philanthropy and private giving as global economy. work on that of others and so that all can take they catch up with Nevada’s rapid growth.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 7 EXECUTIVE SUMMARY �� Facing the Future

Utilization of federal resources Nevada needs to help residents benefit from federally managed resources within the state and make better use of available federal funds to leverage state revenue.

The federal government owns 86% of is the federal Supplemental Nutrition Assis- ments and nonprofit entities need the proper the land in Nevada and thus wields enor- tance Program, also known as food stamps. resources to search out such grants and apply mous influence over activities critical to According to the Nevada Department of for them. To support the NVSG’s equity goals, the state’s economy and quality of life, Health and Human Services, in fiscal 2010 such grant-seeking resources should be pro- including agriculture, minerals, transpor- the state forfeited nearly $350 million be- vided to smaller communities that may not tation, energy and recreation. The NVSG cause of nonparticipation. have the capacity to do so on their own. seeks appropriate levels of partnership with The state is also forgoing tens of millions Effectively linking state, local and pri- the federal government to make sure fed- of dollars in federal grants. In a recent study vate sector programs with federal funds and eral resources benefit Nevadans. performed by Federal Funds Information for grants could help achieve goals for health Nevada also receives fewer federal funds States, Nevada ranked last in fiscal 2009 for and well-being, transportation, education and than almost any other state. In many cases, per capita federal spending on select grants at workforce development, energy resources, the state could leverage its own resources $973. The national average was $1,672.1 These and the environment. Such moves would not by partnering with existing federal programs. are funds that typically require no state match only improve the effectiveness of local initia- As it is, millions of federal dollars that might and can be used by a number of public and tives but also help smooth out the volatility support public services in Nevada are often private entities. State agencies, local govern- of public services. This is not to suggest that left on the table. This is a particular problem Nevada should depend entirely on federal re- during recessions, when demand for govern- 1 Federal Funds Information for States. “FY 2009 Per Capita sources, only that it should take advantage of Federal Spending on Select Grants” (2010). http://www.ffis. ment aid rises substantially. A good example org/node/2100. available resources whenever appropriate.

Adoption of information technology solutions New technologies can allow state and local government as well as nonprofit agencies to provide services more efficiently.

The development of an innovative IT in- Given Nevada’s size and the sharp con- pay dividends in terms of equity. ­Online frastructure would greatly facilitate connect- trasts between its rural and metropolitan courses and other technology-based edness and cooperation in Nevada among areas, the development and implementa- ­educational offerings not only improve federal, state and local entities, helping them tion of an IT infrastructure represent chal- ­student engagement but also give all provide services more effectively and ef- lenges. However, meeting these challenges ­Nevadans access to learning opportunities. ficiently. State and local governments could would promote equity in the provision of Nevada can maximize its existing IT in- significantly lower administrative costs with services across the state while fostering frastructure. Key IT competitive advantages better record-keeping and communication economic development. are already present at the Nevada Test Site, technology. IT investments and improved da- A strong IT infrastructure can help at- Yucca Mountain Nuclear Waste Repository, tabase management stand to help both pub- tract new firms and industries to the state. McCarran International Airport, and private lic and private entities. Among governments, Nevada’s economy would benefit from firms such as Switch Communications. Sus- consolidated beneficiary databases for public increased diversification as well as growth tainable leveraging of these assets will help assistance and other aid programs, criminal among its existing businesses. attract new businesses and industries to Ne- records, and health records can help agencies Expanding technology use by primary vada, ultimately benefiting the entire triple deliver services and monitor performance. and higher educational systems would also bottom line.

8 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 EXECUTIVE SUMMARY �� Facing the Future

Workforce Development Strategies

ECONOMY EDUCATION Health & Well-being

Nevada’s primary advantage is the in- Educational attainment influences an Healthcare is only about half as large flux of young households to the state. If individual’s ability to find a job and in Nevada as it is in other states, by these potential workers are not trained increases earnings potential. A well- share of total employment. Demand for for the needs of growth industries, the educated population also attracts firms resources exceeds supply in a number advantage will be lost. Nevada’s system seeking to ­consider to expand or relocate. of key areas such as mental health. For of higher education is the natural place Nevada’s educational profile constrains the quality of healthcare to live up to to address potential skill shortages. its residents’ economic potential and the needs of Nevada residents, Nevada Public-private partnerships, similar to is not enticing for many firms. It is im- must reduce its shortage of healthcare the gaming institute at the UNLV Col- portant that the state focus on aligning workers by attracting and retaining lege of Hotel Administration, are often educational opportunities with future job medical professionals and training successful at developing skills desired by growth ­potential to ensure that the state new ones. growing firms. is ­competitive in the long run. 22% 51st 1.9 In 2008, fewer Nevada adults held col- Nevada falls behind all states and the The number of new MDs produced in lege degrees than average for the U.S. District of Columbia in its high school Nevada last year for every 100,000 and Mountain states. graduation rate. residents.

PUBLIC SAFETY

The state’s diverse population and ge- ography have led it to develop strong public safety and firefighting programs. This expertise could be leveraged into a training facility that would serve the broader region. The presence of such an academy would not only bring jobs and visitors to the state but would also allow Nevada to maintain a highly qualified police, emergency and fire- fighting workforce to protect and serve its citizens. 1 The National Fire Academy, located in Emmitsburg MD, could be replicated for the western U.S. in Nevada.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 9 EXECUTIVE SUMMARY �� Facing the Future

Connectedness and Coordination Strategies

ECONOMY ENERGY & Environment TRANSPORTATION

The NVSG noted that local economic The vastness of Nevada’s alternative Major transportation projects that cut development agencies often do not energy resources provides a channel across multiple political boundaries will coordinate with one another and some- to diversify the state’s economy while come to fruition only through the coor- times compete against each other. reducing reliance on traditional fossil dinated efforts of regional planning. The Stakeholders felt there should be a fuels. Improving access to federal land state and its agencies should work to more efficient allocation of resources for renewable energy development will build relationships between metropoli- for local economic development groups provide the key to unlocking the state’s tan planning organizations and various and collaboration across local groups potential. government agencies. Expected growth to ­produce a cohesive statewide and in international trade over the 20-year regional marketing approach to attract­ horizon will necessitate additional in- new companies and help expand vestment in the region’s major trade ­existing ones. Development agencies highways and airports. can also partner with the state to review 67% the incentive structure for ­attracting The Bureau of Land Management private industry with innovative ­ 70% administers the single largest share of The vast majority of freight traveling financing techniques. land within Nevada, which highlights along the CANAMEX corridor moves the importance of intergovernmental by truck. cooperation.

EDUCATION Health & Well-being PUBLIC SAFETY

Young children’s access to formalized Health outcomes vary more by location Police, firefighters, and other emergency education gives them an educational in Nevada than in most states, largely be- service personnel must work together advantage and greatly improves their cause the state’s size and geography make to ensure that residents are adequately likelihood of completing further educa- it difficult to meet the health needs of protected in the community. Communi- tional goals. With no state or national the population living in rural and frontier cation across agencies and jurisdictions mandate for early-childhood educa- areas. Over 13% of Nevadans live in areas is necessary to provide a safe and secure tion—private firms and communities with shortages of primary care health environment for residents and visitors. can set their young learners on the road professionals. Technological innovations, The state should work to foster these to a lifetime of learning by developing particularly in the area of telecommu- relationships by encouraging and creat- programs that reach out to families who nications, can help healthcare providers ing a framework for communication. could benefit from a curriculum beyond strengthen health networks and overcome simple daycare. the challenges created by distance. 27.7% 115 9 Nevada’s preschool-age children are less The average number of miles between The many divisions within the Nevada likely to be enrolled in school than their acute care hospitals in rural Nevada and Department of Public Safety highlight national counterparts. the closest tertiary care hospital, offer- the importance of communication. ing specialized consultation.

10 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 EXECUTIVE SUMMARY �� Facing the Future

Utilization of Federal Resources Strategies

ECONOMY ENERGY & Environment TRANSPORTATION

Nevada can leverage its research and The federal government offers various Ultimately, funding for many pro- teaching hospitals and healthcare clean energy incentives and grants for fi- posed transportation projects in Ne- centers to attract public sector grants, nancing development of Nevada’s solar, vada will be supplemented by federal just as the Nevada Cancer Institute wind and geothermal power industries. aid. ­Preparations for Nevada’s major has done. Economic development Alternative energy projects across the ­projects must be sufficient to enable ­agencies can promote the private-sector state could benefit from this source of the state can take advantage of future use of public lands to get funding for short-term funding. funding opportunities as they become shovel-ready ­infrastructure and energy available. The development of a ­projects. The approval of NV Energy’s high-speed rail service connecting proposed north-south energy transmis- Las Vegas to Southern California may sion lines is a good example. benefit from a low-interest loan from the federal government. $973 $122 million In a recent study performed by Federal Federal renewable energy grants were $2.3 billion Funds made available through the Funds Information for States, Nevada awarded under the American Recovery ­American Recovery and Reinvestment ranked last in fiscal 2009 per capita and Reinvestment Act section 1603 for Act for high-speed rail projects across the federal spending. projects in Nevada (July 2009). country; Nevada did not apply for funding.

EDUCATION Health & Well-being PUBLIC SAFETY

To ensure that its students receive the best A higher share of children lack health Public safety departments require funds possible education, Nevada should exploit insurance in Nevada than in almost to provide adequate services but are all types of federal funding. Although admin- every other state due to low rates of not revenue-generating entities. Find- istering education is the function of state enrollment in federally funded plans ing sources of funding from the federal and local governments, the funds available such as Medicaid and CHIP. By not us- government—either ongoing sources from the federal government can enhance ing the opportunity to receive federal or one-time grants to aid improvement students’ educational experiences. Monies matching dollars to expand preven- efforts—would greatly expand public are available from the U.S. Department of tive care, the state shoulders a higher safety agencies’ ability to properly serve Education, as well as from the U.S. Depart- burden than necessary in the form of Nevadans and those visiting the state. A ment of Health and Human Services’ Head expensive emergency services and lost well-trained public safety infrastructure, Start program and the U.S. Department of worker productivity. although low-profile when effective, is Agriculture’s School Lunch program. an important factor. $3.4 billion 35% 13 Amount of Race to the Top, Phase 2 The fraction of children living in poverty The U.S. Department of Homeland funding that was available to states. in 2008 who lacked health insurance, Security offers numerous opportunities Nevada applied, but was not a recipient. about twice the U.S. average. to apply for grants.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 11 EXECUTIVE SUMMARY �� Facing the Future

Adoption of Information Technology Solutions Strategies

ECONOMY TRANSPORTATION EDUCATION

Nevada’s goal of attracting high-tech Investment in communication infra- The state’s large rural population, dis- companies can be achieved by building structure is an important element in persed outside the three metro areas, off the state’s already-established IT in- enhancing connectivity across Nevada. would benefit from an expansion of frastructure related to Switch Commu- Expanding internet access to rural com- technology-based learning. Indeed, all nications in the south. This also can be munities in Nevada can help achieve a students would reap benefits from ex- ushered along by healthcare’s growing wide range of goals, including the more panded educational opportunities such need for electronic data capacity. Yucca efficient transmission of medical infor- as online courses and expanded use of Mountain and the Nevada Test Site are mation, a tighter connection between technology within the classroom. Addi- also options for the location of a secure state and local law enforcement and tional options for all students to ensure government data center. emergency response services, and re- that they have the ability to be taught mote learning. in a way that meets their learning style will improve overall engagement. 2.3% 54.4% 6 The share of Nevada employment in Nevada ranks highly among western Several state-sponsored charter schools high-tech industries in 2009 was one-half states in the share of population with ac- that operate entirely or partly online the U.S. and Mountain State averages. cess to broadband internet connections. already service the state’s students.

Health & Well-being PUBLIC SAFETY

Shifting from paper to electronic medi- Technology innovations can be used by cal record keeping has the potential public safety officers for a broad array to decrease errors and lower long-run of purposes, including communication, administrative costs. Making such a crime tracking and prevention. The abil- transition generally involves a signifi- ity to effectively respond to residents’ cant upfront fixed cost, however, which needs can be enhanced by systems that has discouraged many small medical help pinpoint the need and relay timely practices and clinics from adopting new information to responding officers and technologies and software. A window of central communication workers. Data opportunity may be opening for Nevada collection and management that can to receive federal funds to help support help target areas of need are improved investments made in health IT. with proper IT use. $25.8 billion 3 U.S. federal stimulus funds targeted to Fusion centers are just one example of support improvements in healthcare IT. a format to promote communication among public safety officers.

12 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Economy

Focus On | Economy stable and healthy economy is essential to Nevada’s quality of life. A strong, vibrant and sustainable econ- omy provides all residents with opportunities for work, education, community involvement, and the goods A and services necessary for desirable living standards. Strong economic performance is also intertwined with other quality-of-life measures such as access to effective education, a solid transportation and public-safety infra- structure, a healthy population, and an efficiently functioning government.

Nevada has been fortunate to have a tra- Households will increase spending on leisure Though the worst may be over, the con- ditional core economic driver in the tourism activity and business travel will accelerate. sumer sector’s recovery is still precarious, and gaming industry, which has the ability to Yet, while Nevada’s growth will exceed that and for the next several years consumer expand rapidly as living standards rise both at of other states, the pace will pale in compari- spending will face downward pressure. The home and abroad. Nevertheless, the state’s son with that of recent business cycles, largely loss of household wealth in recent years economic structure has some limitations. While because of slower growth in demand for the will remain a heavy weight on consumer Nevada’s economic model has proved capable goods and services of Nevada’s dominant con- spending. From its peak in mid-2007 to its of long-term growth, the state’s reliance on sumer-oriented industries. These industries are low point in early 2009, U.S. household net gaming leaves its residents highly exposed to highly dependent on national, and even global worth—the difference between what house- short-term economic pitfalls. The industrial consumer demand. A report by the Brookings holds own and what they owe—declined by structure is slowly shifting toward a more Institution found that in 2008, no other metro- some $17.5 trillion, or more than 25%. With stable mix but remains highly concentrated in politan area in the nation generated more out- firmer stock equity and house prices since a few relatively volatile industries. In addition put from service exports than did Las Vegas.1 No then, net worth has recovered somewhat, to gaming, Nevada’s economy has been highly other state in the nation has an economy that but it is still down by $12.5 trillion from its dependent on construction, an industry often is as dependent on leisure and hospitality, retail, peak according to the Federal Reserve (see at risk during downturns, and on mining, which and construction as Nevada’s. These industries Chart 3). can fluctuate wildly with commodity prices. together make up nearly half Nevada’s employ- The impact of lost wealth on consumer As the current national economic recovery ment base. In Hawaii, the state with the second- spending is evident in the increase in the transitions into a self-sustaining expansion, highest concentration, these industries account personal saving rate. When net worth was Nevada is expected to resume its above-av- for one-third of the state’s jobs (see Chart 2). The at its peak in the summer of 2007, the per- erage pace of growth, due largely to renewed decline of these industries during the recent re- sonal saving rate was close to an all-time in-migration and consumer spending by new cession was devastating for Nevada’s economy low of 2% (see Chart 4). Many households households. Nevada’s climate, recreational and illustrates the danger of having such a high were dissaving, by tapping equity from their opportunities, low tax base, and natural beau- exposure to a few consumer-­oriented industries. houses. With home equity now depleted and ty will continue to draw younger migrants in mortgage lending standards tighter, many search of work and retirees in search of a bet- individuals in their prime earning years have 1 http://www.brookings.edu/reports/2010/0726_mountain_ ter quality of life and lower costs (see Chart 1). exports_muro.aspx an acute need to save.

Chart 1: Nevada Will Still Attract Migrants Chart 2: Dependence on Consumers Is Risky Employment in retail, leisure/hosp. & construction, % of total, 2009 120 8 Nevada Net migration, ths (L) 7 100 Hawaii Population, % change yr ago (R) 6 Montana 80 5 Florida Wyoming 60 4 Louisiana 3 40 South Carolina 2 New Hampshire 20 1 Arizona U.S. 0 0 80 85 90 95 00 05 10 15F 20F 25F 30F 20 25 30 35 40 45 50 Sources: Census Bureau, Moody’s Analytics Source: BLS

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 13 FOCUS ON �� Economy

Chart 3: Nest Eggs Are Being Rebuilt Chart 4: An Inflection Point for U.S. Consumers… U.S. household net worth, $ tril Saving vs. wealth, 1960-present 70 25 Stocks -$5 tril

Housing -$7 tril 20 65 15

60 10 5 55 0 -5 50 2010Q1 2007Q2 -10 Household saving rate, % rate, saving Household 45 4.0 4.5 5.0 5.5 6.0 6.5 06 07 08 09 10 Household net worth-to-disposable income ratio, % Source: Federal Reserve Sources: Federal Reserve, BEA

FROM MOODY’S ECONOMY.COM 3 FROM MOODY’S ECONOMY.COM 4 Chart 5: …So Spending Will Not Lead Economy Chart 6: Industrial Diversity Index Average % change, U.S. U.S.=1.0 4.5 Utah Real GDP Real spending 4.0 California Arizona 3.5 Oregon 3.0 New Mexico Idaho 2.5 Montana Wyoming 2.0 1999 Nevada 2009 1.5 Alaska DC 1.0 60s 70s 80s 90s 00s 10s 0.0 0.2 0.4 0.6 0.8 1.0 Sources: BEA, Moody’s Analytics Source: Moody’s Analytics

FROM MOODY’S ECONOMY.COM 5 FROM MOODY’S ECONOMY.COM 6 If the historical relationship between wealth As measured by the Moody’s Analytics in- ment in the state more than twice as volatile and saving holds true, every dollar lost in wealth dustrial diversity index3, which compares the in- as in the nation overall (see Chart 8). Recently, will cut approximately 5 cents from consumer dustrial structure of states with that of the U.S. Nevada has had the most volatile employment spending.2 Many factors influence saving deci- overall, only Alaska and the District of Columbia growth in the country, with correspondingly sions, and the magnitude of the wealth effect are less diverse than Nevada (see Chart 6). For- large swings in household incomes, housing and deleveraging is a matter of considerable tunately for these two areas, their concentra- markets and tax revenues. All metro areas of debate, but it is reasonable to conclude that the tions in government, military and energy have the state exhibit above-average volatility. Unlike financial crisis marks a major inflection point for provided stability even during the recession. most state capitals, that are stabilized by a large U.S. consumers (see Chart 5). Although Nevada’s industrial mix differs from public workforce, Carson City experiences severe Beyond the recent recession’s impact region to region, each area tends to have low business cycles because of its exposure to cycli- on consumer spending, labor income will industrial diversity. Carson City’s economy, with cal manufacturing and gaming (see Chart 9). fall as large population cohorts in the U.S. its dominant government workforce, is the least Nevada’s dependence on a small number of and Europe approach retirement age. Thus, diverse among the state’s three metro areas, key industries leads to a modest growth out- sources of growth other than consumer while Reno’s is the most diverse (see Chart 7). look and also exposes the state to boom-bust spending and leisure travel will have to This lack of diversity and the Nevada econ- business cycles. Volatility hurts regional econo- materialize if the Nevada economy is to omy’s high exposure to discretionary consumer mies in two primary ways: First, uncertain fu- ­maintain the kind of growth it had experi- spending and commodity prices make employ- ture demand conditions can deter firms from in- enced historically. vesting in workforce or facilities. Volatile growth also hurts regional economies by distorting 3 The diversity index compares the employment distribution 2 See Zandi and Pozsar, April 2006, “MEW Matters”, Regional across industrial sectors in the economy. States whose distribu- spending decisions by firms, households and Financial Review and Case, Quiqley and Shiller, 2005, “Com- tion most closely corresponds to that of the U.S. are deemed governments. Abrupt losses in income and tax paring Wealth Effects: The Stock Market versus the Housing the most diverse. Those that diverge the most from the U.S. Market,” Advances in Macroeconomics, Volume 5, Issue 1. employment distribution are deemed the least diverse. revenue can weaken public and private balance

14 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Economy

Chart 7: Reno Is the Most Diverse Chart 8: Nevada Has Most Volatile Economy Industrial diversity, U.S.=1.0 Volatility index: % of U.S. volatility 0.6 Nevada 1990 2000 2009 0.5 Arizona Idaho 0.4 Utah 0.3 Oregon California 0.2 1999 Wyoming 2009 0.1 Montana New Mexico 0.0 Nevada Reno Las Vegas Carson City 0 25 50 75 100 125 150 175 200 225 250 Source: Moody’s Analytics Source: Moody’s Analytics sheets, which in turn can force sharp spending value-addedFROM MOODY’S ECONOMY.COM industries 7 that will keep Nevada dustries and improve its growth potential.FROM MOODY’S ECONOMY.COM More- 8 cutbacks during periods when credit is tight. competitive in a global economy. Such jobs over, many high-tech industries support other Nevada’s lack of economic diversity has require a wider array of skills and increased drivers of the economy. For example, information further implications for the future in that workforce quality, which also demand more systems development is becoming increasingly it has left the state with relatively little from education and training systems. important in medical record-keeping. Nevada is exposure to high-growth industries. With The growth of industry clusters, which uniquely suited to a variety of environmentally gaming and construction both mature, new spur the creation of vertically integrated in- friendly jobs, especially in the area of alternative engines of growth will be required. Over the dustries that capture value at various stages energy generation. Such industries could attract next 20 years, Moody’s Analytics expects of production and service, paves the way to a highly skilled and innovative labor force. Many employment in Nevada’s leisure/hospitality a more diverse economy. Promoting diversity could also help reduce the state’s already-small industry to grow at an average annual rate does not simply mean changing the eco- carbon footprint and conserve natural resources. of 3%. This compares with growth of 3.8% nomic structure of the area; it demands that The stakeholders expressed pride in the between 1990 and 2005. For construction, such changes not come at the expense of vi- general environmental awareness of Nevadans the average job growth rate over the next 20 able industries. Indeed, current industries can and the track record of the government in years is projected to slow to less than 4%, become the centers of larger clusters. working with businesses to arrive at environ- down from more than 7% over the past 15 The second goal, which often overlaps with mental solutions. Members referred to the years. Employment in construction is not the first, is to use Nevada’s existing infrastruc- energy efficiency of the Nevada economy, wa- expected to return to its prerecession peak ture and abundant natural resources to attract ter conservation efforts, the density of urban until the middle of the next decade. Con- clean energy producers and other high-tech and areas, and local builders going green. struction employment relative to the number high value-added firms. The NVSG looked to ar- The goals of diversifying the economy and of households in Nevada will not return to eas where Nevada’s existing infrastructure and attracting high-growth industries to the state the prerecession peak until much later than cost structure would provide lasting compara- are intertwined. Many of the strategies that that. This underscores the need for the state tive advantages for producers. The fertile ground follow could be applied to either goal. to branch out into other industries that can for industry expansion in make up for some of the lost momentum in Nevada lies in its natu- Chart 9: Boom-Bust Cycles Across the State these consumer-­dependent industries. ral resources, healthy Employment volatility index: U.S.=100, 2009 migration trends, low 260 A vision for the Nevada economy tax structure, existing The Nevada Vision Stakeholder Group set infrastructure, access 240 forth two primary goals for Nevada’s econ- to markets in California 220 omy. The first is to reduce volatility not only and Asia, and the exist- in the state’s broad economy but also in the ing skilled labor force 200 flow of state and local government revenue and supply chains of its 180 by diversifying Nevada’s economy. Economic dominant industries. diversification leads to stability and spreads Expanding high-tech 160 downside risk across industries, reducing em- and green jobs would 140 ployment volatility. Diversity creates oppor- lessen Nevada’s depen- Nevada Carson City Reno Las Vegas tunities to develop well-paying jobs in high dence on traditional in- Source: Moody’s Analytics

FROM MOODY’S ECONOMY.COM 9 SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 15 FOCUS ON �� Economy

GOAL OBJECTIVE METRIC STRATEGIES »» Moody’s Analytics »» Vertically integrate new firms with existing 1. Diversify Nevada’s industrial base volatility index industries Reduce volatility in »» Promote collaboration and cooperation Nevada’s economy among state and regional economic development agencies 2. Leverage Nevada’s natural re- »» Venture capital funding »» Increase venture capital funding sources and existing infrastructure »» High-tech share of to- »» Promote and expand R&D clusters in to attract technology-producing tal employment healthcare and energy through the NSHE and green industries »» Clean energy jobs »» Promote Nevada’s core assets to relocating »» Transportation/ware- firms Attract high-growth housing share of total »» Review incentive system and improve upon industries to Nevada employment already-good regulatory environment »» Moody’s Analytics in- »» Improve transportation linkages within the dustrial diversity index state and with other states in the region »» Attract and train skilled workers »» Streamline process and expand private use of public lands

16 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Economy

GOAL 1 Reduce volatility in Nevada’s economy.

OBJECTIVE #1 Diversify Nevada’s industrial base.

METRIC STRATEGIES

Moody’s Analytics volatility index. Vertically integrate new significant local cost advantages. Employment volatility is defined as the standard devia- firms with existing industries. Vertical integration of existing tion in a state’s employment growth relative to the standard Which industries should be ex- industries into their downstream deviation in U.S. employment growth. Volatility of 100 means panded to diversify Nevada’s eco- suppliers or upstream customers employment in a state is as volatile as in the nation as a whole. nomic base? Obviously, industries can exploit these advantages. Nevada’s volatility index in 2009 was double the U.S. average with the best growth prospects For example, proximity to local and the highest in the nation. The 20-year goal assumes Nevada are prime candidates. Yet com- mining operations may provide bridges half the gap between its volatility index and that of the petition is often intense among transportation cost advantages median state. That would put Nevada’s volatility index near 190 states to attract leading industries. for manufacturers and proces- in five years, at about 180 in 2020, and just above 150 Economic development efforts in sors of rare-earth minerals further by 2030. many regions center on the same along the production chain. Gold set of hot industries—chipmakers is Nevada’s largest exported Reduce Economic Volatility in the 1990s, biotech firms in the good. Precious metals develop- Volatility index, U.S.=100, 3-yr MA 2000s, or clean energy producers ment could expand from mining 225 today. Stakeholders felt strongly through refining to the produc- that for meaningful diversification tion of final products such as 200 to take place, development efforts jewelry and industrial and tech 175 must target firms for which Ne- goods that are now made pri- 150 vada’s unique regional compara- marily outside the state. 125 tive advantages lead to long-term Similarly, industry clusters 100 cost savings (see Chart 1). can enjoy local cost advantages Successful established indus- if they depend on the same 75 tries are the first place to look for production inputs as do current 50 90 92 94 96 98 00 02 04 06 08 15 20 30 Chart 1: Highly Competitive on Labor and Taxes Source: Moody's Analytics Cost of doing business index, U.S.=100, 2008 FROM MOODY’S ECONOMY.COM 2 120 Labor Energy State & local taxes Total 100

80

60

40

20

0 Utah Nevada Idaho New Mexico Arizona Source: Moody’s Analytics

FROM MOODY’S ECONOMY.COM 3

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 17 FOCUS ON �� Economy

STRATEGIES (Continued)

Chart 2: Gaming Workers Are Very Productive industries can also attract new levels and can be achieved Real output per worker: arts, entertainment & recreation, 2000$ firms to the state. For example, through partnerships and co- 110 the challenges that Nevada’s ordination between the public 100 fire and police departments and private sectors. The NVSG Nevada face because of the state’s huge noted that local economic de- 90 tourist population and its ex- velopment agencies often do 80 panse of undeveloped land have not coordinate and sometimes New Jersey 70 given them valuable expertise compete with one another.

60 that could be shared with public Stakeholders felt there should Mississippi safety personnel in other states be a more efficient allocation 50 through a training academy. of resources and collaboration 40 The state can also build off the among local groups to produce 97 98 99 00 01 02 03 04 05 06 07 08 skilled personnel at Nevada’s a cohesive statewide market- Sources: BEA, BLS, Moody’s Analytics major medical research facili- ing approach to attract new FROM MOODY’S ECONOMY.COM 4 ties. These research institutions companies and help expand firms. For example, entertain- are nearly twice as productive could be the basis for a medical existing ones. The Nevada Com- ment production, design and as those in other states with tourism industry which caters to mission on Economic Develop- technology firms could locate a large gaming presence (see out-of-state customers seeking ment could recruit more talent near Las Vegas to take advan- Chart 2). The sophisticated se- world-class healthcare. specializing in grant writing and tage of the metro area’s world- curity networks associated with helping companies seek public class status as the premier the gaming industry also could Promote cooperation and and private funding. The stake- entertainment and hospitality be exported to other areas or collaboration among the holders noted that Nevada’s destination. The knowledge and private sector and public sector state and regional economic “small-town feel” facilitates skills of gaming-industry pro- entities in need of the indus- development agencies. easy contact between business- fessionals in Nevada are second try’s knowledge of high-tech Implementing strategies of people and policymakers and to none and could be used to security systems. vertical integration and industry can be used to foster coopera- attract related industries. Ne- The skilled workforces of Ne- agglomeration requires practical tion and more centralization in vada entertainment workers vada’s government and primary efforts at the state and regional development efforts.

18 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Economy

GOAL 2 Attract high-growth industries to Nevada.

OBJECTIVE #1 Leverage Nevada’s natural resources and existing infrastructure to attract technology-producing and green industries.

Stakeholders identified several infrastructure assets with the potential to offer long-run cost savings to private firms. These include modern airports in both the north and south, commercial rail corridors in the north, ample convention and hotel space, the IT infrastructure associated with Switch Communications, and the extensive existing resources associated with the Nevada Test Site and Yucca Mountain. Nevada’s natural resources also provide comparative advantages. Its vast land area brings recreational opportunities, valuable minerals, and solar and geother- mal resources. Its location gives Nevada good access to large consumer and export markets, most notably in California and Asia.

METRIC STRATEGY

Venture capital funding. Increase venture capital The state’s various economic Venture capital funding is a good proxy for innovation in a state or funding. development entities as well as industry. Venture capital dollars usually flow into fledgling high-skill, Stakeholders expressed established businesses should high-tech firms and industries. Biotechnology, medical equipment strong support for efforts to work to attract venture capital and device manufacturing, energy, and media/entertainment indus- expand clean energy production investments in clean energy pro- tries are near the top of the list of industries receiving venture capital in the state. Clean energy pro- duction. Venture capital place- funding in recent quarters; these are the same industries the stake- duction is a prime example of a ments are an important way holders would like Nevada to attract. The 20-year goal for Nevada growth industry that can benefit to spur organic private sector is for the state to grow venture capital investments to $300 million, from Nevada’s existing infra- growth in cutting-edge, fledgling which would be about two thirds the U.S. average excluding California structure, human capital and businesses that larger, public de- 10 years ago. Venture capital funding is highly cyclical, so 2009 levels natural resources. Given its com- velopment entities and mature were depressed from their long-run averages. In five years, Nevada parative advantages, Nevada companies consider too small should aim for $100 million in funding—about the average level of should do well compared with or too risky to invest in. Venture venture capital placements in neighboring states last year—and in 10 the many other states that are capital placements in Nevada years the goal is to draw $200 million in funding annually. trying to attract energy-related are far below average. Through firms. The infrastructure associ- local and statewide economic Attracting Private Investment Is Key ated with Hoover Dam; geother- development agencies, the state Venture capital funding, $ mil mal resources; ample sunlight, could coordinate an investment land and wind; and, most impor- council that would market itself U.S. avg (excl. CA) tant, proximity to the California to venture capitalists. Utah market, all represent compara- Arizona tive advantages for Nevada. Oregon Nevada Goals: Idaho 2015=$100 mil 2009 Montana 2020=$200 mil 1999 2030=$300 mil New Mexico

0 100 200 300 400 500 600 700 Source: PWC/Venture Economics/National Venture Capital Assoc. MoneyTree Survey

FROM MOODY’S ECONOMY.COM 5

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 19 FOCUS ON �� Economy

METRICS

High-tech share of total employment. Clean energy jobs. The Moody’s Analytics high-tech employment ­aggregate In 2009, the last year for which data on clean energy jobs are ­includes 18 detailed industries, spanning medical and available, Nevada ranked last in terms of clean energy jobs as a ­biomedical research and manufacturing, ­telecommunications, share of total employment. The five-year goal for the state is to computer systems design, software development, and a host move its ranking from the bottom quintile into the fourth quintile of other tech manufacturing and service industries. As of 2009, as of 2009. This means the state must increase its share of clean Nevada’s share of these industries was half the U.S. ­average. energy jobs from 0.26% of total employment to 0.39%. This The 20-year goal assumes the state will bridge half the gap would bring the number of clean energy jobs in the state to just with the median U.S. state share, bringing tech’s share of over 5,000. By 2020, the state should strive to move into the third Nevada jobs to just over 3% by 2030. In five years, the share quintile, raising its concentration of clean energy jobs to 0.47%. By should be 2.4%, and by 2020 the state should be halfway 2030, Nevada should strive to match New Mexico’s 2009 share of to its goal, with high-tech accounting for around 2.7% of clean energy jobs of 0.55%. This would put Nevada’s clean energy ­employment in the state. jobs count at over 10,500—more than triple its 2009 level.

Fertile Ground for Tech Expansion Nevada’s Resources Should Be a Draw High-tech employment, % of total Clean energy jobs, % of total employment 6 U.S. avg Nevada U.S. 5 Nevada 2030 2020 4 Utah 2015 Arizona 3 2009 Montana 1999 2 New Mexico

1 Idaho Oregon 0 90 92 94 96 98 00 02 04 06 08 15 20 30 0.00 0.20 0.40 0.60 0.80 1.00 1.20

Sources: BLS, Moody's Analytics Sources: The Pew Charitable Trusts, Moody’s Analytics

FROM MOODY’S ECONOMY.COM 6 FROM MOODY’S ECONOMY.COM 1 STRATEGY

Promote and expand R&D households increase as a share The University of Nevada program, or through the aggressive clusters in healthcare and of the population and as federal School of Medicine in Reno and recruitment of grant writers and energy through the Nevada healthcare reform widens access the University Medical Center in researchers at the Cleveland Clinic System of Higher Education to health services. This demand Las Vegas, as well as the Children’s and UNLV. (NSHE). could support many highly paid Hospital of Nevada and the Cleve- Venture capital and the re- The aging population and jobs among healthcare providers, land Clinic could form the nucleus cruitment of grant writers and presence of university medical researchers and support services. of a healthcare cluster with researchers can be valuable tools facilities in both the north and For example, the capacity for data state-of-the-art research, creating in attracting clean energy jobs south suggest the potential to storage and exchange in Las Vegas spinoffs in the medical equipment to the state. Nevada’s natural form a healthcare cluster that could be exploited by support and supply fields. The Nevada Can- resources and existing research goes beyond providing services firms in the growing field of medi- cer Institute already has attracted facilities throughout the NSHE for Nevadans. These research cal informatics. The expansion of public and private money that should give the state a com- centers can also export health healthcare services and research could transform it into a national parative advantage in attracting services and research, forming a in the state would have the added cancer center. The agglomeration these types of jobs. The Desert medical tourism industry in the benefit of helping to insulate the of medical research and R&D in Research Institute and UNLV’s state. Demand for health services economy from business cycle Nevada could also be achieved by Center for Energy Research in Nevada will grow rapidly over fluctuations, since health services attracting venture capital funding, should be the centers of clean the next two decades as older tend to be noncyclical. through a philanthropic outreach energy expansion in the state.

20 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Economy

METRIC STRATEGY

Transportation/warehousing share of total employment. Promote Nevada’s core advantages and proximity to Nevada’s concentration of transportation, distribution and infrastructure assets to southern California markets. warehousing employment is already above the national average, new and existing firms. There is considerable develop- Core assets include Switch though some of the recent increase occurred as other industries, ment potential remaining to Communications, airports such as construction and gaming, fell as a share of total employ- serve these very large markets. and rail links, Yucca ment. Still, the state’s strategic location near large consumer Nevada’s relatively manageable Mountain, and the Nevada environmental regulation, espe- export markets, low labor costs, and business-friendly climate Test Site. give Nevada an advantage. The five- 10- and 20-year goals are cially relative to California, and for the state to increase its concentration in these industries at Switch Communications, a its lack of an inventory tax cre- the same rate as it has over the past decade. powerful and energy-efficient fiber ate ­incentives for these firms to optics data center located in Las ­operate in Nevada. Vegas, can attract other firms that Stakeholders also recom- Expand on Strategic Locations, Costs support or need large-scale data mend reinventing Yucca Moun- Transportation and warehousing employment, % of total processing, and it could increase tain and the Nevada Test Site for 6 the efficiency of existing firms. It energy development, a national Nevada U.S. is easy to envision the data cen- laboratory, security technol- 5 ter’s use in biomedical research ogy, secure and protected data 4 involving the Cleveland Clinic, the processing, or a government Nevada Cancer Institute, and the data center, among other po- 3 Ruvo Brain Institute, and in infor- tential uses. This would lever- 2 matics, medical records, gaming age existing infrastructure with

1 design, auto design, and comput- high-tech potential. These sites er-generated graphics. have the capacity for storage, 0 Nevada’s central location and tech research and goods pro- 98 99 00 01 02 03 04 05 06 07 08 09 15 20 30 its commercial rail and airport duction—activities that could Sources: BLS, Moody's Analytics facilities make it a natural home create spinoffs in Nevada’s FROM MOODY’S ECONOMY.COM 7 for transportation and distribu- cities and towns, broadening tion. As exports and investment economic activity. The sites also assume a larger role in future could be used in conjunction U.S. economic growth, they will with alternative energy research fuel demand for transportation and development at the state’s and warehousing. The supply universities. UNLV’s Center for management cluster is growing Energy Research recently won in northern Nevada because it a grant to build a solar energy serves nearby northern Califor- facility on the Nevada Test Site, nia, combining the state’s tax for example. These types of advantages with proximity to energy-related research projects markets. Similarly, southern are good examples of the kinds ­Nevada is developing this in- of R&D clusters that can be fos- dustry cluster to utilize its tax tered in the state.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 21 FOCUS ON �� Economy

METRIC STRATEGIES (No Metrics Available)

Moody’s Analytics industrial diversity index. Improve transportation needs of growth industries, Industrial diversity is defined as the extent to which a state’s in- linkages within the state the advantage will be lost. It dustrial structure corresponds to the U.S. industrial structure. Diver- and with other states in is important to recognize the sity is measured between 0 and 1: A 1 means the state has the same the region. strengths in Nevada’s secondary industrial structure as the U.S. A 0 means the state and U.S. struc- For Nevada’s transportation and higher education systems tures have nothing in common. This index allows comparison of dif- and distribution cluster to fully that can be built upon to im- ferent regions. The five-, 10- and 20-year goals for Nevada’s indus- realize its potential, the state prove students’ skills, including trial structure are measured against the 2009 average of the must improve its transportation access to Advanced Placement diversity indices of Arizona and New Mexico. By 2030, Nevada linkages to increase the attrac- courses and alternative models should close the gap in its diversity index with these states—now tiveness of the state to relocat- of education. Nevada’s system 40%—by half. This means Nevada’s industrial diversity index ing firms and allow established of higher education is the natural should be near 0.54 in 2030, which is also near the median for all firms to expand. Stakeholders place to address potential skill states. To get there, it should increase to 0.36 in five years and be at agreed that the construction of shortages. Public-private part- 0.42 by 2020. an interstate highway connect- nerships, similar to the gaming ing Las Vegas to Phoenix is an institute at the UNLV William F. Increase Industrial Diversity essential part of not only devel- Harrah College of Hotel Admin- Industrial diversity index, U.S.=1 oping the state’s transportation istration, are often successful at 0.6 and distribution capabilities, but developing the skills that grow- also of improving access to the ing firms desire. 0.5 state for tourists coming from A diverse economy requires 0.4 Phoenix and points south. Stake- a workforce qualified in a wide holders also feel that expanding variety of occupations. Train- 0.3 freight and long-haul capacity at ing skilled workers is critical to 0.2 McCarran International Airport attracting new-economy, high- in Las Vegas would leverage tech and green industries that 0.1 its already-efficient operations have choices regarding location. 0.0 (it ranked fifth among the na- Technical and community col- 90 92 94 96 98 00 02 04 06 08 15 20 30 tion’s major airports for on-time lege programs should produce Source: Moody's Analytics departures last year) and allow workers with technical skills. FROM MOODY’S ECONOMY.COM 1 the transportation/distribution Universities and colleges must industries to expand further. train top-level research and ad- STRATEGY ministrative workers. Attracting Attract and train skilled satellite operations of businesses workers needed by growth in other states, especially high- Review incentive system can provide financial support industries. tech and science-based firms, and improve upon to private enterprises can be For the typical firm, labor will require highly skilled work- already-good regulatory reviewed to determine how best constitutes well over half of all ers as well as training specific environment. to maximize such incentives as costs. As such, maintaining an to those firms’ processes. This Nevada’s low-tax environ- tax breaks, tax credits, and tax ample supply of skilled and af- makes the labor force attractive ment and relatively small rebates and exemptions. The fordable labor is of paramount to similar businesses. bureaucracy already provide state may also be able to provide importance to development. This businesses with an attractive new and expanding businesses makes the state’s weaknesses Streamline process and regulatory environment in which with low-cost loans for the de- in education and its shortage of expand private use of to operate. The state should aim velopment of infrastructure and skilled workers a growing risk for public lands. to maintain this advantage by capital expenditures through a economic growth (see Chart 3). One main barrier to the ex- reviewing its incentive programs. state economic development Nevada’s primary advantage is pansion of clean energy produc- The extent to which the state and infrastructure bank. the influx of young households tion is Nevada’s limited access to the state. If these potential to developable land. More than workers are not trained for the two-thirds of Nevada’s land area

22 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Economy

STRATEGIES (Continued)

Chart 3: Tech Firms Need Educated Workers export it to neighboring states. velop a state-level plan and Transmission lines are essential ­process for engaging with the 8 for attracting alternative energy BLM’s Resource Management 7 production to the state, but Plan process. NM UT 6 their development must be bal- Active engagement between ID anced with the need to preserve state and federal agencies could 5 AZ ­Nevada’s natural beauty. foster a level of cooperation 4 One barrier to the expansion and coordination to accelerate 3 of clean energy production, and appropriate use of public land. 2 NV indeed many economic devel- The approval of NV Energy’s pro- tech employment % of total of % employment tech - 1 opment activities, is Nevada’s posed north-south transmission 10 20 30 40 50

High limited access to developable lines is a good example. Trans- Share of adults with bachelor’s degree or higher, % land. More than two-thirds of mission lines will allow alterna- Sources: Census Bureau, BLS, Moody’s Analytics Nevada’s land area is admin- tive energy production not only FROM MOODY’S ECONOMY.COM 8 istered by the Bureau of Land to supply electricity within the is administered by the Bureau of line the transfer process and Management. Although the state state but also to export power to Land Management. Although the coordinate “shovel ready” land works with the BLM on land neighboring states. Transmission state works with the BLM on land use projects. The approval of NV transfers and access to rights- lines are essential for attracting transfers and access to rights- Energy’s proposed north-south of-way, NVSG members believe alternative energy production, of-way, NVSG members believe transmission lines is a good ex- that a dedicated taskforce should but they usually must cross that a dedicated taskforce should ample. Transmission lines will work toward the development ­public land, and their develop- work toward the development allow alternative energy produc- of a metric to track the use of ment must also be balanced with of a metric to track its usage of ers not only to supply electric- public land. Further, the NVSG the need to preserve Nevada’s public lands, and could stream- ity within the state, but also to recommends that Nevada de- natural beauty.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 23 FOCUS ON �� Energy & Environment

Focus On | Energy & Environment n many ways, Nevada is the ideal state in which to develop a renewable energy industry. The state’s climate Iand topography are favorable to solar, geothermal and wind power. Based on the amount of direct sunlight on the goal of sustainable growth and strate- At the same time, Nevada has the po- reaching the ground, Nevada leads the coun- gies to achieve it. tential to become a leader in the develop- try in solar energy potential.1 The state also Businesses and households are drawn to ment of alternative power, demand for has sizable geothermal resources. Nevada not only because of employment which will rise as communities across the But growth of alternative energy industries opportunities but also because they find its West impose greater restrictions on green- in Nevada has been slow. A number of states, climate and environmental amenities attrac- house gas emissions.8 including Idaho and California, derive larger tive. This is difficult to measure directly, but Nevada’s concern with energy efficiency shares of their electric power from renew- Nevada’s high rate of net in-migration over the is partly explained by the high average cost able, nonhydroelectric sources.2 Some have last several decades suggests that many house- of power in the state. In 2008, consumers suggested that the pace of development in holds value the region’s amenities enough to in Nevada paid 9.89 cents per kilowatt­ Nevada would be faster if not for delays in accept lower incomes or higher rents for them.6 hour.9 Nevadans paid slightly more for processing environmental permits at the U.S. In addition to climate and geography, environ- ­energy than Arizonans and paid more than Bureau of Land Management3, which must mental amenities such as air and water quality the national average. issue environmental clearances for projects can help explain the location preferences of Nevada’s high energy cost structure re- operated on BLM land. households throughout Nevada. flects its reliance on natural gas for a large This poses a problem for Nevada, where the A perceptible difference between the portion of its power needs. Compared with BLM manages about two-thirds of the land. preferences of households and firms exists: the average state, Nevada gets less of its Recent efforts to accelerate the permitting Cities that appear highly attractive to firms electricity from coal, a relatively inexpensive process have met with some success, but the may appear less attractive to families or fuel in the current U.S. regulatory structure. delays have prompted calls for the federal gov- individuals.7 For example, the quality of res- Although Nevada’s preference for natural ernment to grant more of its land to Nevada.4 taurants may help explain where households gas raises consumers’ costs for electricity, it In contrast with Nevada’s alternative choose to locate within some cities, but this also serves to limit the state’s greenhouse energy potential, the state’s water supplies type of amenity has little effect on business gas emissions, which are below average for are limited. As in many parts of the Moun- location decisions. the nation. tain West, water scarcity is a looming threat. Mostly this reflects businesses’ concern From 1998 to 2008, Nevada’s share of In response, Nevadans have adopted strict with costs and earnings. Resource availability electric power generated by natural gas more conservation measures to limit water use.5 or input costs can strongly influence business than doubled, from 28% to 68% (see Chart These efforts have dramatically lowered per choices and shape the commercial develop- 1). In that time, the share of energy gener- capita water consumption over the last two ment of a region. ated from coal fell from 56% to just 22%.10 decades, but the rate at which Nevadans use The Nevada Vision Stakeholder Group This transition from coal to natural gas oc- public water supplies remains high relative to envisions the state balancing the amenities curred unevenly, with events such as the the average state. that households desire with the resources closure of the coal-powered Mohave Genera- Nevada’s unique strengths and opportu- and cost structure sought by businesses. tion Station in 2005 accelerating the shift. nities in this area necessitate a greater focus The NVSG also recognizes the need to The transition away from less-expensive conserve resources and use them wisely. coal energy generation toward more expen- 1 Nebraska Energy Office. Comparison of Solar Power Poten- Shortages or high costs are already having sive natural gas generation contributed to tial by State. 2010. Available at http://www.neo.ne.gov/statshtml/201.htm. an effect on how Nevada firms and house- 2 U.S. Energy Information Administration. “State Renewable holds use resources, notably in regard to 8 Lang, Robert E., Mark Muro, and Andrea Sarzynski. “Moun- Electricity Profiles 2008” Office of Coal, Nuclear, Electric water-use efficiency. tain Megas: America’s Newest Metropolitan Places and a and Alternative Fuels. U.S. Department of Energy. Washing- Federal Partnership to Help Them Prosper.” The Brookings ton DC, August 2010. Available at www.eia.gov. Institution. Blueprint for American Prosperity. 2008. 3 Groth, Jim and Robert Nellis. Nevada’s Energy Economy 6 Blomquist, Glenn C. (2004). “Quality of Life” in A Com- 9 U.S. Energy Information Administration. “State Renewable Declaration. Office of the Governor. Nevada State Office of panion to Urban Economics, ed. Richard Arnott and Daniel Electricity Profiles 2008” Office of Coal, Nuclear, Electric Energy. 22 March 2010. Available at energy.state.nv.us. McMillen. Malden, MA: Blackwell Publishing, 2006. and Alternative Fuels. U.S. Department of Energy. Washing- 4 Ibid. 7 Gabriel, Stuart A. and Stuart S. Rosenthal (2004). “Quality ton DC, August 2010. Available at www.eia.gov. 5 Southern Nevada Water Authority. “Conservation Plan: of the Business Environment Versus the Quality of Life: Do 10 Energy Information Administration. “State Electricity Pro- 2009 – 2013.” May 2009. Available at http://www.snwa. Firms and Households Like the Same Cities?” Review of Eco- files: 2008.” Office of Coal, Nuclear, Electric and Alternate com/html/cons_plan.html. nomics and Statistics 86(1), pp. 438-444. Fuels, U.S. Department of Energy.

24 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Energy & Environment

Chart 1: Nevada’s Use of Gas Power Is Rising Chart 2: Energy Is More Expensive in Nevada Total electric power net generation by natural gas, % Avg retail price of electricity, cents per kilowatt hour, 2008 70 13 Nevada United States 60 12

50 11 10 40 9 30 8 20 7 10 6 0 5 98 02 03 04 05 06 07 08 California Nevada U.S. Arizona Oregon Utah Idaho Source: Energy Information Administration Source: Energy Information Administration

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 Chart 3: Lower Emissions Are a Recent Trend Chart 4: Nevada’s Renewable Share Is Average

Energy power industry CO2 emissions, metric tons per capita Total electric power net generation by renewable sources, % 22 16 Nevada United States 14 21 Nevada United States 12 20 10 19 8 18 6 17 4 16 2 15 0 01 02 03 04 05 06 07 98 02 03 04 05 06 07 08 Source: Energy Information Administration Source: Energy Information Administration

FROM MOODY’S ECONOMY.COM 3 FROM MOODY’S ECONOMY.COM 4 a sharp increase in energy prices in the state that defines an energy-exporting state. 2008, producing 1,138 pounds of carbon (see Chart 2). Since 2001, the average price Other states in the West are net exporters dioxide per megawatt hour, compared with of electricity in Nevada has exceeded the of energy, although California is a huge net a national average of 1,326.13 national average by about 10%.11 In 2008, energy importer. Nevada ranks about average in the this price ranked second only to California Electricity generation is a leading fac- amount of renewable energy produced among western states. High energy costs tor in determining air pollution levels. within the state. About 9% of the elec- may deter households and businesses from Nevada’s sulfur dioxide emissions ranked tricity generated in the state comes from locating in Nevada. among the lowest in the nation in 2008, hydroelectric or other renewable sources, At the same time that power producers and the rate of carbon dioxide emissions including geothermal energy (see Chart in Nevada were substituting natural gas per capita was below average. In 2008, 4). For renewable energy generation from for coal as a main fuel source, Nevada also Nevada’s power industry produced 16.2 sources other than hydroelectric, Nevada’s shifted from being a net energy exporter metric tons of carbon dioxide per capita, market share has been growing since the to a net importer.12 The change took place while the national average stood at 19.9 early part of the decade. in 2005, but by 2008 the state’s ratio of tons (see Chart 3). Pollution output in Alternative power sources could be a electricity supply to consumption had Nevada fell sharply following the shut- major source of growth for Nevada’s en- climbed back to 0.97, nearing the threshold down of the coal-fired Mohave Genera- ergy industry. Solar and geothermal offer tion Station. the greatest development potential, since An alternative measure of pollution both draw on the state’s natural com- 11 Energy Information Administration, State Energy Data Sys- tem. U.S. Department of Energy. intensity in a region’s power generation is 12 Energy Information Administration. “Southwest Weathers the amount of pollution generated for each 13 Energy Information Administration. “State Renewable Elec- Closure of Mohave Generation Station.” 2009. Updated June megawatt of electricity produced. On this tricity Profiles 2008” Office of Coal, Nuclear, Electric and 24, 2009. Available at http://www.eia.doe.gov/electricity/ Alternative Fuels. U.S. Department of Energy. Washington analyses/nevada/nevada.html. scale, Nevada ranked 38th in the nation in DC, August 2010. Available at www.eia.gov.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 25 FOCUS ON �� Energy & Environment

Chart 5: Water Use Efficiency Is Improving Chart 6: Nevadans Are More Energy Efficient Water withdrawals, gallons per ths $ of GSP, 2000$ Energy consumption per $ of real GDP, ths BTUs, 2007 90 12 Nevada U.S. 80 10 70 60 8 50 6 40 30 4 20 2 10 0 0 90 95 00 05 Nevada Arizona California Idaho Oregon Utah U.S. Source: USGS, BEA, Moody's Analytics Source: Energy Information Administration

FROM MOODY’S ECONOMY.COM 5 FROM MOODY’S ECONOMY.COM 6 parative advantages. While the northern development and a bill to impose stricter the next several decades. This perception half of Nevada contains sizable areas of deadlines on lease sales of land within pre- could deter business relocation as much as geothermal activity, the southern half identified solar development zones. an actual shortage. Thus, the issue of water receives an average dose of sunshine per Future decisions by the BLM could de- availability, real or perceived, is a long-run square mile sufficient to support solar termine the pace at which investment in concern for communities in Nevada as well ­energy generation. both power and communication infrastruc- as in other western states. A huge potential export market for such ture can take place. The federal agency is There are two ways to examine water power exists right next door. California’s a key player in a number of critical growth use in Nevada: by measuring water use ef- government has declared that 33% of the areas, from broadband penetration—Ne- ficiency and by measuring water use per energy supplied in that state must come from vada ranks high overall, but some rural permanent resident. One measure of Ne- renewable sources by 2030.14 communities may be underserved—to pow- vada’s water use efficiency is the ratio of an- Research and development represents er transmission lines. A north-south trans- nual consumption per dollar of output. Here another way Nevada could capitalize on its mission line across Nevada, for example, is Nevada has experienced dramatic improve- comparative advantage in renewable en- necessary to support the development of ment; the number of gallons consumed per ergy development. Public-private research renewable power across the state, and ad- dollar of real gross state output fell from centers and a means of transferring new ditional transmission lines might be needed about 80 in 1990 to around 25 in 2005 (see technologies to the private sector could as- to support energy exports to California and Chart 5). The improvement caused Nevada sist in the development of renewable energy other states. to surpass the national average during the industries. Nevada is taking a step in this Water is a precious resource in Nevada, 1990s, and it remains a more efficient user direction through the creation of the Solar and here the state has managed to boost of water than most states. Energy Initiative at UNLV.15 its efficiency of use. Measures of water Nevada historically ranked below average Public land ownership poses a challenge consumption, quality and reuse all show among states in water conservation, measured to rapid development of renewable energy progress. Facing few options to expand its by per capita water use, but the state made in Nevada. Before a utility-scale solar proj- water supply, southern Nevada’s munici- rapid improvements after the mid-1980s.17 ect can be built on lands managed by the pal water plans include a greater reliance Much of the improvement came via more BLM, that agency must complete an exten- on conservation to meet future demand conservative residential and municipal water sive environmental impact analysis, which growth.16 Water supply concerns are less use. Residential use and irrigation are the main may lengthen development times. Several acute in northern Nevada, although plan- categories of water consumption in Nevada. measures have been enacted or proposed ning agencies in the region have also en- Thermoelectric power, which accounts for a to lessen this delay, including “fast-track” acted conservation strategies. large share of water use nationwide, plays a initiatives to identify land suitable for solar Despite Nevada’s generally positive smaller part in Nevada’s water use profile. record of improving water use efficiency, a As with water, Nevadans consume far less 14 California Office of the Governor. Executive Order S-21-09. public perception may exist that the state energy per unit of output than average for the Enacted on September 15, 2009. Available at gov.ca.gov. lacks sufficient water to sustain growth over 15 Muro, Mark and Sarah Rahman. Centers of Invention: Lever- aging the Mountain West Innovation Complex for Energy 17 Kenny, J.F., Barber, N.L., Hutson, S.S., Linsey, K.S., Lovelace, System Transformation. The Brookings Institution. Brookings 16 Southern Nevada Water Authority. “Conservation Plan: J.K., and Maupin, M.A. 2009. Estimated Use of Water in the Mountain West. September 2010. Available at www.brook- 2009-2013.” May 2009. Available at United States in 2005: U.S. Geological Survey Circular 1344. ings.edu. http://www.snwa.com/html/cons_plan.html. p. 52

26 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Energy & Environment

Chart 7: Recycling Becomes More Prevalent lion BTUs per capita A Vision of a Recycling rate, ex construction and demolition debris, % that year; Oregon, 22 Utah and Arizona Sustainable Nevada 20 each boasted a lower A National Leader 18 rate of per capita en- Nevada already possesses many of 16 ergy consumption. the assets it needs to become a national 14 Another key leader in resource conservation and en- 12 aspect of resource ergy generation. 10 conservation involves Promoting investment in renewable 8 finding suitable uses energy will generate economic opportu- 6 for waste. The propor- nities for Nevadans, as well as encour- 4 tion of municipal solid aging the diversification of the state’s 98 99 00 01 02 03 04 05 06 07 08 09 waste that is recycled industrial structure. A clear benefit of Source: Nevada Division of Environmental Protection provides a measure power derived from renewable sources is FROM MOODY’S ECONOMY.COM 7 of reuse trends in Ne- its long-term sustainability. U.S. Nevada’s consumption equaled around vada. The state’s recycling rate increased from But these new industries must be devel- 7,300 BTUs of energy per inflation-adjusted 19% in 2003 to 21.7% in 2008 (see Chart 7). oped in conjunction with suitable water con- dollar of gross state product in 2008, on par The Nevada Division of Environmental Protec- servation practices. Thermoelectric energy with Arizona (see Chart 6). Among western tion notes that the recycling rate reported for generation can be highly water-intensive. states, only California boasted a greater rate Clark County may be low relative to the actual Finding a suitable mix of new technologies of energy efficiency. amount of ­recycling that occurs in the region and processes will prove essential to sustain- Similarly, Nevada shows greater energy because of ­significant nonreporting by private ing a high quality of life in the state. efficiency on a per capita basis than the na- ­recycling operations.18 tion as a whole, although the state was less efficient than many of its neighbors in the 18 Nevada Division of Environmental Protection. “2007 Recy- West in 2007. Nevadans consumed 304 mil- cling and Waste Reduction Report.”

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 27 FOCUS ON �� Energy & Environment

GOAL OBJECTIVE METRIC STRATEGIES 1. Enhance Nevada’s national Public water withdrawals »» Coordinate water policy efforts at the leadership in resource per capita state level conservation and technology »» Adjust water rates to promote water ­conservation »» Focus economic development on attracting less water-intensive industries »» Nevada should invest in cost-effective, energy-efficient vehicle fleets where practical and appropriate »» Preserve Nevada’s biodiversity Become a national »» Encourage greater regional collaboration leader in resource on water conservation and »» Promote water conservation technology for renewable energy domestic use as well as for export production. 2. Enhance Nevada’s national Market share of renewable »» Facilitate access to federal land ­leadership in renewable energy generating capacity »» Retrofit public facilities with energy-efficient energy generation technology and encourage its use in private buildings »» Develop energy resources and transmission grids for local use as well as for export 3. Increase recycling to levels Municipal solid waste recy- »» Promote the adoption of single-stream ­competitive with other cling rate recycling and increase participation western states »» Promote opportunities for vertical integration in waste reuse

28 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Energy & Environment

GOAL 1 Become a national leader in resource conservation and renewable energy production.

OBJECTIVE #1 Enhance Nevada’s national leadership in resource conservation and technology.

Receiving between seven and eight inches of rain annually, Nevada has little flexibility to expand its water supply, which is subject to highly variable flows from year to year. To meet future increases in demand, Nevada must expand its conservation and reuse efforts.

METRIC STRATEGIES

Public water withdrawals per capita. Coordinate water policy Focus economic development A broad measure of municipal water conservation is the volume efforts at the state level. on attracting less water- of gross water withdrawals per capita per day. This measure captures The state should coordinate intensive industries. Nevada’s overall progress toward the goal of improving water con- plans with municipal water Efforts should be increased servation, as it includes water consumed from public water-supply authorities, the two largest of to develop and recruit busi- systems, which accounted for 28% of the total water consumed in which are the Southern Nevada nesses in industries that use Nevada during 2005. The metric, which includes only water made Water Authority and Truckee water less intensively. The state available through municipal water systems, may be influenced by Meadows Water Authority. The should concentrate its efforts water use for landscaping and by tourists. state should adopt the water upon forms of renewable power Statewide water conservation efforts enacted over the last 20 years conservation goals outlined that consume less water than are largely responsible for the decline in per capita water ­consumption, above and advance water conser- their alternatives. This strategy but further increases in conservation will be necessary in the future. The vation toward achieving the goal complements programs aimed ­Nevada Vision Stakeholder Group proposes the establishment of a state- in conjunction with local efforts. at expanding renewable energy wide water use goal of 209 gallons per capita per day by 2030, which is The state should also collaborate production, creating industries consistent with the long-term conservation goal adopted by the South- with localities on research. that build on Nevada’s compara- ern Nevada Water Authority.1 This goal assumes linear progress toward tive advantages without endan- the SNWA’s long-term goal of 199 gallons per capita per day by 2035. Adjust water rates to gering its water resources. promote conservation. Increase Water Use Efficiency Tiered water rates rise as use Nevada should invest in Public water withdrawals, gallons per capita per day increases to encourage conserva- cost-effective, energy- 350 Nevada U.S. tion. Periodically re-examining efficient vehicle fleets where 300 and adjusting water rate tiers are practical and appropriate. 250 strategies that have been used The state government must successfully in southern Nevada put into practice the use of fuel- 200 to increase water use efficiency efficient or alternative-fuel ve- 150 during the past two decades. hicles to achieve greater energy 100 efficiency where possible and 50 cost effective. The use of such vehicles may also contribute to 0 85 90 95 00 05 15 20 30 environmental quality through Sources: USGS, BEA, Moody's Analytics a reduction in vehicle emissions. The state must seek out an opti- 1 Southern Nevada Water Authority. “Conservation Plan: 2009-2013.” MayFROM 2009. MOODY’S Available ECONOMY.COM at 1 http://www.snwa.com/html/cons_plan.html. mal mix of these vehicles, given

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 29 FOCUS ON �� Energy & Environment

STRATEGIES (Continued) the cost of upgrades and main- or developing measures of bio- water arrangements. Part of supplies and rapidly growing pop- tenance and suitability to the diversity that are suitable to Ne- this strategy involves studying ulation mean that the state will fleet’s purpose. vada’s unique ecology. The state regional water supply issues by confront water supply problems should implement strategies employing greater research and ahead of most other regions. In- Preserve Nevada’s consistent with preserving the collaboration with neighboring vestment in water infrastructure biodiversity. state’s ecosystem for the benefit areas within the state and across and technology could provide the A diverse and sustainable of future Nevadans. the region. state with a competitive edge in a environment will enhance the growing field. Other regions are quality of life for all Nevadans. Encourage greater regional Promote water conservation investing in water-related tech- Biodiversity is a broad concept collaboration on water. technology for domestic use nology and innovation. In Wis- that encompasses many related One way of encouraging as well as for export. consin, the University of Wiscon- concepts, including air and water stability and resilience in its Promoting new and innovative sin—Milwaukee is ­investing in a quality, landscape characteris- water supply is by collaborating ways to conserve or reuse water graduate school and business tics, and the variation and com- with neighboring states. Nevada will encourage the growth of ex- park. In addition, government position of the species inhabiting should seek to strengthen its port-oriented industries in addi- subsidies in Singapore have en- a region. The state should con- existing partnerships and pur- tion to environmental sustain- ticed numerous engineering firms duct more work on investigating sue the development of new ability. Nevada’s scarce water to locate in the country.

30 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Energy & Environment

GOAL 1 Become a national leader in resource conservation and renewable energy production.

OBJECTIVE #2 Enhance Nevada’s national leadership in renewable energy generation.

Nevada has considerable potential as a low-cost producer of solar, geothermal and wind energy. Low production costs and proximity to California, which boasts a rigorous renewable energy standard and rising demand for energy, position Nevada to develop a competitive re- newable energy export industry. Greater reliance on renewables will also reduce carbon emissions in Nevada.

METRIC STRATEGIES

Market share of total U.S. renewable energy Facilitate access to and enforce its existing energy generating capacity. federal land. conservation plan.1 Long-term Using market share to gauge renewable energy genera- Development of renewable strategies outlined in the state’s tion, rather than the quantity produced, allows a comparison energy infrastructure with a energy plan include acquisition of investment in renewable resources that is less sensitive suitable transmission grid will of energy-efficient materials, re- to ­macroeonomic conditions or changes in federal policies. almost certainly require the use placement of older or inefficient ­Renewable energy generating capacity in Nevada is measured of land managed by the federal products, and training personnel as a share of the national capacity. government. To be competitive in energy efficiency.2 Nevada is gradually adding renewable energy generation with neighboring states with The state should also focus capacity, but despite having considerable potential, the state’s more available private land, its efforts on encouraging private market share of renewable power is rising very slowly. The Ne- Nevada needs to coordinate industries to adopt energy-efficient vada Vision Stakeholder Group believes an aggressive strategy closely with the Bureau of Land practices and technologies. The to promote renewable energy production could raise the state’s Management or other federal strategy of converting existing share of solar, geothermal and wind energy production by 50% agencies to speed approvals. This structures and constructing new over the next 20 years. need to coordinate with federal ones will require a workforce agencies is a frequent theme trained in energy-efficient en- Increase Alternative Energy Production across the various quality of life hancements. This strategy supports Geothermal and solar electricity production, % share of U.S. goals of this report. the development goal of attract- 12 ing and retaining skilled workers Retrofit public facilities with needed by growth industries. 10 energy-efficient technology 8 and encourage its use in private buildings. 6 Nevada’s state government 4 should improve its own energy conservation efforts. This strate- 2 gy is consistent with recommen- 1 Nevada Spending and Government Ef- 0 ficiency Commission. “Final Report of the dation 27 of Nevada’s Spending Nevada Spending and Government Efficien- 90 92 94 96 98 00 02 04 06 08 15 20 30 and Government Efficiency cy Commission to Governor Jim Gibbons.” Reno, January 7, 2010. Source: Energy Information Administration Commission, which held that 2 State of Nevada. Energy Conservation Plan FROM MOODY’S ECONOMY.COM 2 the state should update, execute for State Government. 2001.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 31 FOCUS ON �� Energy & Environment

STRATEGIES

Develop energy resources and transmission grids for local use as well as for export. Nevada should explore development of decentralized energy generation models that would locate energy-generating equipment close to consum- ers to minimize transmission costs. Given the state’s size and low population density, this strategy would complement larger-scale renewable energy generation facilities.

32 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Energy & Environment

GOAL 1 Become a national leader in resource conservation and renewable energy production.

OBJECTIVE #3 Increase recycling to levels competitive with other western states.

Minimizing waste generated in Nevada’s cities will help safeguard Nevada’s environment and preserve its natural beauty. Each year, a small fraction of the waste produced in Nevada is diverted from landfills to recycling centers. Recycling is generally an energy-intensive process, but it saves land and other resources. Recycling industries also create employment opportunities.

METRIC STRATEGIES

Municipal solid waste recycling rate. Promote the adoption of Promote opportunities for The recycling rate captures the proportion of municipal solid single-stream recycling and vertical integration in waste recycled and reused. In 1991, the Nevada legislature ad- increase participation. waste reuse. opted a goal of a 25% recycling rate in communities of 100,000 Single-stream recycling al- Pollution-minimizing gasifi- or more. This goal has not yet been achieved. In 2007, Nevada’s lows paper, glass, plastic and cation systems represent one overall recycling rate stood at 21.6%. The 20-year goal is to raise metal to be commingled by promising avenue for research, Nevada’s recycling rate to 75%, consistent with legislation intro- consumers, making recycling and other advanced methods duced by Governor Jim Gibbons. A recycling rate of 75% would more convenient to foster of converting waste into energy put Nevada among the highest levels in the West. greater participation. The suc- are likely to become available cess of limited single-stream over the long term horizon. In recycling projects in Nevada addition, investment in recycling Increase Nevada’s Recycling Rate suggests this strategy can be centers to process waste that Recycling rate, ex construction and demolition debris, % broadened to increase resource would otherwise be sent to a 85 conservation. The strategy may landfill promises to create local 75 also lower the cost of collecting jobs while alleviating strain on 65 recyclables, although such sav- the environment produced by 55 ings must be weighed against waste accumulation. new capital costs, including 45 new collection vehicles and 35 ­processing facilities. 25 15 5 98 99 00 01 02 03 04 05 06 07 08 09 15 20 30 Source: Nevada Division of Environmental Protection

FROM MOODY’S ECONOMY.COM 3

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 33 FOCUS ON �� Transportation

Focus On | Transportation evadans’ collective choices regarding infrastructure play a critical role in shaping how the state grows, how its communities connect, where businesses choose to locate, and how the environ- N ment responds.

One major strength is that Nevada’s all productivity, although the benefits created transportation, trade and construction.4 Ne- transportation network is in better shape by additional investment vary substantially vada’s location along a major trade route be- than those of many other states. Nevada’s over time.2 The mechanisms through which tween Canada and Mexico has helped the re- roads and bridges are structurally sound, public capital influences output and produc- gion develop export-oriented transportation and the state is home to one of the larg- tivity are fairly straightforward. Investments and warehousing industries, although delays est and most efficient passenger airports in transportation capital allow greater access, and bottlenecks are frequent along I-15 in the nation. Even among the relatively save time, and make private investment more through Las Vegas. The share of employment young western states, Nevada’s transpor- efficient, leading to higher productivity. Bet- in transportation and warehousing stood at tation system stands out as one of the ter highway access can enable a business to 4% across Nevada during 2009, compared best maintained. distribute products to a larger customer base with 3.2% nationwide.5 This is an appropri- Yet measures of mobility and access and to hire from a larger pool of labor, reduc- ate measure of the business community’s show Nevada falling behind national and ing the gap between the supply of skilled response to additional investment in major regional averages. Over the last several workers and available jobs.3 highway expansion and maintenance. years, Nevada’s largest urban area has One measure of Nevada’s transportation Highways can also allow a business to grown into one of the nation’s most con- efficiency is the ratio of vehicle miles per in- reach suppliers faster and at a lower cost. gested.1 Despite heightened interest in en- flation-adjusted dollar of gross annual output. Shorter delivery times can minimize the need ergy efficiency and environmental protec- The more efficient the system, the lower the to carry inventory.6 Conversely, if a poorly tion, Nevada’s communities still rely more ratio. Nevada has seen rapid improvement maintained road surface lowers average heavily than most on automobiles. The in this metric in recent years: The number of speeds or decreases the volume of traffic, state also lacks important links to some of vehicle miles traveled per thousand dollars it may negate some of the improvement in its largest neighbors. of real gross product fell from 239 in 2000 productivity that a road provides. Nevada now faces unique challenges to to 201 in 2008. The transportation efficiency Nevada maintains a high-quality net- growth and the improvement of its living of the whole U.S. economy has improved, work of roads and bridges, and the state standards. The sizable role of transporta- but not as fast as Nevada’s. The shift may be is served by one of the nation’s largest tion in advancing economic development partly structural, as information technology airports. One measure of road quality is and quality of life is a compelling reason for and a shift away from manufacturing made it the proportion of Nevada’s highways and Nevadans to assess both the state’s relative possible to increase output with less travel. major arteries rated “good” or “very good” ranking and its progress toward an integrat- The effectiveness of Nevada’s transporta- in terms of pavement smoothness. Road ed and efficient system. tion investments can be seen in the growth roughness is closely associated with safety, Targeted investments in infrastructure of competitive export-oriented industries in comfort and travel time.7 These rating sys- such as highways, airports, mass transit, and the state. The benefits of good highways vary tems allow for comparison among regions water and sewer systems stand to generate across industries; those that gain the most and over time. important long-term benefits for Nevada. include agriculture, food-related activities, Transportation infrastructure influences costs 4 Nadiri, Ishaq M. and Theofanis P. Mamuneas. “Contribution of Highway Capital to Industry and National Productivity and productivity, health and safety, and en- Growth.” Federal Highway Administration. Office of Policy vironmental quality. Nevada’s transportation Development, Washington DC. 1996. 2 Aschauer, David A. and Munnel, Alicia H., ed. “How Does 5 U.S. Bureau of Labor Statistics. “Regional and State Em- policy initiatives are therefore critical to im- Public Infrastructure Affect Regional Economic Perfor- ployment and Unemployment (Monthly).” Economic news proving the state’s overall quality of life. mance?” Is There a Shortfall in Public Capital Investment? release, August 20, 2010. Federal Reserve Bank of Boston Conference Series 34. 1991. http://www.bls.gov/news.release/laus.toc.htm. Infrastructure and economic growth are in- For a broad overview of associated literature, see also: Baird, 6 Nadiri, Ishaq M. and Theofanis P. Mamuneas. “Contribution extricably linked. A larger stock of public capi- Brian A. Public Infrastructure and Economic Productivity: A of Highway Capital to Industry and National Productivity Transportation-Focused Review. Transportation Research Growth.” Federal Highway Administration. Office of Policy tal is associated with higher output and over- Record no. 1932. 54-60. 2005. Development, Washington DC. 1996. 3 Weisbrod, Glen, and Arlee Reno. “Economic Impact of Public 7 Sayers, Michael W. and Steven M. Karamihas. “The Little 1 Schrank, D. and Lomax, T. The 2009 Urban Mobility Report. Transportation Investment” prepared for the American Public Book of Profiling: Basic Information about Measuring and Texas Transportation Institute, Transportation Association, TCRP Project J-11(7). October Interpreting Road Profiles.” University of Michigan Transpor- http://mobility.tamu.edu/ums/. 2009. tation Research Institute. 1998.

34 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Transportation

Chart 1: Nevada Boasts High-Quality Roadways Chart 2: Nevada’s Bridges Have Fewer Faults… Miles of road rated good or very good, % Road bridges rated structurally deficient, % 80 14 Nevada United States Nevada United States 70 12

60 10 50 8 40 6 30 4 20 10 2 0 0 05 06 07 08 04 05 06 07 08 09 Source: Bureau of Transportation Statistics, Federal Highway Administration Source: Bureau of Transportation Statistics, Federal Highway Administration

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 Chart 3: …And Very Modern Structures The proportion fic congestion in Las Vegas is a significant chal- Road bridges rated functionally obsolete, % of Nevada’s bridges lenge to the growth of southern Nevada, while 16 found structurally de- many of the state’s other communities offer Nevada United States 14 ficient to the point of few travel options other than automobiles. 12 reduced load-carrying Congestion in the Las Vegas metropolitan 10 capacity stood at just area is increasing rapidly. This can be mea- 2.5% in 2009, the sured a number of ways, such as the ratio of 8 lowest share of any total usage to total capacity or by analyz- 6 state.9 The proportion ing the costs of congestion. An example of 4 of the state’s bridges the former is the number of vehicle miles 2 classified as function- traveled per freeway lane mile. This metric 0 ally obsolete—indicat- provides information about the demand for 04 05 06 07 08 09 ing they no longer travel relative to the supply of road space; an Source: Bureau of Transportation Statistics, Federal Highway Administration meet current design increasing number represents disproportion- FROM MOODY’S ECONOMY.COM 3 standards and may ate growth in usage relative to capacity. Among western states, which generally require improvement—was higher at 9.8% According to the Texas Transportation In- boast above-average road quality, Nevada but still below the national average rate for stitute, the number of vehicle miles traveled ranks highly in its share of roads rated obsolescence (see Chart 3). daily on Las Vegas’ freeways rose 7.5% be- “good” or “very good.” In 2008, the propor- Beyond purely economic effects, public tween 2006 and 2007 to 11.51 million, while tion of highways and arteries rated at least infrastructure has a large bearing upon the number of available lane miles of freeway good in Nevada stood at nearly 63%, higher a community’s quality of life. Access to was unchanged at 575. As a result, Las Vegas’ than the national average of about 40% employment opportunities, amenities ratio of miles of vehicle travel per lane mile (see Chart 1). Even so, Nevada’s roads, like such as parks and recreational areas, and climbed to 20,000 in 2007, up from 18,600 those across the nation, have deteriorated goods and services produced elsewhere in 2006.11 Measured this way, Las Vegas over the last several years. In 2003, for ex- can define a region for both existing and ranked second, after Los Angeles, in conges- ample, nearly 67% of Nevada’s roadways prospective residents.10 tion among cities in the West (see Chart 4). were rated at least good. Only Georgia, Nevada depends heavily on automobile Outside Las Vegas, average miles of Florida, Montana, and Tennessee reported travel and lags other regions in offering alter- vehicle travel per capita appear relatively better overall pavement conditions. native modes of transportation. Moreover, the stable, but this has not prevented a sharp rise Another measure of transportation infra- costs of auto dependence are increasing. Traf- in the number of vehicle miles of travel per structure quality is the condition of a region’s year. Save for a sharp drop in the recession 8 bridges. Most bridges receive regular inspection 9 U.S. Bureau of Transportation Statistics. “State Transporta- in 2008, the average Nevadan has consis- for deficiencies that could restrict performance tion Statistics 2009.” Research and Innovative Technology tently driven around 8,700 miles per year for Administration. U.S. Department of Transportation. Available or require repair or replacement (see Chart 2). at www.bts.gov/. a decade (see Chart 5). Nevada commuters 10 Aschauer, David A. and Munnel, Alicia H., ed. “Why is Infra- 8 Federal Highway Administration. “2006 Status of the Na- structure Important?” Is There a Shortfall in Public Capital 11 Schrank, D. and Lomax, T. The 2009 Urban Mobility Report. tion’s Bridges, Highways, and Transit: Conditions & Perfor- Investment? Federal Reserve Bank of Boston Conference Texas Transportation Institute. http://mobility.tamu.edu/ mance.” U.S. Department of Transportation. 2007. Series 34. 1991. ums/.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 35 FOCUS ON �� Transportation

Chart 4: Las Vegas Among the Most Congested Chart 5: Average Nevadan Drives Fewer Miles Daily freeway miles per lane, ths, 2007 Vehicle miles traveled per capita per year, ths Salt Lake City 11 Philadelphia Nevada United States 10 Boston Average 9 New York Chicago 8 Wash., DC Phoenix 7 Sacramento Las Vegas 6 Los Angeles 5 0 5 10 15 20 25 98 99 00 01 02 03 04 05 06 07 08 Source: Texas Transportation Institute Sources: Census Bureau, Bureau of Transportation Statistics

FROM MOODY’S ECONOMY.COM 4 FROM MOODY’S ECONOMY.COM 5 generally travel fewer miles per year than do mobiles, and few Chart 6: Alternative Transportation Is Used Less drivers in other regions of the country, but alternatives exist Workers commuting by means other than driving alone, % even this lower level, when combined with for commuters. 25 Nevada U.S. rapid population growth, produces a faster In 2008, nearly increase than average in total vehicle miles. 77% of Nevadans 24 Total annual vehicle miles traveled rose 144% traveled alone to 23 from 1990 to 200712, compared with an in- work in a car, truck 14 crease of 40% nationwide. or van. This was 22 With more cars competing for the same slightly above the road space, the average commute time has national average of 21 increased rapidly, as have the costs associated 76%, while most with congestion delays. Such costs are an- other western states 20 other important measure of a region’s quality reported rates of 04 05 06 07 08 of life. According to the Texas Transportation solo automobile Source: Census Bureau: American Community Survey Institute, the average number of hours per commuting at or FROM MOODY’S ECONOMY.COM 6 year spent delayed in traffic by a traveler in Las below the national average. Nevadans use largest urban areas (see Chart 7). Bus travel Vegas during peak commute periods rose from carpools slightly more than average, with was the dominant mode of transportation, 36 to 44 between 2002 and 2007.13 By com- 12.1% of commuters participating in such accounting for 86% of all trips. parison, the average for all urban communities arrangements, compared with a national Set against the background of Nevada’s in the U.S. was just 36 hours; for urban areas figure of about 11%. Fewer Nevadans use population explosion over the last several similar in size to Las Vegas, the average was 35. public transportation, walk, or ride a bicycle decades, the transportation system within Transportation infrastructure also signifi- to commute to work than the U.S. average much of the state appears to have largely cantly affects the environment. Some trans- (see Chart 6). kept up with demand. Links with other states portation modes are more environmentally Within Las Vegas, however, public transit in the region, however, appear underdevel- friendly than others. Mass transit systems is used extensively despite the area’s lack of oped. Expanded trade among the U.S., Cana- may help reduce carbon emissions and other passenger rail service, an alternative found da and Mexico has led to a sharp increase in forms of air pollution if commuters are in- in many other urban areas. One measure the volume of traffic through Nevada. One duced to replace automobile travel. of public transit use in an urban setting is response to this shift could be the expansion Travel within Nevada’s largest urban the number of public transit trips made per of the interstate highway system from Cana- areas is still highly dependent upon auto- year per capita. During 2008, the number of da to Mexico, including a direct link between unlinked passenger trips per capita in Las Ve- Las Vegas and Phoenix.15 gas ranked 14th highest among the nation’s 12 “State of Nevada Transportation Facts and Figures.” Opera- 15 Lang, Robert E., Mark Muro, and Andrea Sarzynski. “Mountain tions Analysis Division, Nevada Department of Transporta- Megas: America’s Newest Metropolitan Places and a Federal tion. 2009. 14 U.S. Bureau of Transportation Statistics. “State Transporta- Partnership to Help Them Prosper.” The Brookings Institution. 13 “Urban Mobility Report 2009.” University Transportation tion Statistics 2009.” Research and Innovative Technology Blueprint for American Prosperity. 2008. Cox, Wendell and Center for Mobility, Texas Transportation Institute. 2009. Administration. U.S. Department of Transportation. Available Jean Love. “Interstate 2000: Improvement for the Next Mil- Available online at http://tti.tamu.edu. at www.bts.gov/. lennium.” Roads and Bridges. June 1997.

36 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Transportation

Chart 7: Public Transit Widely Used in Las Vegas modate future required investment in new forms of trans- Public transit passenger trips per capita, 2008 growth in business portation, particularly if alternative modes

Phoenix travel and tourism. of travel reduce fuel usage, for example. Sacramento As airport traffic Over the long term, ­dependence upon the Salt Lake City grows and bottle- gasoline tax could lead to a shortfall in Las Vegas necks increase, Ne- state and local ­government revenues. Los Angeles vada’s performance Philadelphia Urban Average edge may erode. Chicago Securing the A Vision of a Boston funds necessary to Connected Nevada Wash. DC preserve Nevada’s New York existing infrastruc- Promoting Connectivity 0 50 100 150 200 250 ture and invest in The Nevada Vision Stakeholder Group’s Source: Bureau of Transportation Statistics new systems will long-term goals include the improved FROM MOODY’S ECONOMY.COM 7 be an important movement of goods and people across Nevada boasts a strong air transporta- part of the state’s long-range transporta- the state as well as stronger connections tion system, but adding capacity to meet tion plan. The largest portion of funding to other parts of the Intermountain West. increased demand will be a long-term for Nevada’s Department of Transporta- Nevada can take advantage of its position challenge. McCarran Airport in 2009 tion comes from federal and state highway near growth markets on the West Coast to boasted a greater overall on-time arrival user fees, which depend upon fuel taxes, support development of transportation and percentage than many other large passen- vehicle registration and permit fees, and logistics industries. A well-maintained road ger airports, ranking fifth-highest among the government services tax.17 The reliance system that provides access to Nevada’s the nation’s 50 largest airports.16 However, upon revenue from gasoline consumption largest neighbors will accelerate develop- existing runway capacity may not accom- may mean funds will fail to keep pace with ment of these industries. Connecting communities within Nevada 16 Bureau of Transportation Statistics. “State Transportation will also promote equity, providing better ac- Statistics.” Research and Innovative Technology Administra- 17 Rawlings, Scott. “Transportation In Nevada: Vision and Strat- tion. U.S. Department of Transportation. 2009. egies.” Nevada Department of Transportation. 2010. cess throughout the state.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 37 FOCUS ON �� Transportation

GOAL OBJECTIVE METRIC STRATEGIES

1. Maintain Nevada’s lead over Roadway and bridge condi- »» Preserve Nevada’s existing infrastructure the nation in the quality of its tion indices »» Invest in transportation infrastructure infrastructure throughout Nevada »» Investigate innovative ways of financing infra- Enhance the structure movement of »» Investigate alternatives to the fuel tax goods and people 2. Achieve a greater mix of forms of Commuters using alterna- »» Develop alternative forms of transportation throughout Nevada transportation tives to driving in an energy-efficient 3. Strengthen Nevada’s connection Interstate highway center »» Improve highway links between southern way; strengthen to communities throughout the line miles per mil residents ­Nevada and Arizona Nevada’s connection Intermountain West »» Pursue development of high-speed rail with a to communities across federal subsidy the Intermountain »» Coordinate infrastructure development West through regional planning organizations »» Develop policies to support alternative-fuel vehicles »» Orient transportation systems toward the development of inland ports

38 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Transportation

GOAL 1 Enhance the movement of goods and people throughout Nevada in an energy-efficient way; strengthen Nevada’s connection to communities across the Intermountain West.

OBJECTIVE #1 Maintain Nevada’s lead over the nation in the quality of its infrastructure.

Nevada must strive for balance between investing in new roadways and providing upkeep for its existing structures. Nevada’s first-rate roads and bridges are essential to sustaining a high level of mobility and enhancing trade connections. Well-maintained roadways are asso- ciated with improved driver comfort, time savings, greater fuel efficiency, and lower vehicle maintenance costs.

METRIC STRATEGIES

Roadway and bridge condition indices. Preserve Nevada’s existing span.2 Nevada’s bridges will Reported annually by the Bureau of Transportation Statistics, the infrastructure. thus require more repair or re- road and bridge condition indices assess the health of Nevada’s sur- Nevada’s arid climate helps construction over the next two face transportation infrastructure relative to that of other states. This preserve its infrastructure, but decades, and the state may find indicator responds to the state’s resurfacing and reconstruction ac- most of its roads and bridges are itself losing its lead if infrastruc- tivities. Road conditions are measured according to the international relatively young and will require ture repair is neglected. roughness index, a measure of pavement smoothness. Bridges are increased maintenance over time. rated based on how much their flaws reduce load-bearing capacity. This is essential to developing Invest in transportation The five-year benchmark calls for Nevada to remain above Nevada’s trade connections, as infrastructure throughout its 2008 level. Nevada’s 10-year goal is to increase its share of smooth roads form a comparative Nevada. roads rated at least “good” to 65%, which would put it second advantage for the development of Investing in additional road among the states by 2008 values. Over the next 20 years, Ne- trucking and warehousing. infrastructure is a strategy to vada’s goal should be to maintain the highest-quality roads in Prioritizing existing infra- help alleviate congestion in the country, which, based on 2008 data, would be consistent structure ahead of investment in the Las Vegas and Reno-Sparks with a percentage of at least 73% rated at least “good.” new projects is consistent with metropolitan areas. Connectiv- the policy recommendations ity is a greater concern in rural Maintain Nevada’s High-Quality Roads outlined by the Blue Ribbon communities, and investment in Miles of road rated good or very good, % Task Force to Evaluate Nevada new roadways will be necessary 75 Department of Transportation to provide a consistent level of Nevada U.S. 70 Long-Range Projects.1 access to expanding towns. 65 Over the next decade, about 60 one-fifth of the state’s bridges Investigate innovative ways 55 will reach 50 years of age, con- of financing infrastructure. 50 45 sidered a normal usable life Innovative borrowing ar- 40 rangements may allow Nevada 35 to accelerate certain types of in- 30 1 State of Nevada. Blue Ribbon Task Force to 25 Evaluate Nevada Department of Transpor- 2 Nevada Department of Transportation. 03 04 05 06 07 08 15 20 30 tation Long-Range Projects, 2008-2015. “State Highway Preservation Report.” Car- Roads to the Future Task Force. 2006. Avail- son City, February 2009. Available at www. Source: Bureau of Transportation Statistics able at www.nevadadot.com. nevadadot.com.

FROM MOODY’S ECONOMY.COM 1

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 39 FOCUS ON �� Transportation

STRATEGIES (Continued) frastructure projects. When funds Investigate alternatives to more fuel-efficient or fully elec- have the potential to produce are needed for large projects, the the fuel tax. tric vehicles. more stable revenue while better state may consider the use of Nevada’s fuel tax consti- Research on alternative managing congestion by creat- Grant Anticipation Revenue Ve- tutes an important source sources of revenue should con- ing incentives to travel during hicles. Interest and issuance costs of funding for state highway tinue. One alternative revenue off-peak hours. related to the use of GARVEE construction and maintenance, structure would involve assessing Any study of a viable alter- bonds may be eligible for federal but it may not be a stable a fee based upon miles driven in native must weigh the costs reimbursement. Nevada may source of revenue over the long lieu of a tax on fuel. This concept of implementation and main- also consider a state infrastruc- term. Revenue from the fuel has been extensively studied in tenance associated with it ture bank, a revolving investment tax is particularly sensitive to other states.3 Such alternatives against the intended benefits. fund for transportation projects. changes in demand for gasoline, These costs should be consid- A broad array of innovative fi- and the price of crude oil can ered in the design of any future 3 Oregon Department of Transportation. “Or- nancing options are available and create volatility for this revenue egon’s Mileage Fee Concept and Road User ­revenue structure. should be considered for funding stream. Revenues may decline Fee Pilot Program: Final Report.” Salem, November 2007. Available at future projects. as commuters shift toward www.oregon.gov.

40 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Transportation

GOAL 1 Enhance the movement of goods and people throughout Nevada in an energy-efficient way; strengthen Nevada’s connection to communities across the Intermountain West.

OBJECTIVE #2 Achieve a greater mix of forms of transportation.

Limited available land and water, the cost of infrastructure, and longer travel times constrain the outward growth of Nevada’s communi- ties. Urban land use patterns in Nevada are in many ways more efficient than elsewhere in the West, yet they still depend on travel by au- tomobile. To sustain long-term population growth, preserve environmental quality, and achieve balanced economic growth, Nevada’s cities must provide better ways to link residents, businesses and community facilities.

METRIC STRATEGY

Commuters using alternatives to driving. Develop alternative forms of number of other similarly sized The share of commuters who find alternatives to driving high- transportation. metropolitan areas in the West. lights the travel choices available. In 2008, 76.8% of Nevadans Policies should encourage The Las Vegas bus rapid transit traveled alone in an automobile as their primary means of getting greater use of pooled transporta- system could complement the to work. Just 8.1% of Nevada workers took public transportation tion, urban transit, walking and development of a regional light or taxis, bicycled, or walked as their primary means of commuting, bicycling. Nevada may require rail network. compared with 9.6% nationwide. The remaining 15.1% worked at additional investment in infra- A complementary strategy home, carpooled, or rode with family members or friends. structure or rights-of-way to would incorporate bicycling The five-year goal is to increase Nevada’s share of commut- encourage alternative modes of plans into new construction or ers not driving alone to 24.4%, which was the national average transit. The return on such invest- rehabilitation projects involving share during 2008. A reasonable 10-year goal is to raise the share ment will be highest in regions state roads.1 Bicycle-friendly im- of commuters using alternative modes of transportation to the now suffering from congestion. provements might include wider regional average; during 2008, this was 25.4%. The 20-year goal A light rail service could con- road shoulders or dedicated bi- is to match or exceed the share of alternative commuters in nect communities to businesses cycling lanes. Montana, the current leader in the Mountain West. In 2008, Mon- and recreational areas such as parks. The Las Vegas Valley lacks 1 Nevada Bicycle Advisory Board. “Nevada tana’s alternative commuter share was approximately 27.2%. Bicycle Transportation Plan.” January 2003. such a service, in contrast with a Available at www.bicyclenevada.com. Increase Alternative Transportation Usage Workers commuting to work by means other than driving alone, % 28 Nevada U.S. 27 26 25 24 23 22 21 20 04 05 06 07 08 15 20 30 Sources: Census Bureau: American Community Survey

FROM MOODY’S ECONOMY.COM 2

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 41 FOCUS ON �� Transportation

GOAL 1 Enhance the movement of goods and people throughout Nevada in an energy-efficient way; strengthen Nevada’s connection to communities across the Intermountain West.

OBJECTIVE #3 Strengthen Nevada’s connection to communities throughout the Intermountain West.

Nevada boasts a high-quality road network, but transport links to neighboring communities such as Phoenix and southern California need to be improved. Linking Nevada with other regions in the West will generate trade and transportation synergies as goods and people move more freely.

METRIC Increase Connectivity With Mountain West Interstate highway centerline miles per mil residents 450 Nevada Mountain state average Interstate centerline miles per million residents. 425 The amount of interstate highway per permanent resident 400 375 measures Nevada’s relative connectedness compared with other 350 Mountain West states. The metric will rise as new roads are 325 added, although it will not reflect the addition of lanes to an 300 275 existing roadway. 250 Population everywhere has been growing faster than the in- 225 terstate highway system, which has caused this ratio to decline 200 175 over time. This has been particularly true for Nevada. The state’s 150 long-term goal involves increasing the size of its interstate 99 00 01 02 03 04 05 06 07 08 15 20 30 highway system through connections to Phoenix and between Sources: Census Bureau, Bureau of Transportation Statistics

Las Vegas and Reno. Efforts to improve existing roads to free- FROM MOODY’S ECONOMY.COM 3 way standards in northern Nevada will increase connectivity over the next several years. However, a suitable 10-year goal STRATEGIES involves the creation of Interstate 11, which will add 31 miles of interstate highway in Nevada.1 Over the 20-year horizon, the Improve highway links Pursue development of goal is to extend the proposed interstate between Las Vegas and between southern Nevada high-speed rail with a Reno, which would contribute 375 to 415 centerline miles to the and Arizona. federal subsidy. interstate network. A new highway would be constructed and The upgrade of U.S. Highway A high-speed rail service portions of the existing highway (US-95) between Las Vegas and 93 to freeway standards and would dramatically shorten Reno would be reclassified once they are expanded by including its inclusion in the interstate travel times between Las Vegas additional lanes and resurfacing. system as Interstate 11 would and southern California, offering complete an improved link to a viable alternative to short-haul 1 Hazlett, Bob. “Interstate 11 Update.” Transportation Policy Committee. Maricopa Associa- tion of Governments. April 2010. Phoenix. The future I-11 would flights between the two regions. also form a part of the This strategy would complement CANAMEX corridor, ultimately diversification efforts and allow linking Mexico, the U.S. and existing capacity at McCarran Canada through the Inter­ International Airport to be real- mountain West. located toward long-haul flights.

42 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Transportation

STRATEGIES (Continued)

A longer-term expansion of Coordinate infrastructure Develop policies to support Orient transportation the western rail corridor would development through alternative-fuel vehicles. systems toward the involve creating routes between regional planning Increased use of alternative- development of inland other large urban areas, includ- organizations. fuel vehicles such as fully elec- ports. ing Las Vegas, Phoenix, Salt Lake Regional planning organiza- tric cars will require investment Promoting the development City, and Reno. tions can help develop high- in charging stations. The shift of an inland port is consistent The state should seek to cap- ways and rails across political toward these types of vehicles with several other strategies ture more federal matching funds boundaries. Planning at this is expected to accelerate as outlined in this section. An in- and grants. Funding from the level also enables projects to neighboring states, particularly land port located in southern federal government for a future serve broad areas with future California, move toward man- Nevada would help move goods high-speed rail will depend heav- expansion in mind. dating greater fuel efficiency or throughout the rapidly grow- ily upon the completion of early imposing tougher standards on ing Intermountain West. Such a feasibility studies, budgets, and fossil-fuel vehicles. port would benefit from cargo project schedules. As is evident shipped by highway or rail from from the overwhelming number Arizona and California, and it of applications received in the could tie into the planned Ivan- most recent round of federal pah Valley airport.3 grants, many states are compet- ing for limited federal funding. 3 This strategy is consistent with a recom- mendation from the Legislative Commis- Funds made available through sion’s Subcommittee to Study the Devel- the American Recovery and Re- opment and Promotion of Logistics and Distribution Centers and Issues Concerning investment Act of 2009 targeted Infrastructure and Transportation to draft individual projects for which pre- a letter urging support for allocation of funds for the development of road and rail liminary impact and design work infrastructure into the Ivanpah area. See had been completed.1 Summary of Recommendations, Assembly Concurrent Resolution No. 30. Available at Another strategy for financ- www.leg.state.nv.us. ing a high-speed rail would involve a loan from the Federal Railroad Authority. Government credit assistance can help in overcoming short-term financ- ing hurdles for projects in which the initial stream of fare revenue may be volatile or uncertain.2

1 Federal Railroad Administration. “High- Speed Intercity Passenger Rail (“HSIPR”) Program, Notice.” Federal Railroad Admin- istration. Department of Transportation. Federal Register, Vol. 74, No. 119. June 23, 2009. 2 Federal Railroad Administration. Supple- mental Draft Environmental Impact State- ment and 4(f) Evaluation for the proposed DesertXpress High-Speed Passenger Train. U.S. Department of Transportation. Avail- able at www.fra.dot.gov/pages/1703.shtml.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 43 FOCUS ON �� Education

Focus On | Education well-educated population and workforce are arguably the most important determinants of a state’s eco- nomic prospects and quality of life. Education promotes individual, community and economic develop- A ment; an educated workforce helps local businesses expand, promotes entrepreneurship, and attracts new business investment. Educational attainment is also correlated with greater earnings potential, lower rates of job- lessness, and a healthier population.

The Nevada Vision Stakeholder Group those without one, and that gap has widened Future job opportunities will be concen- believes Nevada’s low ranking among states over time. An associate’s degree also has sig- trated in careers that require education be- on a number of educational metrics should nificant value, raising average earnings about yond high school. According to the Bureau be addressed, or the state’s quality of life 25% above the incomes of those with only of Labor Statistics, from 2008 to 2018, the could deteriorate rather than improve over a high school diploma. Bachelor’s degree fastest job growth will occur in occupations the long term. holders had mean earnings nearly double the requiring an associate’s degree, followed by Nevada faces a number of challenges level of those lacking high school diplomas. those requiring a master’s degree.3 to raising the educational attainment of its Raising high school graduation rates and in- In the coming years, the industrial struc- residents. Some of this can be traced to the vesting in higher education from community ture of Nevada will also change. Indeed, a state’s industrial structure and some to so- colleges to universities can bring significant more diverse economy is among the goals cioeconomic and demographic conditions in rewards for individuals and the community addressed in this report, and higher educa- the state. Nevada’s population mix includes as a whole. tion is critical to a more diverse economy. ethnic groups that have historically pursued Higher educational attainment also ex- While fewer than 20% of workers in leisure higher education at lower than average rates, pands employment opportunities. Jobless and hospitality have bachelor’s degrees, an extension of their higher likelihood to rates decline steadily as levels of educational 40% of workers in public administration, drop out of high school. attainment rise (see Chart 2).2 The unemploy- financial services, professional and business A higher average level of educational ment rate for college graduates is generally services, and health and education have at attainment stands to benefit Nevada in around a third of the rate for those who have least bachelor’s degrees (see Chart 3). many ways. Individuals will see their earn- not completed high school. College-educated In order to boost the quality of its work- ings potential enhanced;1 even a high school individuals have the highest labor force force, Nevada will need to expand oppor- diploma can significantly increase lifetime participation rate of any group. Conversely, tunities to earn associate’s degrees at com- earnings (see Chart 1). In 2007, the mean in- those without high school diplomas or the munity colleges as well as to increase the come for Americans with high school degrees equivalent are overrepresented among the number of bachelor’s or graduate degrees was nearly 50% higher than the earnings of unemployed, making up more than 11% of the conferred by its universities. jobless but only around 7% of all workers. 3 U.S. Bureau of Labor Statistics. “Employment Projec- 1 U.S. Census Bureau, Current Population Survey, Annual So- tions—2008-2018” press release. Updated December 11, cial and Economic Supplements (March). 2 Bureau of Labor Statistics, Current Population Survey. 2009. http://www.bls.gov/news.release/pdf/ecopro.pdf.

Chart 1: Earnings Boost From Education Chart 2: Education Helps Job Search Mean earnings by educational attainment, U.S., $ Unemployment rate, by educational attainment, U.S., % 80,000 16 Not high school graduate High school graduate Less than a high school diploma 70,000 14 High school graduates; no college Associate's degree Bachelor's or higher 60,000 12 Less than a bachelor's degree College graduates 50,000 10 40,000 8 30,000 6 20,000 4 10,000 2 0 0 98 07 92 94 96 98 00 02 04 06 08 10 Source: Census Bureau Source: BLS

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 44 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

Chart 3: Educational Attainment by Industry Chart 4: Students Struggle to Keep Up U.S. workers 25 or older with at least a bachelor’s degree, % NAEP eighth grade reading score All employed civilians 264 Construction Nevada U.S. Ag, forestry, fishing & hunting 2007 262 Transportation and utilities Mining 260 Leisure and hospitality Wholesale and retail trade 258 Other services Manufacturing 256 Public administration Financial activities 254 Information Prof. and business services 252 Edu. and health services 250 10 20 30 40 50 60 02 03 05 07 09 Source: U.S. Census Current Population Survey Source: U.S. Department of Education

FROM MOODY’S ECONOMY.COM 3 FROM MOODY’S ECONOMY.COM 4 Chart 5: Gap Present Across Subject Areas Chart 6: Younger Students Also Fare Poorly NAEP eighth grade math score NAEP fourth grade reading score 283 225 Nevada U.S. Nevada U.S. 281 220 279

277 215 275 273 210 271 205 269 267 200 03 05 07 09 98 02 03 05 07 09 Source: U.S. Department of Education Source: U.S. Department of Education

FROM MOODY’S ECONOMY.COM 5 FROM MOODY’S ECONOMY.COM 6 Education also correlates positively A quality education must start early in child- spending had risen in each of the previous five with physical and emotional health.4 Those hood. Enrollment in early-childhood educational years. Nevada’s public school pupil-to-teacher with higher levels of schooling experience programs improves performance in elementary ratio8 was 18.3, above the national average less depression, anxiety, and other forms school.5 Yet, in Nevada, only slightly more than of 15.5. The National Assessment of Educa- of emotional distress and also report fewer 25% of children aged three or four are in school, tional Performance reports Nevada’s fourth physical aches and pains; greater emotional compared with nearly half of all three- and four- and eighth graders performed well below the and physical well-being in turn accompanies year-olds in the U.S. The Head Start program, national average (see Charts 4, 5, 6 and 7). gainful employment. which is active in Nevada, has had positive The fourth grade gap is smaller than the gap On a collective level, higher overall edu- short- and medium-term results, particularly in eighth grade, but the Nevada Vision Stake- cational attainment enhances a community’s with children from lower-income households.6 holder Group strongly believes that bringing economic growth potential by attracting Other measures also show Nevada strug- student performance up to at least the national higher value-added businesses. Rising labor gling to keep up. State spending per pupil of average by the fourth grade is essential for the force quality promotes business develop- $7,806 in 2006-20077 was well below the state to be able to at first narrow the gap and ment and encourages firms to locate in the U.S. average of $9,683, even though Nevada’s then close it for older students. This is critical community, creating a self-reinforcing posi- for achieving longer-term educational success. tive cycle. Business expansion attracts new The state should be sure to include English 5 Belfield, Clive R. “Investing in Early Childhood Education in residents, creating demand for local services Ohio: An Economic Appraisal.” Cleveland Federal Reserve, Language Learner programs, since acquiring and expanding the labor pool, which in turn Conference on Education and Economic Development. English language skills will be an integral part 2004. creates more employment opportunities. 6 Currie, Janet. “Early Childhood Education Programs.” Journal of the educational process for its high share of of Economic Perspectives, Vol. 15 No. 2. pp. 213-238. 2001. ethnically diverse students. 4 Ross, Catherine E. “Education and the Subjective Quality of 7 U.S. Department of Education, Institute of Education Sci- Life.” Journal of Health and Social Behavior. Vol. 38, Septem- ences. “Digest of Education Statistics: 2009.” http://nces. ber 1997. pp. 275-297. ed.gov/programs/digest/d09/. 8 ibid

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 45 FOCUS ON �� Education

Nevada’s educational system also needs to Idaho and Wyoming Chart 7: Not All Is Dreary find ways to keep older students from dropping are the others—not to NAEP fourth grade math score out before they complete high school. Accord- have a research univer- 245 ing to the U.S. Department of Education9, the sity classified by the Nevada U.S. 240 average freshman graduation rate at public Carnegie Foundation secondary schools in Nevada was 52% for the as an institution with 235 2006-2007 school year, compared with a na- “very high research 230 tional average closer to 74%. Students are more activity.”11 The Univer- likely to drop out when they are not fully en- sity of Nevada cam- 225 gaged in their education, possibly because they puses at Las Vegas and 220 are distracted by hunger or discouraged about Reno are each labeled their ability to graduate. School districts need “high research activ- 215 to ensure students have appropriate resources, ity” institutions, one 00 03 05 07 09 whether that means a school lunch program, af- step down from the Source: U.S. Department of Education ter-school tutoring, or coursework that matches top rank. Rankings are FROM MOODY’S ECONOMY.COM 7 their skills. Keeping students engaged at school based on the number of doctoral degrees er. Strategies for achieving these objectives will help prevent juvenile crime as well. awarded and the level of research fund- include alternative education, differentiated Some obstacles to improving educational ing. To have truly competitive universities, diplomas and student scholarships. attainment stem from differences between research and development funding needs While raising overall educational attain- the state’s urban schools and those in its to increase. Nevada lags every state except ment is the overarching goal, the group also far-flung and often very small rural districts. Louisiana and Wyoming when measured by identified three subsidiary goals for early- The state has a structure in place for long- R&D funding relative to gross state prod- childhood education, elementary and second- distance education; enhancing and expanding uct. Boosting R&D spending to 1.5% of the ary education, and higher education. To start such learning opportunities will help more state’s GSP from the current 0.6% would all children on the right path to educational students complete high school. Technology- bring Nevada to the middle of the pack for attainment, the group felt the state should based distance education not only provides all 50 states and the District of Columbia. increase options for early-childhood education broader opportunities for students but also The current national average for R&D ex- and enroll more children in such programs. offers benefits beyond those of a traditional penditures is 2.7% of GDP. Giving children the advantage of early school- classroom environment.10 Because of education’s vital role in advanc- ing will be an important step toward the long- In part because of the state’s low high ing a community’s economic development and run goal of greater overall achievement. school graduation rates, the share of Neva- quality of life, Nevadans need to assess both Students in elementary and secondary dans completing college is also low. Nevada the state’s achievements and progress toward education need access to quality opportuni- ranks 46th among the 50 states and the Dis- improving educational attainment. ties. At the most basic level, the state can trict of Columbia for higher educational attain- encourage the provision of breakfasts so ment, with only 22% of adults holding college students are not attending school hungry. degrees, compared with nearly 28% nation- A Vision of Education Nevada should also work to attract and re- wide. Nevada does better at the associate’s The Nevada Vision Stakeholder Group tain well-qualified teachers through licensing degree level: The share of adults holding such identified four goals within education. The reciprocity, competitive compensation, and degrees nearly equals the U.S. rate of 7.5%. first is to raise educational attainment across professional development opportunities. At the highest educational level, Nevada the state. A high school diploma is an impor- After reinforcing elementary and second- is one of three Mountain West states— tant first step, but Nevada needs to build its ary education, the group felt the state’s uni- base of those with college degrees and high- versities and colleges should work to increase 9 U.S. Department of Education, Institute of Education Sci- completion rates and attract more research ences. “Digest of Education Statistics: 2009.” http://nces. 11 The Carnegie Foundation for the Advancement of Teaching possibilities. Without a broader culture of ed.gov/programs/digest/d09/. periodically updates the Carnegie Classifications of Institu- 10 Edwards, Mark Evans, Sheila Cordray and Jon Dorbolo. tions of Higher Education, designed to allow comparisons college attendance, as well as an attractive “Unintended Benefits of Distance-Education Technology for among institutions. The most recent update was done in array of opportunities, the state will struggle Traditional Classroom Teaching.” Teaching Sociology, Vol. 28, 2005. More information is available at http://classifications. pp. 386-391. 2000. carnegiefoundation.org/. to increase educational attainment.

46 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

GOAL OBJECTIVE METRIC STrATEGIES 1. Increase the share of adults with High school freshman »» Alternative models of K-12 education Recognize that at least a high school diploma graduation rates, public »» Promote effective capital investment in Nevada has a schools, GED participation school districts drop-out crisis rate, GED pass rate »» Expand offerings of differentiated diplomas and that it needs »» Promote and track the completion of GEDs to dramatically increase graduation 2. Encourage higher education, The share of the labor force »» Support Millennium Scholarship and other 25 to 64 years old with at rates associate’s degrees and higher student subsidies least a high school diploma 1. Increase students’, parents’ and No Child Left Behind, »» Maximize schools’ ability to attract and teachers’ active involvement in Adequate Yearly Progress retain good teachers and site leaders and commitment to education »» Increase communication with parents »» Nurture and extend teachers’ skills »» Expand English Language Learner programs Raise the quality »» Enhance staff development and evaluation of elementary »» Ensure data-driven formulation of and secondary ­curriculum and instruction education »» Lower the pupil-to-teacher ratio »» Evaluate reform options 2. Bring Nevada’s measures of edu- NAEP 4th grade test scores »» Stabilize funding cational achievement into the top »» Expand distance learning options third of the states »» Attract and retain qualified teachers, partic- ularly for reading, writing, math and science 1. Increase graduation rates Statewide six-year college »» Increase the number of college degrees in graduation rate fields related to growth industries »» Stabilize higher education funding 2. Give universities more flexibility »» Allow public universities to retain a larger Increase the value over the use of tuition and other share of tuition of education resources to meet the state’s »» Increase the share of out-of-state students at Nevada’s workforce needs while expanding the total student base universities and »» Allow public universities to charge differ- colleges ential tuition for different programs and schools 3. Raise the level of university re- University R&D funding »» Stabilize funding and seek additional dollars search for university research 1. Enroll more children in early-­ Share of three- and four- »» Raise standards for early-childhood education programs year-olds enrolled in school ­education centers Increase early- »» Expand community-based programs childhood »» Invest in early-childhood education education options »» Provide low-income families with options beyond childcare

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 47 FOCUS ON �� Education

GOAL 1 Recognize that Nevada has a drop-out crisis and that it needs to dramatically increase graduation rates.

OBJECTIVE #1 Increase the share of adults with at least a high school diploma.

METRIC into the current top third of all states by 2015, rise to match the cur- rent 10th highest state by 2020, and match the highest participation High school freshman graduation rates, public schools. rate by 2030. For the pass rate, the state’s goal is to cut its gap with Reported by the U.S. Department of Education, the average fresh- the national average in half by 2015, match the current U.S. average man graduation rate examines the number of high school graduates in 2020, and move into the current top third of all states by 2030. in a given year compared with the number of entering students four Combining the three metrics, by 2030, the goal is that 84.3% of Ne- years earlier. This indicates how successful the school is in advancing vadans will have either completed high school or passed high school students toward the completion of their secondary schooling. equivalency exams, up from 53.6% in 2007. The measure has limitations, as it does not account for stu- dents who changed schools between freshman year and gradua- Increase High School Graduation Rates tion nor does it break down students by racial or ethnic groups. Yet GED participation rate, % adults without high school credential it still provides a useful picture of secondary education. The state’s 6 goal here is to cut its gap with the national average in half by 2015, Nevada U.S. match the current U.S. average in 2020, and move into the current 5 top third of all states by 2030. The American Council on Education collects data on adults who 4 participate in GED programs. The data consider all those aged 16 years and older who do not have any high-school credential—a di- 3 ploma or GED. To get a good picture of GED takers, both the partici- 2 pation rate and the pass rate for takers are included. Nevada’s resi- dents are more likely to participate in a GED program than average 1 but are less likely to pass. Because it is important that all residents 06 07 08 09 15 20 30 have a high-school level education, the state’s goal here is to move Source: American Council on Education

FROM MOODY’S ECONOMY.COM 2 Increase High School Graduation Rates Increase High School Graduation Rates Averaged freshman graduation rates, public secondary schools, % GED pass rate, % of takers 85 82 Nevada U.S. Nevada U.S. 80 80 78 75 76 70 74 65 72 60 70 55 68 50 66 03-04 04-05 05-06 06-07 14-15 19-20 29-30 06 07 08 09 15 20 30 Source: U.S. Department of Education Source: American Council on Education

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 3

48 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

STRATEGIES

Alternative models of K-12 students that give them the nec- Expand offerings of Promote and track the education. essary skills for the changing job differentiated diplomas. completion of GEDs Conventional forms of el- market. Schools’ primary goals Some secondary school Attaining a high school di- ementary and secondary educa- should be reading, writing, sci- graduates in Nevada have the ploma is the best way to ensure tion serve many students well, ence and mathematics proficien- option to pursue honors diplo- young adults have a good chance but alternate paths to graduation cy, but there should be options mas or adjusted diplomas, but for future success. But Nevada’s would improve success rates. for students. the standards are not universal high school graduation rate is ad- Innovations in alternative educa- Even while encouraging stu- and not all students have access mittedly low, and adults who do tion—including magnet schools, dents to aim for college, schools to differentiated diplomas. There- not have a diploma need to be apprenticeship programs, career should prepare them for a variety fore, Nevada should create a encouraged to complete a GED. academies, charter schools, com- of post-high school options. Vo- statewide standard for an honors While a high school diploma may munity college high schools, cational training can open doors diploma and encourage all dis- be preferable, a GED provides empowerment schools, interna- for many students. The state tricts and schools to provide it as an important advantage for job tional baccalaureate programs, must be sure that amid the push an option for students. Teachers seekers over individuals who online learning, and technical to raise educational attainment and administrators should then have not completed any high academies—could be made avail- levels, it does not devalue non- encourage students to pursue school equivalency. Thus, the able to students. Alternative edu- college options. the honors diploma. Along with state should track the number of cation programs can stand alone simply offering a state-standard adults pursuing a GED, and pro- at the secondary level, as with Promote effective capital honors diploma, the state should grams should be made available vocational technology campuses, investment in school create an incentive structure for to encourage participation. To but because of cost limitations, districts. students who pursue the chal- adequately monitor the progress school districts should be en- Because school districts must lenge. The reward system could of this strategy, the participation couraged to consider establishing operate within available budgets, take several forms, including ac- rate and the pass rate for GED programs within the structure of the state should promote ef- cess and scholarships to Nevada’s programs should be tracked. existing high schools. ficient and effective spending, in- System of Higher Education. Given the low high school gradu- The state should embrace cluding capital investments. Vo- For other students the barriers ation rate, Nevada’s residents online learning opportunities as cational high schools are costly, may be too high. Some struggle are more likely to participate well as public charter schools. for example, so districts should through school, while others do in a GED program than is the Students need to be engaged be encouraged to investigate op- not receive enough credit for average U.S. resident, but past and encouraged to graduate. tions such as satellite programs performance in one subject area trends show that the pass rate Alternate options for education in existing high schools. New while lagging in other areas. Tal- is lower than average. Because should be offered in early grades initiatives should not weaken ex- ented students can waste time high school equivalency is so im- as well as in high school. Children isting programs, unless these are on subjects irrelevant to their portant for improving workforce who cannot read at grade level shown to be ineffective. future. An alternative approach quality and the quality of life of by the third and fourth grade are might allow for more flexible the employed, the state should less likely to graduate. forms of testing. Students should work to promote both a higher There are no formal national be encouraged to develop their GED participation rate and a standards for education, but Ne- strengths rather than being held higher pass rate. vada can take the initiative to set back by their weaknesses. its own high standards for school districts. To meet students’ education needs, reasonable but challenging goals should be in place. Schools need to be vision- ary and focus on the job markets of tomorrow, offering education to meet those future needs. The state should encourage schools to strive to set curricula for K-12

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 49 FOCUS ON �� Education

GOAL 1 Recognize that Nevada has a drop-out crisis and that it needs to dramatically increase graduation rates.

OBJECTIVE #2 Encourage higher education, associate’s degrees and higher.

Post-secondary education is important, but it can take a number of forms.

METRIC STRATEGY

Support Millennium The share of the state’s labor force 25 to 64 years old students’ grades and test scores. Scholarship and other with at least a high school diploma and the share of the This laudable program could be student subsidies. state’s labor force 25 to 64 years old with at least some enhanced by tying it to other college. Nevada will have difficulty at- metrics such as honors classes. tracting new businesses if it does The American Community Survey collects responses on both The state should encourage such not offer strong secondary and educational attainment and labor force status. Focusing on rewards for greater achievement. postsecondary educational op- those in their prime working years provides a look at the educa- Committee to Evaluate Higher portunities. The combination of tional attainment of the state’s workforce, specifically. Because Education Programs (A.B. 203 of the current business climate and the data show the share of the labor force with at least a high the 2003 session) recommended Nevada’s educational attainment school diploma, this is a good proxy for overall educational at- the creation of a needs-based gap can make it difficult to attract tainment. As the goal is to encourage higher education, it is also financial aid program to keep employers to the state. Without useful to examine those with any college experience. Complet- college affordable for the least both a short- and long-term com- ing high school is an important first step to higher education, affluent of Nevada’s residents. mitment to education, the state but the state should also be mindful of how many students The NVSG believes this would be will struggle to create a culture of progress to college. Nevada’s goal is to reduce the state’s gap a valuable strategy for improving higher educational attainment. with the national average by half by 2015, to meet the current educational attainment statewide. Nevada has one such pro- U.S. average by 2020, and move into the current top third of all School district charter schools can gram in place, the Millennium states by 2030. also help more students complete Scholarship, which is based on secondary school.

Encourage Higher Education Encourage Higher Education At least a high school diploma, 25 to 64 yrs, % labor force Some college or higher, 25 to 64 yrs, % labor force 94 66 Nevada U.S. 93 65 64 Nevada U.S. 92 63 91 62 90 61 89 60 88 59 58 87 57 86 56 85 55 07 08 15 20 30 07 08 15 20 30 Sources: Census Bureau: American Community Survey 3 yr estimates, Moody’s Analytics Sources: Census Bureau: American Community Survey 3 yr estimates, Moody’s Analytics

FROM MOODY’S ECONOMY.COM 4 FROM MOODY’S ECONOMY.COM 5

50 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

GOAL 2 Raise the quality of elementary and secondary education.

OBJECTIVE #1 Increase students’, parents’ and teachers’ active involvement in and commitment to education. To make completing high school an attainable goal, students need resources and motivation.

METRIC STRATEGIES

No Child Left Behind, Adequate Yearly Progress. Maximize schools’ ability there are none for teacher train- With guidance from the U.S. Department of Education and to attract and retain good ing and licensing; therefore, Ne- the No Child Left Behind legislation, the state of Nevada defined teachers and site leaders. vada needs to strike a balance annual progress necessary for its schools to achieve accept- Fully engaging students starts between attracting and training able growth. Not all schools, or all school districts, meet these with qualified, talented teachers. teachers and ensuring that its ­standards every year. To properly serve students, all districts Over the long term, the state standards are high enough to should be meeting progress goals. Nevada’s goal is to have all must both train Nevadans to ensure quality. districts making adequate yearly progress by 2015 and maintain teach and make it an attractive that growth through 2020 and 2030. destination for teachers trained Increase communication elsewhere. Teacher licensing with parents. reciprocity, which Nevada has Efforts to help students Increase Responsibility and Involvement with many states, makes it easier complete their schooling must School districts making adequate yearly progress, % total for qualified teachers to relocate. include parent communication 105 The state needs to maintain ap- and engagement. The desire Nevada 100 propriate standards while foster- to finish high school should be 95 ing a welcoming environment for reinforced at home. Schools can 90 new teachers and encouraging use technology to open multiple 85 all to consider the state as a channels of communication be- place to pursue a career. tween teachers and parents, thus 80 Nevada should also develop accommodating widely disparate 75 new paths to teaching careers, work schedules in rural areas 70 rather than recruiting only col- and cities with 24/7 hospitality- 65 lege graduates with education based economies. 05-06 06-07 07-08 08-09 09-10 15-16 20-21 30-31 degrees. Aspiring teachers, Source: Nevada Department of Education administrators and principals FROM MOODY’S ECONOMY.COM 6 with work experience in differ- ent fields may bring valuable skills and experience to the classroom. Encouraging nontra- ditional routes to teaching will help attract and retain a broad range of talented and qualified teachers. Just as there are no national standards for students,

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 51 FOCUS ON �� Education

STRATEGIES

Nurture and extend ways to fairly measure students’ evaluations and parent or student ed to two states in the spring teachers’ skills. growth and improvement. As a feedback. When curriculum and of 2010 and nine states and the A commitment to profes- step in this direction, the 2010 instruction are examined or al- District of Columbia in the fall of sional development programs for special session of the Nevada leg- tered, it should be done based on 2010. Nevada did not receive a teachers can aid in attracting and islature introduced a link between data and proven methods. grant in either phase. retaining staff. Such programs are student achievement and teacher During the grant application often reduced or eliminated when evaluations. While there are no Lower the pupil-to-teacher writing process, the group did in- budgets are tight, but teachers national standards for measuring ratio. depth research into the effective need support to provide the best teacher performance, Nevada can The Department of Educa- means for education and how to possible classroom experience for help lead the way in setting ambi- tion’s pupil-to-teacher ratio reform Nevada’s existing system. students. Professional develop- tious standards and ensuring that can be one gauge of student The state should evaluate these ment programs can help create a teachers encourage their students engagement. This measure recommendations and incor- career environment for teachers. to grow by adopting the common includes teachers for students porate the reforms that would core state standards. Professional with disabilities and other spe- provide Nevada’s students with Expand English Language development programs would cialists who are not counted an advantage. Similar to the Learner programs. assist teachers in these efforts, when calculating average strides that have been made in English Language Learner which should be consistent and classroom size. A lower pupil- Florida’s education performance programs are an essential com- monitored across districts and to-teacher ratio means that following the 1999 reforms, ponent in Nevada’s education schools. Teachers need support students have more access to Nevada should examine the system. Given the state’s diverse and feedback to effectively meet instructors and that teachers steps it can take to encourage demographics, education goals students’ needs. Revisiting some are better able to know and teachers, students and parents cannot be met without stronger facets of the current system could engage students. Given the dif- to perform to the best of their support for ELL programs. This is lead to an improved process. ficulty of directly measuring abilities. The Florida reforms an area where the state should The teacher evaluation process engagement, the ratio can be a included accountability and encourage school districts to should be examined to gauge its useful, quantifiable proxy. rewards by assigning ‘A’ through explore partnerships such as effectiveness in rewarding top ‘F’ grades to schools based on private and government grants performers and addressing un- Evaluate reform options. student achievement.4 Research while coordinating and provid- derperformers. The state should The Education Reform’s Blue has shown that accountabil- ing the infrastructure for such re-examine the trial period for Ribbon Task Force1 was formed ity for schools boosts5 overall programs. Large numbers of new teachers. Nevada should by an Executive Order from ­student performance.6 Florida students cannot be properly en- consider making performance- Nevada Governor Jim Gibbons has also introduced legislation gaged and graduate without the based pay adjustments an extra to write the state’s application2 that ­prevents schools from pro- support of an ELL program. Ex- facet of compensation as part of for the national Race to the Top3 moting third graders who are not panding ELL programs is included the effort to attract and retain funding. The Race to the Top pro- reading proficiently.7 as a focus because the Nevada high-quality teachers. gram is a federal education grant Department of Education esti- competition established as part mates that 17.6% of students Ensure data-driven of the American Recovery and 4 Jim Horne, Commissioner of Florida Board of have limited English proficiency. formulation of curriculum Reinvestment Act of 2009 that Education, “Florida’s A+ Plan for Education: A Firm Foundation for School Reform,” The and instruction. rewards states for implementing American High School Crisis and State Policy Enhance staff development For teachers and administra- significant education reforms. Solutions forum, 2003, National Governors Association Center for Best Practices and Na- and evaluation. tors to be sure that the curricu- Managed by the U.S. Department tional Center on Education and the Economy. Teachers, administrators and lum they offer is effective, they of Education, grants were award- 5 Greene, Jay P (2001). “Florida A-Plus Account- ability and School Choice Program.” Manhat- principals should be encouraged should use data to track results. tan Institute Center for Civic Innovation. to effectively reach out to stu- The data can take the form of test 6 Rouse, Cecilia Elena, et al (2007). “Feeling 1 http://www.nevadaracetothetop.org/over- the Florida Heat? How Low-Performing dents and be evaluated in part scores, many of which are now view.html Schools Respond to Voucher and Account- according to their efforts and tracked as part of the state’s No 2 http://www.nevadaracetothetop.org/pdfs/ ability Pressure.” Princeton University, nevada-promise-app-complete.pdf Working Paper #24. success in doing this. Beyond Child Left Behind guidelines. The 3 http://www2.ed.gov/programs/racetoth- 7 http://www.flbsi.org/schoolimprove/ test scores, schools should find data can also come from teacher etop/index.html studentprogression/thirdgradeprog.htm

52 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

GOAL 2 Raise the quality of elementary and secondary education.

OBJECTIVE #2 Bring Nevada’s measures of educational achievement into the top third of the states.

METRIC students who do not meet the standard are given the chance to retake the test again in 11th and 12th grades. As part of the state’s NAEP fourth grade test scores. attempts to improve academic achievement, schools should make The Department of Education administers the National Assess- an effort to increase the share of students who are proficient in ment of Educational Progress to fourth, eighth and 12th grade stu- the various subject areas of the test. In 2008-2009, the share of dents. These tests provide a picture of student performance across students who met or exceeded standards by the 11th grade was the country and cover a variety of subject areas. Fourth grade read- 70.4% for mathematics, 93.6% for reading, 75.7% for science, ing, math and science scores are the metric adopted here because and 87.5% for writing. the NVSG feels substandard results need to be recognized and cor- rected as early as possible in students’ lives. While no test score can measure all aspects of education, the NAEP provides a way to compare performance across states and jurisdictions or over time. Within the reading and science tests, the goals are to shrink the gap between Nevada and the nation- wide average by 2015, to match the current U.S. average by 2020, and to move into the current top third of all states by 2030. Within the math test, the goals are to maintain the state’s current level, which is on par with recent U.S. trends, through 2020 and move into the current top third of all states by 2030. Nevada administers high-school proficiency exams for all stu- dents as a requirement of graduation. First offered in 10th grade for reading, math and science and 11th grade for the writing test,

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 53 FOCUS ON �� Education

STRATEGIES

Stabilize funding. tunities and having the expertise three metropolitan areas should as is creating pathways for those While the primary purpose to go after those grants would have equitable access to educa- seeking second careers in teaching. of this report is to set broad improve the state’s overall edu- tional opportunities. The state The AB 203 Committee recom- long-term goals, it is important cation programs. should embrace online learn- mended that the Nevada System to acknowledge that funding is ing opportunities, especially in of Higher Education expand its a concern. High-quality educa- Expand distance learning this situation. Expanding the offering of night and weekend tion offerings require appropri- options. technology capabilities of the courses for teacher training. Quali- ate funding, and Nevada needs In tandem with ensuring that statewide education system fied and talented teachers will be to be able to take advantage all students have educational would benefit all students, giv- better able to engage students in of various sources of funding opportunities that match their ing a particular boost to those their classroom. so that new programs do not interests and learning styles, in rural areas. Additional band- Some very useful programs crowd out current programs that Nevada should encourage the width would allow rural stu- are in place that build teaching are effective. use of distance learning in dents greater access to learning staff such as Teach for America. As an example, Nevada’s secondary schools. No matter opportunities, increasing their While this can be a useful tool, recent unsuccessful proposal for where they are located, students overall educational attainment. the state needs to be sure that federal Race to the Top funding need to be engaged in a variety such programs encourage teach- highlighted the importance of of ways to achieve their highest Attract and retain qualified ers to make long-term commit- having experienced grant writ- learning potential. Online learn- teachers, particularly for ments to Nevada. ers to make the state’s case. ing could be an important tool reading, writing, math and Students need access to qual- The NVSG heard frequently for achieving this objective. science. ity teachers to perform at their that Nevada’s state and local This strategy includes provid- Nevada needs to increase ef- potential. To compete nationally governments as well as private ing sufficient telecommunica- forts to attract and retain teachers and globally, Nevada’s students agencies are handicapped when tions bandwidth in rural areas. in core areas. Encouraging teach- need teachers who can provide they compete against other The A.B. 203 of the 2003 ses- ers from other states to consider high-quality education in all jurisdictions for funds. Knowing sion recommended that the moving to Nevada is one way to fields, but particularly in math where to look for funding oppor- populations outside Nevada’s increase the state’s talent pool, and science.

54 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

GOAL 3 Increase the value of education at Nevada’s universities and colleges.

OBJECTIVE #1 Increase graduation rates.

METRIC STRATEGIES

Statewide six-year college graduation rate. Increase the number of Stabilize higher education The Department of Education tracks the percentage of stu- college degrees in fields funding. dents at each U.S. college and university who receive their bach- related to growth industries. Just as at the K-12 level, elor’s degrees within six years after starting their studies. This Along with simply awarding improving education at the col- allows for comparisons among institutions and among states. more college degrees, Nevada lege and university level requires Nevada has languished near the bottom among the 50 states in needs degree programs that are funding. Fortunately, higher recent years. The state’s goal here is to cut its gap with the na- likely to help drive the state’s education is able to draw on a tional average in half by 2015, match the current U.S. average in economy forward. Nevada’s uni- wider array of funding sources, 2020, and move into the current top third of all states by 2030. versity system and community including tuition and research colleges should engage in part- grants from both government Increase Graduation Rates nerships to train workers for to- and private agencies. The uni- Six-year graduation rate of bachelor’s degree students morrow’s private and public sec- versity system needs to take ad- 60 tor jobs. Giving secondary school vantage of all possible resources. Nevada U.S. students a better understanding University funding should be tied 55 of the state’s degree options to outcomes including aligning could also encourage them to academic programs to economic 50 continue their education. development initiatives.

45 Capital campaigns enable higher education institutions to 40 fund construction, teaching and research. The University of Ne- 35 vada at Las Vegas recently com- 00 01 02 03 04 05 06 07 08 15 20 30 pleted a successful capital cam- Sources: Dept. of Education, National Center for Higher Education Management Systems paign; other institutions across FROM MOODY’S ECONOMY.COM 10 the state should be encouraged to initiate similar programs.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 55 FOCUS ON �� Education

GOAL 3 Increase the value of education at Nevada’s universities and colleges.

OBJECTIVE # 2 Give universities more flexibility over the use of tuition and other resources to meet the state’s workforce needs. To allow the state’s higher educational system to develop the appropriate programs to expand its offerings and become more entrepre- neurial, public colleges and universities should be given more autonomy to set and retain tuition.

METRIC STRATEGIES

No metric available. Allow public universities higher educational system should to retain a larger share of expand the overall student base, tuition revenue. so that more in-state students Nevada’s public colleges and are able to attend college. universities could be more entre- preneurial or innovative if they Allow public universities could directly manage tuition to charge differential revenue rather than having it go tuition for different into the state’s general fund. Al- programs and schools. lowing schools to retain a larger Higher educational pro- share of direct tuition revenue grams and schools have vary- would create more certainty for ing costs and market values, long-term planning. and the ­University of Nevada system should be allowed to Increase the share of charge differential tuition. out-of-state students Specialized equipment and the while expanding the total need to attract highly quali- student base. fied faculty can raise the cost Out-of-state students con- of providing certain facilities tribute to the state, not only and programs. ­Students who through higher tuition payments, pursue such degrees as mas- but also indirectly by spending ters in Business Administration on housing, goods and services. have higher ­earnings potential, These students contribute to and schools can adjust tuition Nevada’s tax base. Attracting rates ­accordingly. ­Differentiated more out-of-state students also ­tuition is ­increasingly used by would help subsidize the costs public ­universities across the of a higher education for in-state U.S. to maintain and expand students. At the same time, the ­degree offerings.

56 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

GOAL 3 Increase the value of education at Nevada’s universities and colleges.

OBJECTIVE #3 Raise the level of university research.

Expanding research can effectively broaden the reach and raise the profile of Nevada’s higher education system.

METRIC STRATEGY

University R&D funding. Stabilize funding and The National Science Foundation collects data from various seek additional dollars for university research funding sources, including federal and state university research. governments, businesses, and nonprofits. To compare perfor- To expand its research ca- mance with other states, the metric used here is total research pabilities, the state system of funding dollars by state as a share of gross state product. higher education must improve The figure gives a good picture of the role that university its ability to seek and obtain research plays in a state’s economy. As has been seen in such grants. A sophisticated approach regions as Silicon Valley, well-funded university research facili- to grant writing can yield a high ties can attract private industry and generate entrepreneurship. payout. Boosting the state’s ap- Nevada lags behind all but two states in this metric. Because peal as a research destination research funding is highly concentrated in a few states, the focus would help develop ties among for Nevada initially will be the national median—rather than educational institutions, philan- mean—and to enter the top third of states in the longer term. thropic organizations and private Thus, the state’s goal is to cut its gap with the national median business. Greater university re- in half by 2015, match the current U.S. median in 2020, and search opportunities will also en- move into the current top third of all states by 2030. hance workforce development. The A.B. 203 of the 2003 Increase Appeal of University Research Facilities ­session made several recom- R&D expenditures, % of GDP mendations about funding re- 3.0 search at institutions of higher Nevada U.S., median of states 2.5 education, including more pub- lic-private partnerships and state 2.0 funding. The NVSG supports

1.5 these recommendations.

1.0

0.5

0.0 02 03 04 05 06 07 15 20 30 Source: National Science Foundation

FROM MOODY’S ECONOMY.COM 65

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 57 FOCUS ON �� Education

GOAL 4 Increase early-childhood education options.

OBJECTIVE #1 Enroll more children in early-education programs.

Many children would greatly benefit from earlier engagement in the learning process. Going beyond day care, early-childhood education programs can give children a boost toward success.

METRIC STRATEGIES

Share of three- and four-year-olds enrolled in school. Raise standards for many other areas, development The American Community Survey documents the number early-childhood of a sophisticated and grant- of children aged three and four who are enrolled in school pro- education centers. seeking infrastructure would be grams. These data provide a snapshot of the early-childhood College readiness begins in of enormous benefit here. education picture in each state. Nevada lags the national aver- preschool, and students’ ability age, with just over one in four children attending preschool, to compete in a global economy Expand community- compared with nearly half of all children nationally. starts at basic skill levels. En- based programs. Numerous factors influence parents’ decisions to enroll their suring that Nevada’s children Early-childhood education children in such programs, including their employment status have early access to education helps prepare children for el- and the cost of school programs. The rate is nonetheless a good will pay off over many decades. ementary school. But there is proxy for access to early-childhood education. The state’s goal To build an infrastructure of no state mandate for such pro- here is to cut its gap with the national average in half by 2015, early-childhood education grams. Community-based pro- match the current U.S. average in 2020, and move into the cur- centers, the state must create grams thus need to be encour- rent top third of all states by 2030. a framework of requirements. aged. The state’s role should Many programs are overseen by be to create the infrastructure More Children in Early Education Programs substate agencies, but the state for accredited programs and 3- to 4-yr-olds enrolled in school, % needs to set standards to ensure encourage community groups 50 equity and quality. to expand existing programs as Nevada U.S. Nevada needs to raise its well as undertake new efforts. A 40 low requirements for early- pilot program could help early- childhood teacher qualification. childhood education adminis- 30 This includes both initial re- trators identify best practices

20 quirements for certification and for programs. continuing education bench- 10 marks. Early-childhood educa- Invest in early-childhood tion is not a highly profitable education. 0 endeavor, making enforcement There is no one way to fund 07 08 15 20 30 of standards difficult. Monitor- early-childhood education. Sources: Census Bureau: American Community Survey, Moody’s Analytics ing is thus important to ensure Some state and federal funding FROM MOODY’S ECONOMY.COM 12 the state’s methods are effec- is available, but private funding tive. With proper oversight and through philanthropy, grants a framework from the state, or partnerships can also be of early-childhood education of- help. To attract funding, pro- fers an opportunity for private grams need to be result-driven philanthropic partnerships. As in and show the benefits to the

58 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Education

STRATEGIES (Continued) children served and the broader Provide low-income families community. Community and with options beyond private support is not entirely childcare. about funding, but that is cer- Many families struggle to tainly a key component. Public- manage preschool expenses. private partnerships linking Private funding can complement state and local government with government efforts to make ear- private and community groups ly-childhood education available would greatly boost access to for all who seek it. The state’s early-childhood education. agencies that serve low-income families need to make sure par- ents are aware of opportunities that do exist for their children.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 59 FOCUS ON �� Health & Well-being

Focus On | Health & Well-being evadans enjoy a magnificent natural landscape, many recreational opportunities, and inviting, compas- sionate communities. These attributes have attracted a growing population that is younger and more N active than average, helping to sustain rapid economic growth and low rates of poverty across much of the state. Despite these advantages, however, Nevada fares worse than many states with respect to the health of its residents and the quality of healthcare that they are able to receive. To meet the vision of the Nevada Vision ­Stakeholder Group, more must be done to expand access to health services, improve cost efficiency, and make Ne- vadans and their communities healthier.

Like most states in the Mountain West, per- rural households a challenge; perhaps not grams to cover those with low incomes such capita healthcare spending in Nevada is below surprisingly, health outcomes in Nevada vary as Medicaid and the Children’s Health Insur- the U.S. average, but Nevada’s expenditures more by location than they do in most states. ance Program (CHIP, administered in Nevada have also grown more slowly than in neigh- Relative to other states, more Nevadans as the Check Up program). The state has boring states (see Chart 1). Although slower who receive health insurance do so through lower Medicaid expenditures per capita than growth in healthcare spending is positive when their employers, as employment tends to any other, with a low level of participation it results from greater efficiency, an array of be highly concentrated in large businesses.3 and benefits (see Chart 3). health statistics suggest that Nevada also trails Employer-based coverage has been fairly Because of Nevada’s low level of participa- most other states in health outcomes and in generous in Nevada, with employees cover- tion, spending by the federal government on the healthcare resources it provides. ing a smaller share of premium costs than in healthcare and aid programs for Nevadans is most states. Over the past decade, this has just 71% of the average in other states. In effect, helped keep health costs manageable for Ne- Nevada is leaving money on the table because How Nevada vada families. With the recent deterioration the federal government pays over half the cost Measures Up of economic conditions, however, unem- of Medicaid (and about two-thirds the cost of ployment and poverty rates are increasing, CHIP), while Nevadans bear the full direct and For several years, Nevada has ranked raising potential health and financial risks for indirect cost imposed by the medical needs of among the bottom half of states in more than families and placing a much greater strain on those without insurance.4 two-thirds of the 18 measures of healthcare state and local health services. Despite the potential for long-term cost quality compiled by the U.S. Department of Hunger and a lack of health insurance are savings, increasing participation in federal Health and Human Services.1 Most recently, widespread among Nevada’s neediest residents, programs is constrained by the difficulty state Nevada was ranked among the bottom five including many children. Nevada was recently and local governments face in committing states in more than one-third of the indicators, ranked 49th among states based on the share additional matching funds. To avoid leaving including those related to maternal and child of children with health insurance. The uninsured federal funds on the table, Nevada would health, timeliness of care, and patient safety. rate among children was nearly twice the na- have to increase spending on need-based Nevadans suffer high rates of homeless- tional average, even though Nevada is ranked programs when economic times are toughest ness, mental illness, substance abuse and food only 19th in the incidence of children living in (and revenues lowest). Increasing the stability insecurity. The suicide rate is among the na- poverty. Over the past decade, the share of of government finances, an important goal tion’s highest, as are death rates from colorec- children without insurance in Nevada has risen, in its own right, would also help improve the tal cancer and heart disease, conditions that even as it has fallen nationally (see Chart 2). provision of health services and increase the are survivable when diagnosed and treated Among other things, this reflects Ne- “bang for the buck” of Nevada taxpayer dol- early. Life expectancy in Nevada is now 76.3 vada’s low participation rate in federal pro- lars through increased federal support. years, the lowest of any state in the West.2 The concentration of healthcare resources 3 On average, larger firms–those with 50 or more employees– in urban areas makes caring for the state’s are far more likely to offer health insurance to employees than are smaller ones (97% vs. 42%, respectively, among U.S. firms). Data from the 2009 Medical Expenditure Panel 4 In Nevada, statutory responsibility for paying the direct Survey (MEPS) show that, controlling for size, employers in financial cost of indigent medical care lies with county 1 2009 National Healthcare Quality Report, U.S. Department Nevada are actually less likely to offer health insurance than governments. A lack of adequate and timely healthcare of Health and Human Services, December 2009. It is worth employers in most states: only 93% of larger Nevada em- treatment can also impose an array of indirect economic noting that Nevada generally ranks highly in one quality ployers and 38% of smaller ones do. Employers in Nevada and social costs on both local communities and the state indicator: home-based rehabilitation. are simply more likely to be large firms than elsewhere in government, including lost productivity and a reduced 2 American Human Development Report, 2008-2009. the U.S. quality of life.

60 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

Chart 1: Per Capita Healthcare Spending Chart 2: Uninsured Children Index of relative healthcare spending (U.S. state avg=100) Uninsured (healthcare), % share of population under 18 120 20 1994 2004 Nevada U.S. 100 16 80 12 60

40 8

20 4 0 Wyoming Montana Colorado Nevada New Idaho Arizona Utah 0 Mexico 2000 2008 Source: Kaiser Family Foundation Source: Bureau of Labor Statistics: Current Population Survey

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 A Vision of Health well-fed population Chart 3: Medicaid Coverage and Service enhances worker pro- Enrollees/population under FPL Expenditures per enrollee It is clear that Nevada has some way to go ductivity and improves 120% $6,000 to be competitive with other states in delivering student performance. quality healthcare and providing a safety net for With almost a quar- 100% $5,000 those displaced by economic downturns. De- ter of state spending 80% $4,000 spite these challenges, members of the Nevada devoted to healthcare 60% $3,000 Vision Stakeholder Group believe a number of and aid programs5, a steps can be taken to improve health and well- healthier population 40% $2,000 being and expand opportunities for care while can also mean signifi- 20% $1,000 simultaneously increasing the efficiency of the cantly less pressure on healthcare system. government budgets. 0% $0 Nevada U.S. average Nevada U.S. average The group’s specific objectives can be In addition to categorized into three broad areas of focus benefiting economic Source: Kaiser Family Foundation Note: FPL = Federal poverty level (shown in the Goals and Strategies Table): growth and state FROM MOODY’S ECONOMY.COM 3 »» Expand Nevadans’ access to quality budgets, strategies to promote health- and the state’s goals as well as metrics for healthcare services. care also complement efforts to address progress can be adapted from those in use »» Contain costs by spending healthcare other issues. In particular, addressing elsewhere. In 2000, the U.S. Department of dollars more efficiently. the shortage of local healthcare workers Health and Human Services released Healthy »» Create healthy communities by foster- through university training can add to People 2010, which presented a strategic ing partnerships that support good economic diversity. The average health- vision for improving health outcomes and physical and mental health. care job is more productive and less listed a set of health-related metrics with tied to local business cycles than jobs in national targets set for 2010.6 Many of the These goals are mutually reinforcing in many other industries. Health services HP2010 metrics and targets can serve as a several ways. For example, improving access will be a national economic growth driv- basis for Nevada’s 2020 and 2030 targets.7 to treatment also facilitates the use of more er over the next two decades as demand cost-efficient treatment options (primary care grows among aging baby boomers. In- Expanding access to healthcare vs. emergency care, for example). Similarly, vestments made by healthcare and pub- The single most important factor de- addressing gaps in healthcare quality, access, lic aid organizations in IT and database termining Nevadans’ access to healthcare and measures of general well-being will help management also have the potential to strengthen Nevada’s communities by reducing improve the connectedness and broader 6 U.S. Department of Health and Human Services, Healthy the strain on residents’ finances and improving well-being of Nevada’s many rural areas. People 2010: Understanding and Improving Health, 2nd ed., overall health, making the state a more ap- Nevada’s health challenges are similar in Washington DC: U.S. Government Printing Office, November pealing destination for new residents. many ways to those faced across the country, 2000. 7 In many cases the national targets for 2010 set in the HHS re- Measures to improve health and well- port remain ambitious targets for Nevada. The HP2010 report being can spill over into other aspects of the will soon be updated and released officially as Healthy People 5 “2009 State Expenditure Report,” National Association of 2020. At that time, the metrics and targets in this report can state’s quality of life. Having a healthy and State Budget Officers, December 2009. be re-evaluated if necessary.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 61 FOCUS ON �� Health & Well-being

Reforming the System Impact of Federal Medicaid Expansion Given the scope and complexity of the healthcare system in Ne- Total impact by 2019 (% change relative to baseline forecast) vada, serious reform will require significant, coordinated effort by 70% 62% Nevada U.S. multiple state and local agencies. Yet the time appears ripe for such 60% an undertaking. 50% 50%

40% Federal healthcare reform legislation passed in 2010 (the Patient 27% Protection and Affordable Care Act11) creates new opportunities 30% and challenges for states. To extend coverage and reduce the soci- 20% etal burden of caring for those without health insurance, the PPACA 10% requires action by families, employers and state governments. 3% 0% These reforms are scheduled to be phased in through 2014. The Enrollment State spending Federal spending Total spending

legislation’s impact on Nevada is being studied by state agencies Source: Urban Institute, Medicaid Coverage and Spending in Health Reform, May 2010 and affected organizations, but it is clear that an appropriate and FROM MOODY’S ECONOMY.COM 10 effective response should be a central focus of any strategy for im- proving healthcare in the state. federal reform will help with state budgets.3 Yet these projections entail great uncertainty about future costs. Effective allocation of The federal reforms open new avenues to pursue health and welfare healthcare resources, expanded use of information technology, goals discussed by the Nevada Vision Stakeholder Group. In par- and other targeted investments in productivity measures will be ticular, the PPACA creates incentives for states to change the way crucial to containing costs while expanding the quantity and qual- long-term care is provided, adopt quality and cost-containment ity of care. measures, increase access to behavioral healthcare, and engage in workforce development. While there may be long-term budget savings, the short term will certainly bring additional costs. The implementation of the One obvious concern in any reform is cost. Ensuring that health- PPACA is expected to add $600 million to the Nevada state budget care is available and affordable is a goal in itself and can also lead through 2019 because of increased eligibility, higher access rates, to budget savings for the state. Evidence suggests that expanding and administration and IT costs.4 Under the PPACA, states will be healthcare access to the uninsured can reduce total healthcare eligible for additional federal revenue to help finance the transition. expenses by shifting demand away from high-cost emergency ser- Indeed, the cost of meeting new federal targets for Medicaid enroll- vices toward more efficient primary care and outpatient services.2 ment is forecast to be met almost entirely through additional fed- As a result, initial studies in some states have concluded that the eral revenue (see Chart). This highlights the importance of another central goal of the Stakeholder Group, namely leveraging federal funding to use state resources more efficiently. 1 As amended by the Health Care and Education Affordability Reconciliation Act of 2010. 2 The authors of a 2007 study concluded that reducing enrollment of children under Medic- aid/SCHIP by 10% would increase overall healthcare costs in the Phoenix AZ community by 3 For example, a recent budget report conducted for the State of Maryland estimates total about $3.5 million, or over $2,000 per child enrolled. (Rimsza, M., R. Butler and W. Johnson, savings of $829 million through 2020 (Maryland Health Care Reform Coordinating Council, “Impact of Medicaid Disbursement on Health Care Use and Cost,” Pediatrics, Vol. 119, No. 5, Interim Report to the Governor, submitted July 26, 2010). May 2007). 4 Testimony of Michael Wildan, Director, Nevada Health and Human Services. is whether they have health insurance.8 By larly vulnerable, as their incomes are often further, as the expansion of healthcare this metric, Nevada falls below most states; too low to afford insurance but too high to resources has failed to keep up with popu- 20% of Nevadans under 65 have no form qualify for aid. lation growth (see Chart 6). Hospital ca- of health insurance, well above the national Improving access to health insurance is pacity utilization rates in Nevada are now average of 17%. Nevadans of all income a necessary step to meeting the healthcare above the U.S. average.9 levels are more likely than average to lack needs of Nevadans, but it is not a suf- health insurance (see Chart 4), but those ficient one: Although it helps guarantee families with modest incomes are particu- access to healthcare, it does not guarantee availability. Nevada has far fewer medical 9 Estimates by Moody’s Analytics based on total inpatient days per hospital bed. In 2008, the rate was 249 days in 8 In 2009, 17% of Nevadans reported not seeing a doctor professionals per capita than most other Nevada (68% of a year) and 239 days (65%) for the U.S. as a because of cost. This was higher than the average of other states (see Chart 5), and Nevada’s recent whole. Data were taken from the Kaiser Family Foundation, states, 15% (statehealthfacts.org analysis of data from the statehealthfacts.org, drawing on survey data from the Health Behavioral Risk Factor Surveillance System Survey, 2009). economic boom has stretched providers Forum LLC an affiliate of the American Hospital Association.

62 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

Chart 4: Insurance Coverage Among the Poor Chart 5: Supply of Healthcare Professionals Uninsured share of total nonelderly population, by income group Number per 10,000 persons 25% 90 80 Nevada U.S. average 20% 70 3.7% Above 300% of FPL 60 2.9% 15% 50 40 9.3% 100%-300% of FPL 10% 7.9% 30 20 5% 0-100% of FPL 10 7.5% 6.7% 0 Physicians Nurses Dentists Mental health 0% counselors and Nevada U.S. total social workers

Source: Kaiser Family Foundation Note: FPL = Federal poverty level Sources: AMA, ADA, Kaiser Family Foundation, BLS

FROM MOODY’S ECONOMY.COM 4 FROM MOODY’S ECONOMY.COM 5 Chart 6: Hospital Beds measurably worse Most of the cost of their care is simply shifted Hospital beds per 1,000 resident population health outcomes. onto taxpayers. 5.0 Although there A number of themes have emerged from 4.5 has been widespread the national debate over healthcare reform Nevada U.S. 4.0 agreement for many that can help define strategies for improving 3.5 years that the cost of healthcare in Nevada. For example: 3.0 healthcare is grow- »» Promote primary care. Money spent ing too rapidly and on prevention can often pay for ­ 2.5 the system is in need itself in cost savings elsewhere in 2.0 of reform, there has the system. 1.5 been far less agree- »» More expensive care is not neces- 1.0 ment about the spe- sarily better care. Expanding the use 1960 1970 1980 1990 2000 2007 cific steps needed to of Medicaid waivers for home-based Source: U.S. Centers for Disease Control and Prevention improve it. Although care in Nevada can expand options, FROM MOODY’S ECONOMY.COM 6 the problems facing promote choice, and be cost-effective Containing healthcare costs Nevadans and the tools available to ad- as well. Although the U.S. healthcare system dress them differ slightly from those being »» Improvements in IT and database is capable of producing high-quality care, debated at the national level, the broad management—including the adop- national statistics suggest it is relatively challenges are the same: how to give more tion of electronic health records— inefficient compared with those in other people access and improve overall health can help lower long-run administra- developed countries. Americans spend more outcomes while keeping costs down. While tive costs and potentially reduce on healthcare, without a clear, associated the national debate over health reform will medical errors. improvement in their health. One explana- likely continue, many ideas being discussed tion is that a smaller fraction of healthcare at the national level have gained sufficient A fourth area of potential cost-saving is spending in the U.S. actually goes toward acceptance to help create a template for unique to the state level: improving health. moving forward in Nevada. »» Nevada should take better advantage Rather than a free market—where con- For example, much attention has been of opportunities to use federal dollars sumers have choices, compare prices, and given to the incentives that promote inef- to pay for expanded and improved pay for what they consume—or a national ficient behavior. Both fee-for-service arrange- health coverage for Nevadans. single-payer system such as Medicare, ments and the threat of malpractice suits Americans under age 65 in need of health encourage doctors to maximize the number insurance face a hybrid system involving of procedures rather than their effective- Increasing Efficiency in employers, private insurers and public ness, and health insurance companies do not Healthcare subsidies. The result has been excessive always find it profitable to sell insurance to administrative costs, inefficient cost-shift- everyone who might desire it. Individuals and Primary and preventive care ing, confusing billing practices, and—for families priced out of the private insurance Modern research supports the old maxim many of those left out of the system— market do not simply disappear, however. that an ounce of prevention is worth a

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 63 FOCUS ON �� Health & Well-being

Chart 7: Federal Food Stamp Benchmarks Studying the Leveraging federal funds Nevada Supplemental Nutrition Assistance Program, fiscal yrs cost-effectiveness Nevada participates in federal aid pro- 350 95 of treatments grams to a much smaller degree than many Lost funding due to 300 nonparticipation, $ mil (L) can help doctors, states and the state’s Medicaid policies for 85 Participation rate, % (R) families and policy- long-term care are among the least gener- 250 makers in Nevada ous.17 Overall, Nevada’s Medicaid policies 75 200 spend money are rated less generous than those in most

150 65 wisely. Ultimately, states with comparable per capita incomes. 100 however, putting a Although some Nevadans oppose the addi- 55 price tag on a pa- tional government intervention associated 50 tient’s life requires with federal aid programs, generous federal 0 45 difficult, subjective matching funds provide a strong incentive 04 05 06 07 08 09 10 11 decisions about to participate. Source: Nevada Department of Health and Human Services how much health For example, food stamps and school FROM MOODY’S ECONOMY.COM 7 and longevity are meal programs are fully funded by the fed- pound of cure in many cases, although not worth. Nevadans must determine their own eral government, with states responsible necessarily in all of them. Without doubt, priorities here. Nevertheless, it is easy to en- only for administrative costs. The Nevada catching problems early can head off serious dorse initiatives that combine improved qual- Department of Health and Human Services health issues later, reducing the cost of care ity of life with overall cost savings.14 estimates that $300 million in available and enabling residents to realize their high- The goal of prevention is to shift demand food stamp funds went unused during fiscal est potential.10 Long-term benefits must be away from high-cost treatments to lower- 2010 (see Chart 7). The income lost by needy weighed against short-term costs, however. cost care. This goal can be met in other ways households because of forgone earned in- To help make its healthcare system more as well by encouraging options such as out- come tax credits was even larger. efficient, Nevada must identify and focus on patient services and promoting the use of preventive treatments that are targeted and home and community-based care over cen- Building healthy communities have proved cost-effective.11 tralized institutional care. A healthy community is one that meets For instance, there is evidence that flu Relative to their number of outpatient the basic needs of its population: first-rate vaccinations for children and the elderly visits, Nevadans are more likely than those schools, a clean and safe environment, and as well as certain cancer screenings are in other states to seek treatment in hospital a wide range of cultural and recreational op- both clinically effective and cost-effec- emergency rooms.15 This may be in part from portunities. A healthy population remains the tive.12 In other cases, the trade-off is more Nevada’s tourism industry, but it also reflects foundation for building healthy communities, difficult: Prevention can lead to longer, the high rate of uninsured families in Nevada. and there are several important objectives healthier and happier lives, but not neces- Expanding community-based and residen- the state should address regarding its citizens’ sarily cost savings.13 tial care options for elders, the indigent, and overall well-being and quality of life. Foremost the mentally ill also promises to deliver ef- among these are improving indicators of nutri- ficiency gains. In many cases, community fa- tion and physical and mental health. 10 Similarly, behavioral health programs may help reduce soci- etal costs in future years. Less research has been done in this cilities can provide better care at a lower cost Poverty and food insecurity are det- area, however. than medical institutions. In general, hospi- rimental, both directly and indirectly, to 11 According to the CDC, cancer deaths in Nevada exceed the U.S. average, but the reported incidence of cancer is lower talization and long-term care in public facili- these objectives. Although the rate of pov- than average (450 vs. 462 per 100,000 people in 2006). ties can be a costly and ineffective means of erty in Nevada is below the national aver- This could be evidence of inadequate diagnosis: Only 56% of Nevadans over 50 reported receiving a colon cancer screen- delivery. Moreover, Nevada has shown itself age, it is rising (see Chart 8). Nevada now ing in 2008, well below the U.S. average of 62% (see Centers particularly effective at home-based rehabili- leads the country in foreclosures, which, for Disease Control and Prevention, Behavioral Risk Factor 16 Surveillance System). tative care. in June 2010, occurred in 1 in 88 homes 12 Maciosek et al. “Priorities Among Effective Clinical Preventa- (relative to 1 in 411 nationally). This high- tive Services,” American Journal of Preventative Medicine, 2006. lights the importance of contending with 13 For instance, both programs aimed at preventing relapse among former smokers and those aimed at preventing to- 14 For detail on state plans regarding prevention and wellness, see problems of economic opportunity and the “Nevada Strategic Health Care Plan,” Report of the Legislative bacco use among 7th and 8th graders result in an increase in state’s safety net for those who experience QALY (quality adjusted life years), but neither entails a net Committee on Health Care, 2007. cost saving. Moreover, the cost difference in these antismok- 15 In 2008, Nevadans made 1 ER visit for every 3.7 outpatient economic and social dislocation. ing programs is significant: the former program is estimated visits. The U.S. average was 1 ER visit for every 5 outpatient to cost $190/QALY, while the latter is estimated to cost visits. (Calculations based on data from Statehealthfacts.org). $23,000/QALY (see Cohen, Neumann and Weinstein, “Does 16 45% of home health patients had reported improvements in 17 See, for example, Tables 3 and 7 in “James W. Fossett and Preventative Care Save Money? Health Economics and the their mobility–the 7th highest rate among the 50 states and Courtney E. Burke, “Medicaid Policy and Long-Term Care Presidential Candidates,” The New England Journal of Medi- DC (Agency for Healthcare Research and Quality, National Spending: An Interactive View,” The Nelson A. Rockefeller Insti- cine, February 14, 2008). Healthcare Quality Report, 2009). tute of Government, University of Albany, NY, August 2010.

64 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

Chart 8: Poverty be highly concen- Poverty is linked to immigration: Hispan- Persons in poverty, % of population trated in urban ar- ics have a higher poverty rate in Nevada 16 eas.18 This has some than in most of the country, while the Nevada benefits, as poverty rate among both white and black U.S. 12 it may help lower non-Hispanics is lower. This suggests that the cost of deliv- efforts promoting community outreach and ering services to assimilation can be important in addressing 8 those at risk. It also not only the symptoms but also the root risks drawing at- causes of poverty. 4 tention away from Poverty remains a complex and multi- the rural poor when faceted problem, with few easy remedies. 0 policies are being What the state can focus on, more directly 99 00 01 02 03 04 05 06 07 08 designed, however. and immediately, is the detrimental impact Source: Census Bureau of poverty on social conditions such as 18 According to a study by the Urban Institute and Kaiser Com- FROM MOODY’S ECONOMY.COM 8 hunger. The fraction of Nevada households mission on Medicaid and the Uninsured, 92% of the poor in Strategies that respond to poverty and Nevada live in metropolitan areas, versus 82% for the U.S. as classified as food insecure is, therefore, an homelessness need to consider demo- a whole. This difference mirrors the higher overall urban con- important indicator of Nevada’s progress in centration of the population in Nevada (see The Kaiser Family graphic trends. The poor in Nevada tend to Foundation, www.statehealthfacts.org, for details). this area.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 65 Increase Efficiency to Contain Costs

FOCUS ON �� Health & Well-being

GOAL OBJECTIVE METRIC STRATEGIES 1. Ensure all Nevadans are able to pay Share of population under »» Expand enrollment in Medicaid and CHIP for medical treatment 65 with no health insurance »» Create new options for private insurance Provide all Nevadans 2. Increase healthcare resources Number of physicians (per Improve training and professional with access to quality »» 10,000 population) development in medicine healthcare »» Promote philanthropy »» Strengthen rural health networks 1. Promote preventive care Immunization rate at 19-35 »» Increase access to and use of primary care months of age (%) facilities 2. Shift use patterns toward more cost- Ratio of outpatient visits to »» Expand health insurance and the use of home effective treatments ER visits and community-based care waivers for Increase efficiency to Medicaid patients contain costs 3. Improve health information technol- Use of electronic records – »» Subsidize the cost of technology adoption ogy and database management not yet available among smaller firms 4. Increase use of outside funding Federal health revenue as a »» Expand enrollment in federally funded share of general revenue programs 1. Reduce the burden of poverty on Share of families classified »» Provide opportunities for housing and support families and communities as food insecure social services »» Increase support for mental health Build strong and professionals healthy communities 2. Promote healthy lifestyles Obsesity rate (% with »» Promote exercise and good diet through BMI>30), adult smoking primary­ care and public education campaigns rate

66 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

GOAL 1 Provide all Nevadans with access to quality healthcare.

OBJECTIVE # 1 Ensure all Nevadans are able to pay for medical treatment.

The fraction of Nevadans covered by private employer-based insurance is slightly higher than in most states, but the low rate of participa- tion in publicly funded alternatives, including Medicaid and CHIP, puts some of the state’s most vulnerable such as children and the indi- gent at much greater risk. This is not only a social problem but a financial one, as several studies show uninsured families typically eschew more efficient primary and preventive care options in favor of more expensive care such as emergency services.

METRIC

Share of population under 65 with no health insurance. Lack of Health Insurance The rapid rise of healthcare costs over the past three decades % of population under 65 with no health insurance has made even routine medical treatment unaffordable for those 25 Nevada U.S. without health insurance of some kind. Aggravating the prob- lem, those Nevadans least capable of “self-insuring” by accumu- 20 lating private assets are typically those most likely to lack the 15 opportunity for traditional employer-based insurance: children and those without a secure, full-time job at a large firm. While a 10 higher share of Nevadans receive employer-based coverage than the U.S. average, a smaller than average share purchase individ- 5 ual private coverage or receive publicly financed coverage such as Medicaid. As a result, the share of the non-elderly population 0 99 00 01 02 03 04 05 06 07 08 15 20 30 (those under 65, who are not eligible for federal Medicare cover- Source: Census Bureau age) without any form of health insurance coverage is also much higher than the U.S. average. FROM MOODY’S ECONOMY.COM 1 Universal coverage has been and should remain a policy goal, ensuring that no citizen fails to receive necessary medical treat- STRATEGIES ment because of age or income. Practical considerations make this difficult to achieve within the current U.S. private insurance market, however. Much progress can be made by responding to Expand enrollment in tral component of the federal federal initiatives to expand eligibility for Medicaid and create Medicaid and CHIP. healthcare reform legislation new insurance markets, which present an opportunity for in- Increasing insurance cover- (see box on page 62). creasing insurance rates dramatically among children, the poor, age is not only crucial to im- Unfortunately, Nevada’s and those with pre-existing conditions, the three populations proving health outcomes, it is current budgetary pressures most likely to be underserved by the current system in Nevada. also essential for cost contain- are pushing policy in the other The Congressional Budget Office has estimated that as a result ment. Comparisons of coverage direction, in favor of tighten- of federal health reform legislation about 94% of the non- rates relative to other states ing eligibility and reducing elderly will be covered by health insurance. Accordingly, Nevada suggest that the quickest way benefits. Similarly, the state should set a goal of reducing the share of non-elderly uninsured to reduce the number of unin- has been cutting Medicaid re- to 6% by 2020, and achieving near-universal coverage by 2030, sured is to expand participation imbursement rates for health- with no more than 1% without some form of insurance cover- in public health insurance pro- care institutions as part of age, private or public. grams. Indeed, the expansion its search for budget savings. of Medicaid eligibility is a cen- Cutting reimbursement rates

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 67 FOCUS ON �� Health & Well-being

STRATEGIES (Continued) to healthcare providers only Create new options for often priced out of the private specifically to the needs of Neva- further limits Medicaid patients’ private insurance. insurance market and forced to dans. Because the goal of these access to healthcare, however, While it is typically straight- bear significant risks for them- exchanges is to foster participation as healthcare providers who no forward and inexpensive for selves and their families. in private markets and promote longer find it profitable to serve individuals to purchase car or ho- Part of the federal strategy for individual choice, the role of gov- Medicaid patients at reduced meowner’s insurance, health in- expanding health insurance is to ernment in creating and maintain- rates will no longer choose to surance can be difficult and often help consumers purchase insur- ing such exchanges should align do so. While current economic prohibitively expensive to obtain ance by setting up new private closely with the philosophy of and budget conditions remain a the same way. This is because of insurance markets, called ex- most Nevadans. significant short-term constraint an informational problem known changes. Individuals, particularly It is also important that on the state’s ability to improve as adverse selection, which arises those self-employed or working efforts to expand insurance and expand its Medicaid system, because the buyer of insurance for small businesses, will be able through Medicaid and new increasing participation in feder- knows more about his or her own to buy affordable health insur- private markets not crowd out ally supported programs such health than do the sellers. Insur- ance that pools their risk with existing private and employer- as Medicaid and CHIP should be ance companies know coverage others, just as employer-provided based coverage. Otherwise, emphasized in long-term plan- is most valuable to those who ex- health insurance pools risk the result may be merely to ning as a cost-effective strategy pect to need it the most, that is, among employees, avoiding the substitute one form of insur- for expanding the insurance op- those who expect to incur large adverse selection problem. ance for another, with no overall tions of Nevada residents: help- health costs. Insurers therefore Allowing Nevada families expansion of coverage. That said, ing those residents most at risk, raise health premiums for indi- access to a federal insurance not all such substitution is prob- with the state paying less than viduals well above those charged exchange could help bring down lematic: In some cases, shifting half the cost (see p. 75). to large groups. Unfortunately, insurance costs without significant families from individual private this means that individuals with state investment. But the state coverage into larger, pooled-risk average or low healthcare needs should also consider setting up programs could lower healthcare but no access to group plans are an insurance exchange tailored costs for many Nevadans.

68 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

GOAL 1 Provide all Nevadans with access to quality healthcare.

OBJECTIVE # 2 Increase healthcare resources.

The share of Nevadan employment in healthcare is only half the U.S. average. Nevada should set a goal of increasing its medical resources through strategies that promote capital investment and worker training in the health field.

METRIC STRATEGIES

Physicians per 10,000 persons. Improve training and adopt a more academic model Using the density of physicians in the population as a proxy professional development in that emphasizes research and for the availability of medical professionals more broadly, Ne- medicine. teaching has been suggested as vada operates with only about 70% of the healthcare resources Nevada’s healthcare train- a way to increase revenues and of the average state. As a long-run goal, Nevada should set out ing and research facilities are attract grant money, helping to achieve parity with the U.S. average. Meeting this goal will re- inadequate, with much less shift the burden of operating quire adjusting the opportunities and incentives for students to capacity than in other states costs away from taxpayers. pursue careers in medicine and for doctors to live and practice in of similar size. As a result, Nevada, so visible progress toward this goal may not be imme- Nevada not only trails other Promote philanthropy. diate. With a concerted effort, however, it should be achievable states in total number of medi- In other states, philanthropy by 2030. cal professionals, but it appears has proved an important and to be falling further behind, re- effective tool for financing new Medical Professionals placing doctors at half the rate investments in healthcare. Ne- Active physicians per 10,000 civilian population of the U.S. as a whole. For in- vada’s healthcare and aid insti- 30 stance, in 2009, the University tutions receive relatively little Nevada U.S. of Nevada produced only 51 private philanthropic support.1 26 new medical school graduates, Despite Nevada’s recent popula- or roughly one new doctor for tion boom, the state is home to 22 every 52,000 residents. In that few permanent residents with

18 same year, by contrast, the the means to make significant population in Nevada increased charitable contributions. Never- 14 by 70,000. theless, the recent $27 million Partnerships with industry campaign for the Ruvo Brain 10 such as the new expansion Institute illustrates the poten- 78 85 95 05 15 20 30 of the Cleveland Clinic in Las tial for a strategy of expanding Source: U.S. Centers for Disease Control and Prevention Vegas can be a promising ap- philanthropic support in some FROM MOODY’S ECONOMY.COM 2 proach to attracting and train- areas of the state, particularly ing new doctors. Nevada’s uni- Las Vegas. versities can also be valuable partners with local and state governments. Encouraging 1 Giving USA 2010, a publication of Giving hospitals such as the University USA Foundation, researched and written by the Center on Philanthropy at Indiana Medical Center in Las Vegas to University.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 69 FOCUS ON �� Health & Well-being

STRATEGIES (Continued)

Strengthen rural health makers for some time. Policymak- networks. ers have tried through the Nevada For most of Nevada’s popula- Flex Program to create a sustain- tion, living in urban areas with able, financially viable healthcare hospitals and other healthcare network in rural areas based on resources nearby, ensuring ac- several specially designated Criti- cess to healthcare is principally cal Access Hospitals. Neverthe- about ensuring adequate capac- less, significant challenges remain ity. For the state’s remaining to ensuring that an adequate residents of rural and frontier supply of healthcare professionals areas, however, the question of exists to serve rural areas. access is more often about avail- Improved adoption and use ability and proximity: the aver- of information technology hold age distance between acute care some promise in alleviating or hospitals in rural Nevada and overcoming geographical bar- the closest tertiary care hospital riers to healthcare, however. is 115 miles.2 As of September Several Nevada universities have 2008, over 13% of Nevadans participated in collaborative ef- were estimated to be living in forts to develop training and pro- an area designated as having a fessional degree programs ad- shortage of primary care health dressing rural workforce needs, professionals.3 including a telehealth initiative Ensuring that the medical that provides degree programs, needs of these Nevadans are met consultations and telemedicine has been a concern of state policy- services (for example teleradiol- ogy) in addition to promoting 2 See Nevada Rural Health Plan (revised), the general connectedness Nevada Office of Rural Health, April 2008 among doctors and healthcare 3 Kaiser Family Foundation, www.statehealth- facts.org. Source data from the Office of professionals operating in rural Shortage Designation, Bureau of Health areas. As innovations in the field Professions, Health Resources and Services Administration. According to the Nevada of telecommunications emerge, Office of Rural Health, 10 of Nevada’s 14 new opportunities should be rural and frontier counties are designated as full-county Health Professional Shortage sought to exploit technology to Areas for primary care, 11 are designated as strengthen initiatives aimed at HPSAs for dental care and 13 are designated as HPSAs for mental health improving rural healthcare.

70 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

GOAL 2 Increase efficiency to contain costs.

OBJECTIVE # 1 Promote preventive care.

An array of alarming statistics has caused health policy experts recently to focus on preventive care as an avenue for containing healthcare costs. Nearly 40% of deaths in the U.S. annually are attributable to preventable causes such as smoking, poor diet, physical inactivity and sub- stance abuse. The financial cost is significant. According to the U.S. Centers for Disease Control and Prevention, three-quarters of U.S. health- care dollars are spent treating chronic diseases such as diabetes, heart disease and cancer that are closely linked to manageable risk factors.

METRIC STRATEGY

Immunization rate at 19 to 35 months of age. Increase access to and use of able or affordable option for de- From a public health perspective, steps to prevent outbreaks primary care facilities. livering preventive care. Given of communicable diseases are of particular importance. A simple The best strategy for raising the central role of health educa- and conventional metric for assessing the state of preventive immunization rates and similar tion in prevention, particularly care in Nevada is the share of children aged 19 to 35 months preventive measures is to guar- for those populations most at who have received a full set of recommended immunizations. antee access to healthcare. In risk, state Medicaid policies In 2008, the rate was 70%, short of the U.S. average of 78% many ways, primary care is pre- should be re-evaluated for op- and below the HP2010 target of 80%. Nevada should strive to ventive care: Establishing regular portunities to improve prenatal match the current U.S. rate by 2020 and reach the HHS target contact between patients and and infant care. For instance, by 2030. their physicians is important not 27 states now cover childbirth only for preventive treatment, education under their Medicaid Childhood Immunization but for physicians making diag- policies, and 31 cover infant Children who are fully immunized at age 19-35 mo (%) noses and educating patients to care: Nevada covers neither.1 100 the importance of vaccinations 90 Nevada U.S. and a healthy lifestyle and diet. 1 State Medicaid Coverage of Perinatal Ser- vices: Summary of State Findings, Kaiser 80 Until the goal of access to Family Foundation and The George Wash- 70 healthcare is met, regular pri- ington University Medical Center School of 60 Public Health and Health Services, Novem- mary care may not be an avail- ber 2009, Table 10. 50 40 30 20 10 0 00 01 02 03 04 05 06 07 08 15 20 30 Source: U.S. Centers for Disease Control and Prevention

FROM MOODY’S ECONOMY.COM 3

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 71 FOCUS ON �� Health & Well-being

GOAL 2 Increase efficiency to contain costs.

OBJECTIVE # 2 Shift use patterns toward more cost-effective treatments.

The goal of prevention is to take relatively low-cost steps that avoid the need for high-cost treatment later. Costs can also be saved by ­substituting more cost-effective treatments for less cost-effective ones. Ambulatory care is typically less expensive than emergency care, for example. Similarly, long-term can often be provided more easily and at a lower cost through the use of home and community-based services than within an institutional setting.

METRIC Cost-Effective Treatment Total outpatient visits/total emergency room visits 7 The ratio of outpatient visits to ER visits. Nevada U.S. 6 An inefficiency of the U.S. healthcare system lies in the fact that emergency services are among the most expensive methods 5 of treatment, but they are often the only option for those who 4 lack health insurance, because of hospitals’ mandate to treat 3 every patient. A metric that captures excessive use of emergency 2 care is therefore useful in establishing the extent to which demand for healthcare is being met in a cost-effective way. 1 In 2008, there were 298 emergency room visits in Nevada 0 for every 1,000 residents, significantly less than the U.S. average 00 01 02 03 04 05 06 07 08 15 20 30 of 404 visits. In isolation, this statistic seems to suggest that Source: U.S. Centers for Disease Control and Prevention

Nevada’s emergency services are less overburdened than those FROM MOODY’S ECONOMY.COM 4 elsewhere. At the same time, however, there were 1,115 outpa- STRATEGIES tient visits per 1,000 persons—or about 3.7 outpatient visits for every ER visit. The nationwide average, however, was about 5.1 outpatient visits per ER visit. By this metric, demand in Nevada Expand insurance and vate sector support. State fund- for ER treatment is quite high; indeed, it ranks in the top 10 waiver coverage. ing will also need to support states. Nevada should strive to shift patient demand away from Both the low overall usage alternatives to institutional care.1 emergency services toward outpatient treatments. In particular, rate and the preference for emer- The state provides options for the state should strive to stabilize the current rate by 2015, set- gency services over outpatient home- and community-based ting a minimum benchmark of 3.8 outpatient visits per ER visit, services are consistent with the services through a waiver sys- and then make progress towards reaching the U.S. average of 5 state’s relatively low rate of tem operated by the Centers for outpatient visits per ER visit by 2030. health insurance coverage. Much Medicare and Medicaid Services. as with preventive care, a natural In Nevada, and the U.S. more strategy for achieving a reduction generally, the majority of these in demand for emergency services waivers go to individuals with would be to increase health insur- mental and developmental dis- ance coverage. abilities, who are also the most There is also a natural role expensive to treat. Meeting the for private firms and households needs of these and other aged in supporting community-based and disabled residents with care options. Unfortunately, the relatively small philanthropic 1 “Strategic Plan for Senior Services,” Ne- base in Nevada constrains pri- vada Department of Human Services, 2002.

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STRATEGIES (Continued) waivers can be cost-efficient, as the average daily cost of home- based care can be less than the daily cost of institutional care.2 Waivers are not only an eco- nomical means of supplying care, they also expand the range of choices available to patients. De- mand for waivers is exceeding the supply: The waiting list for these waivers is about one-quarter as large as the total number of ex- isting program participants.3

2 This claim is based on comparing average waiver cost per participant against the Medicare rate paid for institutional care. 3 This estimate is based on 1,028 persons on the waiting list for HCBS waivers in 2008, and 4,241 participants in 2006. For those with developmental disabilities the rate is higher (38%). This calculation was made us- ing data from statehealthfacts.org. See also The Centers for Medicare & Medicaid Ser- vices (CMS) Form 372, December 2009, Table 6. “Medicaid 1915(c) Home and Community- Based Service Programs: Data Update.”

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 73 FOCUS ON �� Health & Well-being

GOAL 2 Increase efficiency to contain costs.

OBJECTIVE #3 Improve health information technology and database management.

A third source of efficiency gains can come from investments in improved healthcare IT, health information exchange systems, and state databases. Electronic record keeping has the potential not only to reduce administrative costs but also to improve the quality of care by better tracking medical data. Better database management can also help track the performance of healthcare and aid programs. Imple- menting such new innovations in healthcare as telemedicine would be particularly useful in helping to serve the needs of rural communities.

METRIC STRATEGY

Percent of physician practices and hospitals that have Subsidize the cost of for-profit hospitals are more adopted and use electronic health records (not yet available). technology adoption among likely to use electronic medi- Although data on physicians’ use of electronic health records smaller firms. cal records than nonprofit and is still too limited to allow detailed state-level comparisons of One of the biggest impedi- government-owned hospitals. Nevada’s progress toward adoption of health information tech- ments slowing the adoption of The 2009 federal stimulus nology, the Health Information Technology for Economic and electronic record keeping is bill provided funds to help states Clinical Health Act of 2009 (HITECH), part of the federal stimu- the required upfront cost. For invest in health information lus legislation, has directed the Centers for Medicaid and Medi- small firms, the time and cost technology. The Nevada Office care Services to create a system of incentive payments to help of changing systems—including of Health Information Technol- reach the stated goal of “achieving widespread adoption and potential lost revenue—are sig- ogy has initiated planning in this meaningful use of electronic health records” by 2014. Monitor- nificant relative to the benefits, area, and a commitment to con- ing of these rules, and the bonus payments made, will provide a which accrue over time. A recent tinue the effort is important. useful metric for assessing Nevada’s performance in the future. study has shown that only about Increasing active use of health information technology, in- 30% of offices with 10 or fewer cluding initiatives to expand data collection and information physicians have adopted elec- sharing, also provide an important opportunity for the state to tronic health records, while more consider a range of potential new healthcare metrics that would than 46% of offices with 11 or be of use to doctors, hospital administrators and state policy- more physicians have done so.1 makers. For example, there is currently little information on Given this problem of scale emergency room wait times or reasons for patient visits. Using and the broader public benefits innovations in healthcare IT to collect and distribute this data from electronic medical records, would help the state assess the extent to which ERs in the state a case can be made for govern- are being overburdened. Similarly, data on the share of patients ment to help facilitate the tran- initially held for psychological evaluation who are (or are not) sition by subsidizing the cost for later transferred into institutional settings could shed light on smaller providers. Concerns that the capacity of state resources to process and treat those with such subsidies might be inef- mental health problems. ficient or politically driven are likely misplaced. In fact, private

1 Hing, Hall and Ashman, “Use of Electronic Medical Records by Ambulatory Care Pro- viders: United States, 2006,” National Health Statistics Reports No. 22, Centers for Disease Control and Prevention, April 30, 2010.

74 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Health & Well-being

GOAL 2 Increase efficiency to contain costs.

OBJECTIVE #4 Increase use of outside funding.

In fiscal 2008, Nevada’s Medicaid expenditures totaled $455 million. The amount spent by the federal government on matching funds was $684 million. On a per capita basis, Nevada receives less support from the federal government toward health insurance than other states. Partly this is a federal decision; Nevada is assigned a lower matching rate than many poorer states. But it also reflects a policy choice by Nevadans. By designing eligibility requirements and benefits for federally funded programs to minimize state expenditures, the state also minimizes the help it receives from Washington to address its citizens’ health needs.

METRIC STRATEGIES

Federal share of healthcare expenditures. Expand enrollment in on project startup costs out of fear One benchmark goal would bring the state’s per capita federally funded programs. that funding will soon dry up. healthcare revenue from federal sources in line with national Low participation rates in fed- Many Nevada households averages. Although this would require the commitment of ad- eral programs can be traced to also never learn about federal ditional state resources, the productive value of such spending both state policy and a lack of in- programs for which they might be would be high given the federal match. This goal may be realized formation among eligible house- eligible. Outreach programs such in any case, since expansion of Medicaid eligibility is set to occur holds. Coordinating an increase in as the “no wrong door” policy and under federal healthcare legislation (see box on page 62). participation rates is further com- universal aid applications have plicated by the structure of Ne- been successful in other states. Healthcare Revenue From Federal Sources vada’s public healthcare system. Community-based outreach Federal health-related revenue, as a % of state general revenue While most states centralize poli- programs (for example, Trusted 2.0% cymaking and financial responsibil- Partners) are particularly effective Nevada U.S. average ity for programs such as Medicaid in ­educating households about 1.5% at the state level, ­Nevada places available benefits. statutory responsibility for indigent Opportunities exist to receive care with the counties. revenue from federal sources 1.0% Nevada’s volatile regional beyond participation in match- economy and revenue system ing programs. One example is the 0.5% significantly inhibit participation in 2009 American Recovery and Re- federal programs. Most federal aid investment Act, which committed 0.0% is delivered through need-based significant federal funds to support 50s 60s 70s 80s 90s 00s 15 20 30 healthcare and public assistance state budgets and to implement Source: Census Bureau programs. As such, caseloads and reforms and capital improvements. FROM MOODY’S ECONOMY.COM 5 spending requirements typically in- Relative to other states, Nevada crease at the same time that state received not only less federal tax revenues decline, often leaving Medicaid assistance, but also less Nevada hard-pressed to provide its for healthcare and other grants. share of matching funds. Volatile Unlike many states, Nevada does state resources have been blamed not employ full-time grant writers for the failure to attract federal to pursue federal funds, as many project grants, with researchers other states do. Such an effort and aid workers reluctant to take could more than pay for itself.

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GOAL 3 Build healthy communities.

OBJECTIVE #1 Reduce the burden of poverty on families and communities.

Poverty remains a complex and multifaceted problem, with few easy remedies. What the state can address more directly and immediately is poverty’s detrimental impact on social conditions. Foremost among these is hunger, and the fraction of Nevada households classified as food insecure is an important metric in assessing Nevada’s progress in this area. In addition to the lack of food, lack of shelter is a major quality of life issue for Nevada. Even before its foreclosure crisis, the state had one of the highest rates of homelessness in the country, most of it concentrated in the south.

METRIC STRATEGIES

Share of families classified as food insecure. Provide opportunities for more than 86,000 adults in Ne- The HP2010 benchmark for this metric is 12%. The reported housing and strengthen vada were identified as having a rate of food insecurity in Nevada for 2008 exceeded this target social services. serious mental illness.3 slightly and may have risen further since then. By 2015, the Providing appropriate op- The true incidence of mental state should strive to bring down the share of families classified portunities for housing and health problems is hard to mea- as food insecure below 12% and progress thereafter toward a social services is critical. By one sure precisely, as is the social target of 7% by 2030. estimate, efforts to provide sup- cost. At the extreme, mental The use of food stamps is also an important metric. Access portive housing environments in health problems can cause their to food stamps is important to those who need them, but their metropolitan areas produced a sufferers to harm themselves or increased use can also signal a decline in overall well-being. The combined cost savings of more others. In 2008, Nevada’s vio- goal of reducing food stamps should therefore be pursued by than 30% for state and local lent crime rate was the highest reducing residents’ need for them. However, because SNAP, the governments, with emergency in the West, and almost 60% U.S. food stamp program, is fully funded by the federal govern- room visits reduced by 56% higher than the U.S. average.4 ment–with Nevada responsible only for associated administra- and inpatient stays reduced to There is no evidence that tive costs–utilization rates are also an important indicator of nearly zero.1 these statistics are related to leveraging federal resources to lower state costs. mental health, but that no- Increase support for mental tion is supported by Nevada’s health professionals. high suicide rate. In 2007 the Hunger Mental health can be a fac- state’s rate was 18.3 deaths per Households classified as food insecure, % of total tor in social problems such as 100,000, well above the U.S. 13 poverty and homelessness. One- level of 11.3, and more than four Nevada U.S. 12 third of Americans were reported times the national target of 4.3 5 11 in poor mental health in 2007; set by HP2010. Although the 10 in Nevada this rate was signifi- cantly higher (39%), with the 9 3 National Mental Health Information Cen- majority being women.2 In 2002, ter, Substance Abuse and Mental Health 8 Services Administration. 4 Table 4, Crime in the United States-2008, 7 Federal Bureau of Investigation, U.S. De- 6 1 Nevada Disability Advocacy and Law Cen- partment of Justice, 2008. ter, “Report on the Mental Health Crisis in 5 The Centers for Disease Control and Pre- 5 Southern Nevada,” February 2005. vention (CDC), National Center for Health 02 03 04 05 06 07 08 15 20 30 2 Data taken from the Kaiser Family Founda- Statistics, Division of Vital Statistics, Na- tion, statehealthfacts.org, based on unpub- tional Vital Statistics Report Volume 58, Source: FDA lished data from the BRFSS, 2007. Number 19, May 2010.

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STRATEGIES (Continued) suicide rate is highest among those older than 75, it is of particular concern among the relatively young. Suicide is now among the top three causes of death for 15 to 34 year olds.6 More can and should be done to increase the capacity of community-based services to help individuals with mental ill- ness and relieve the burden they put on local emergency rooms. According to a Nevada advocacy organization, 40% of those who checked into a local walk-in clinic left out of frustration without receiving services. 7

6 Nevada Department of Health (see http:// health.nv.gov/PDFs/HSPER/Snapshots/ Snapshot_of_Suicide_2006_021010.pdf). 7 Nevada Disability Advocacy and Law Cen- ter, “Report on the Mental Health Crisis in Southern Nevada,” February 2005.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 77 FOCUS ON �� Health & Well-being

GOAL 3 Build healthy communities.

OBJECTIVE #2 Promote healthy lifestyles.

Creating mechanisms to address larger social and economic forces such as homelessness, poverty and hunger is central to building strong communities. But it is equally important that individuals take responsibility for themselves and their communities. Lifestyles that empha- size healthy behavior not only improve the quality of life for Nevada’s citizens, they are also a central factor driving future state healthcare spending. Rates of exercise, obesity, smoking and substance abuse are all important leading indicators of future health costs.

METRIC STRATEGIES

Obsesity rate (% with BMI>30), adult smoking rate. Promote exercise and no statewide plan to address child- The quality of Nevadans’ health and the risks presented by good diet through primary hood obesity, either with respect to their lifestyle choices are not easily captured in a single met- care and public education nutrition or physical education.2 ric. The HP2010 report lays out targets for a number of indica- campaigns. The share of smokers in the tors associated with poor future health, including obesity among Although Nevada compares population has declined steadily adults and children, tobacco use, substance abuse, physical ac- well with other states in some over the past decade to 22%, yet tivity, sexual behavior, environmental quality, and violence. of these areas, attention is still this is significantly above the goal The two indicators most commonly associated with chronic required. The state has tradition- of 12% set in the HP2010 report. health problems are obesity and tobacco use. The HP2010 tar- ally enjoyed a lower than average Substance abuse is also a prob- get for obesity is 15% for adults and 5% among children. The obesity rate, but its ranking among lem for Nevadans. While they are target rate for smokers among the adult population is 12%. states fell from second to 20th no more likely than most Ameri- Although smoking rates have trended downward in recent years, between 1998 and 2008. Obesity cans to drink alcohol, the rates of obesity is on the rise, and Nevada still has some way to go to among children is a particular heavy drinking (6.9%) and binge meet national targets in either area. The state should focus concern, and Nevada’s children drinking (17.5%) are higher in Ne- initially on stabilizing the upward trend in obesity, holding cur- appear in worse shape than its vada than in most states.3 rent levels through 2015. It can then focus on making progress adults: 34% of those aged 10 to Smoking and substance abuse toward national target levels for smoking and obesity by 2020, 17 qualified as obese in 2007, a often can be symptomatic of meeting these goals by 2030. higher proportion in this age group deeper behavioral health prob- than in any other western state.1 lems. As such, many of the ef- Leading Health Indicators Intervening early in a child’s life forts to expand primary care and % of Nevada adults with BMI > 30, and share who smoke tobacco to address obesity concerns can address mental health resources 30 help to sustain better physical and discussed elsewhere in this report Obesity Smoking mental health through adulthood. may be the best way to address 25 Parents, doctors and state health these concerns as well. 20 and education officials should work

15 together to develop a plan that ad- dresses this issue in a coordinated 10 2 The American Academy of Pediatrics and sensitive manner. Nevada has (http://aap.org/advocacy/statelegrpt.pdf, p29). 5 3 For males, heavy drinking is defined as two 1 From statehealthfacts.org, data source: or more drinks per day, while binge drink- Child and Adolescent Health Measurement ing is defined as five or more drinks on one 0 Initiative. 2007 National Survey of Children’s occasion (for females, the rate is one drink 00 01 02 03 04 05 06 07 08 15 20 30 Health, Data Resource Center for Child and lower). Data come from the Centers for Adolescent Health web site Disease Control and Prevention, Behavioral Sources: FDA, U.S. Centers for Disease Control and Prevention (www.nschdata.org). Risk Factor Surveillance System.

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78 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Public Safety

Focus On | Public Safety ow crime rates and short response times by local public safety departments enhance residents’ quality of life by providing a safe and secure living environment. Along with choosing locations that offer employment, lei- L sure and educational opportunities, households seek out safe communities.

Nevada’s public safety workers face to compare among states and can be used to crimes or accidents are able to effectively unique challenges created by the state’s as a proxy for Part II crimes in general. Ne- communicate and work together will im- vast geography as well as the large number vada’s statewide property crime rate is just prove outcomes. of tourists. In response, local public safety 7% higher than the U.S. average. Efforts to While the size and effectiveness of police departments have developed unique innova- reduce this property crime rate would keep forces are leading factors in limiting crime tions and local expertise, much of which may Nevada attractive for new residents, busi- rates, they are not the only influences. be valuable to safety workers in other states. nesses and tourists. Private security personnel such as those Nevada struggles with a higher than average The juvenile crime rate in Nevada is high. working in Nevada’s large casinos can help crime rate, driven largely by property crime. While the juvenile crime rate has fallen in contain crime, as can efforts at the com- Highway safety is another concern for the recent years—in 2007 it was just 70% of its munity level.4 A community commitment to state, with a large number of road fatalities 2001 rate—the per capita rate still ranks well preventing crimes and rehabilitating previous relative to national averages. above the national average. Improved edu- offenders to minimize the recidivism rate Both violent crime and property crime cational opportunities, along with economic creates a safer environment for residents. are more common in Nevada than nation- growth and more job opportunities, will also The Opportunity for Probation with Enforce- wide. Violent crimes, which include murder, influence crime rates.2 Creating stronger ment (OPEN) Diversion Program is an ex- forcible rape, robbery, aggravated assault community-based programs such as Las Ve- ample of how offenders on probation can be and simple assault, are a definite threat to gas’ Youth at Risk prevention and rehabilita- monitored to limit recidivism.5 residents’ and visitors’ safety. These crimes tion program to discourage youth crimes and Ensuring that the state has sufficient fire- are often highly targeted, but the state also to rehabilitate juvenile offenders will also fighting capacity is also important. Efficient -re needs to work to minimize these offenses to pay dividends for Nevada. sponse times and cooperation among agencies promote a safe environment. Many factors influence the overall crime will increase residents’ safety. While violent crimes are naturally of con- rate, including the presence and visibility of Road safety is also important for Nevada. cern, the perception of quality of life is most police officers.3 In this regard, Nevada falls Along with a sufficient infrastructure to safe- affected by so-called Part II crimes.1 These short. The number of crimes per patrol offi- ly handle vehicle traffic, quick response to include property crimes and nuisance crimes cer far exceeds the national average, but this highway accidents can help reduce fatalities. such as graffiti, curfew violations and loiter- measure has improved somewhat in recent Traffic deaths occur in Nevada at noticeably ing—offenses often more visible to residents years (see Chart 2). The improvement stems higher rates per miles traveled than the U.S. and visitors. Due to the high number of tour- from the combination of a larger police average (see Chart 3). Ensuring that roads ists who visit the state, and particularly Las force and a reduction in the total number of are adequately marked and that emergency Vegas, and Lake Tahoe crimes such as bur- crimes in 2007 and 2008. response teams are properly trained and glary, larceny, and motor vehicle theft occur A nimble public safety force, able to ef- staffed can help reduce fatal traffic injuries. more frequently in Nevada than elsewhere. ficiently and effectively communicate with The state can also offer traffic safety courses Part II offenses are difficult to compare other departments, will improve the overall and promote driver safety generally. across states due to differences in definitions response to crime and other emergencies. Substance abuse is also a public safety (See Chart 1). Property crimes are easier Communication improvements can stem concern for the state. In Nevada, the rate of from IT innovations and coordinated equip- ment upgrades among agencies. Ensuring 1 The FBI defines Part II offenses as simple assaults, forgery 4 Cook, Philip J. “Assessing Urban Crime and Its and counterfeiting, fraud, embezzlement; stolen property: that public safety personnel who respond Control: An Overview.” National Bureau of Economic buying, receiving, possessing, vandalism; weapons: carrying, Research, Working Paper No. 13781. 2008 possessing; prostitution and commercialized vice, sex of- 5 Horne, William, Assemblyman/Chairperson. “Advisory Com- fenses (except forcible rape, prostitution and commercialized mission on the Administration of Justice.” The program works vice), drug abuse violations, gambling, offenses against the 2 Lochner, Lance. “Education Policy and Crime.” to mitigate probation revocation due to violations. Rather family and children, driving under the influence, liquor laws, National Bureau of Economic Research, Working Paper than revoking probation after violations, offenders are sent drunkenness, disorderly conduct, vagrancy, suspicion, curfew No. 15894. 2010 to Casa Grande Transitional Housing and participate in inter- and loitering laws, runaways and all other offenses not 3 Klick, Jonathon and Alex Tabarrok. “Using Terror Alert Levels vention programs to allow them to then continue with their specifically identified as Part I or Part II offenses, except to Estimate the Effect of Police on Crime.” The Journal of Law probation. The program is designed give violators a second traffic violations. and Economics, Vol. 48. 2005 chance while alleviating crowding in the prison system.

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Chart 1: Property and Nuisance Crimes Chart 2: Nevada’s Coverage Falls Behind Part II crimes per 100,000 population, Nevada Crimes per patrol officers 6,000 30 Nevada U.S. 5,900 28 5,800 26 5,700 24 5,600 22 5,500 20 5,400 5,300 18 5,200 16 04 05 06 07 08 05 06 07 08 Sources: FBI, Moody’s Analytics Sources: FBI, BLS, Moody’s Analytics

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2 Chart 3: Roadways Improving, Still Dangerous Public safety en- not only the juvenile crime rate but also the Fatality rate per 100 mil vehicle miles traveled compasses not only rate among adults as those children mature. 22 crime prevention, but Education, therefore, not only improves 21 Nevada also incarceration quality of life directly, through greater 20 U.S. and rehabilitation. employment and earnings potential, but 19 Effective public safety also has a positive influence on the general 18 programs link crime ­quality of life. 17 16 prevention, criminal In addition to all its local crime and safety 15 justice and correc- concerns, Nevada must be concerned with 14 tions. Rehabilitation terrorism and other external threats. Ensur- 13 can complement ac- ing that the Department of Homeland Secu- 12 tive crime prevention rity is properly involved in the state’s safety 00 01 02 03 04 05 06 07 08 by reducing recidi- programs is therefore a necessary focus for Sources: Federal Highway Administration, Moody’s Analytics vism rates and allow- Nevada. Fusion centers, which coordinate

FROM MOODY’S ECONOMY.COM 1 ing past offenders to among federal, state and local agencies, illicit drug use is highest among those aged re-enter society.8 are a way for Nevada to encourage federal 18 to 25. The rate of illicit drug use among Funding is a concern for all public safety involvement and improve readiness within the youngest age group, those aged 12 to 17, programs, with police, firefighting and ambu- the state. and those 26 and over has held fairly steady lance services accounting for large portions of in recent years. state and local government budgets. Assuring A Vision of Public Safety Reducing maternal substance abuse im- quality services and coverage within the scope While the state’s public safety depart- proves the outlook for children, highlighting of available fiscal resources is as important as ments have dealt with numerous challenges the importance of prevention and rehabilita- expanding public safety operations. to provide quality service to residents and tion for those struggling with drug addiction.6 Goals and strategies for other quality of visitors, statistics show room for improve- Providing education about drug abuse preven- life areas addressed in this report can also ment. The Nevada Vision Stakeholder tion and creating protection programs for contribute to better public safety. In par- Group has therefore, set a broad goal of high-risk groups can reduce substance abuse ticular, increased educational attainment, improving public safety within the state. among those groups.7 Reduction of substance school enrollment and educational quality Several objectives will help Nevada advance abuse will also discourage associated crimes. are factors that can reduce crime,9 affecting that goal. A safer community will improve the quality of life for both residents and vis- 6 Frank, Richard G. and Ellen Meara. “The Effect of Maternal itors. Reducing Part II crimes is important, Depression and Substance Abuse on Child Human Capital 8 Di Tella, Rafael and Ernesto Schargrodsky. “Criminal Recidi- Development.” National Bureau of Economic vism after Prison and Electronic Monitoring.” National Bu- since property crimes, graffiti, loitering, Research, Working Paper No. 15314. 2009 reau of Economic Research, Working Paper No. 15602. 2009 and other nuisance violations can signifi- 7 Hawkins, J. David, Michael W. Arthur and Richard F. 9 Lochner, Lance. “Education Policy and Crime.” cantly hurt the perception of a community’s Catalano. “Preventing Substance Abuse.” Crime National Bureau of Economic Research, Working Paper and Justice, 1995. No. 15894. 2010 ­quality of life.

80 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Public Safety

GOAL OBJECTIVE METRIC STRATEGIES 1. Promote low-crime environment Property crime rate »» Expand crime prevention and probation pro- Violent crime rate grams »» Improve personnel management for efficiency and effectiveness »» Encourage and enable cooperation among public service agencies »» Address correctional facility needs 2. Discourage juvenile crime Juvenile crime rate »» Provide additional support for the juvenile justice system »» Expand juvenile crime prevention programs and work to rehabilitate offenders Improve 3. Foster safer roadways Fatal traffic injuries per »» Encourage agencies to work in cooperation in the level of billion miles traveled response to roadway accidents public safety 4. Reduce substance abuse Illicit drug use rate »» Promote agency collaboration to reduce sub- stance abuse, to include rehabilitation options »» Expand rehabilitation options for those ar- rested for drug use 5. Ensure cost-effective firefighting and »» Encourage fire departments to consolidate fire prevention capabilities »» Encourage greater resource sharing »» Ensure efficient use of technology »» Focus on preventing youth from setting fires

6. Export Nevada’s public safety and »» Establish a national fire academy firefighting knowledge

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 81 FOCUS ON �� Public Safety

GOAL 1 Improve the level of public safety.

OBJECTIVE #1 Promote a low-crime environment.

Part II crimes are highly visible to both residents and tourists. Reducing the incidence of these nuisance crimes will make Nevadans feel safer and improve the social and civic environment. Such efforts should take the form of both crime prevention and rehabilitation for prior offenders.

METRIC STRATEGIES

Property crime rate. Expand crime prevention propriately to address the vary- Reported by the Federal Bureau of Investigation in its Uni- and probation programs. ing concerns.1 form Crime Reporting program, property crimes include bur- Crime prevention should be The state should divert glary, larceny theft, motor vehicle theft, and arson. the first aim of community- probation violators from the Although the category does not exactly match Part II crime, based programs, but rehabilita- prison system when possible. it is a good proxy because it captures nonviolent offenses. The tion is also a necessary piece The Opportunity for Probation property crime rate for the Mountain West excluding Nevada of the puzzle. The state should with Enforcement in Nevada exceeds the state’s average, so the state’s goals are focused on work to take advantage of Diversion Program at Casa the national figure. Nevada should aim to halve its gap with the federal funding, through either Grande Transitional Center is nation by 2020 and to meet the current U.S. average by 2030. one-time grants or ongoing an example of a program that The FBI also tracks violent crimes, which include murder, sources, to support preven- works to prevent probation forcible rape, robbery, aggravated assault and simple assault. To tion programs. Grant-writing violators from re-entering the promote a safe environment, the state also needs to minimize expertise would greatly benefit prison system. these offenses. The violent crime rate for the Mountain West is these efforts. The state should below both the Nevada and U.S. averages; therefore, the state’s also be aware that rural and 1 Donnermeyer, J.F. (1994). Crime and violence in rural communities. In G. Karim goal is to narrow the gap with the U.S. by half in 2015, meet the urban crime are very different (Ed.), Violence and Substance Use in Rural current national average in 2020, and fall to the current Moun- and should encourage public America: Keys to Prevention. Oak Brook, IL: North Central Regional Educational tain West average by 2030. safety agencies to respond ap- Laboratory

Promote Low-Crime Environment Promote Low-Crime Environment Property crimes per 100,000 population Violent crimes per 100,000 population 4,400 770 Nevada U.S. 730 Nevada U.S. 4,200 690 4,000 650 3,800 610 570 3,600 530 3,400 490 450 3,200 410 3,000 370 00 01 02 03 04 05 06 07 08 15 20 30 00 01 02 03 04 05 06 07 08 15 20 30 Sources: Census Bureau, Federal Bureau of Investigation, Moody’s Analytics Sources: Census Bureau, Federal Bureau of Investigation, Moody’s Analytics

FROM MOODY’S ECONOMY.COM 1 FROM MOODY’S ECONOMY.COM 2

82 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Public Safety

STRATEGIES (Continued)

One unique aspect of Ne- development programs. Also One example of collaboration communication through the Ne- vada’s rehabilitation program is important are infrastructure is- in this area is the Department of vada Shared Radio System. This the way cases are assigned at the sues such as aging correctional Homeland Security’s fusion cen- provides communication capabili- state level. Staffing is therefore facilities. Public safety agencies ters. Developed to aid in counter- ties throughout the state, includ- a concern for justice system pro- should also be aware of oppor- terrorism, these promote informa- ing service to rural areas. grams. The state needs to ensure tunities to leverage common tion sharing among federal, state an appropriate level of personnel. resources: For example, multiple and local government depart- Address correctional jurisdictions could share hazmat ments as well as private agencies. facility needs. Improve personnel response units. Nevada has three such centers. Many of Nevada’s correc- management for efficiency The state’s public safety tional facilities are aging, and the and effectiveness. Encourage and enable departments can also seek state is at risk of losing capac- One concern is the use of cooperation among public federal grants to aid in train- ity. To ensure that the state can overtime to meet public safety service agencies. ing and resource development. properly handle incarceration staffing needs. While this can Wherever feasible, the state Dedicated grant writers would needs, it will have to focus on help save costs in the areas of should promote cooperation allow departments to better maintenance and construct- benefits, training and personnel across agencies, particularly in use funding opportunities. ing new facilities or expanding administration, it can also raise overlapping jurisdictions, as well Another example of inter- ­current ones. Although the state issues of effectiveness. The state as across functions such as police agency cooperation, one that needs to provide alternatives to needs to assist agencies in find- and firefighting. Programs should works to ensure the best possible incarceration such as probation ing the proper balance between use a bottom-up approach, with coverage for the state’s rural com- and rehabilitation, some crimi- the use of overtime hours and local departments taking the munities, is a joint initiative of NV nals will need to be incarcerated. additional hiring. initiative. At the same time, the Energy, the Nevada Department To prevent premature release of High staff turnover rates in state can work from the top down of Transportation and Nevada these individuals due to a lack of the Department of Corrections to provide a framework for col- Department of Public Safety, correctional facility space, could be addressed through laboration. The state can promote Washoe County, as well as other the state should address its ­ succession planning and staff and encourage, without coercing. groups that works to provide aging infrastructure.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 83 FOCUS ON �� Public Safety

GOAL 1 Improve the level of public safety.

OBJECTIVE #2 Discourage juvenile crime.

Targeting juvenile crime would improve public safety and help lower future crime rates.

METRIC STRATEGIES

Juvenile crime rate. Provide additional support velop partnerships with private Reported by the Federal Bureau of Investigation in its Uni- for the juvenile justice entities or with the state univer- form Crime Reporting program, the juvenile crime rate includes system. sity system’s various computing all incidents in which someone under age 18 is arrested, cited or Funding is a concern for facilities such as UNLV’s super- summoned for an offense. Juvenile crime rates for other states in public safety, and the juvenile computing facilities. the Mountain West generally exceed Nevada’s, so the goals are justice system is no excep- to extend recent improvement through 2015, halve the gap with tion. Beyond identifying stable Expand juvenile crime the nation by 2020, and meet the current U.S. average by 2030. funding sources, whether prevention programs federal, state or local, Nevada and work to rehabilitate Discourage Juvenile Crime can encourage support for the offenders. Juvenile crime rate per 100,000 population juvenile justice system. For ju- Particularly for youth, preven- 12,000 veniles, county-level probation tion goes hand in hand with out- Nevada U.S. and youth parole programs reach. Communities have an op- 11,000 such as the Juvenile Detention portunity to serve children who 10,000 Alternatives Initiative1 should would benefit from intervention. be strengthened. To discour- Programs can be focused on 9,000 age repeat offenders, Nevada education such as after-school 8,000 should focus on intermediate tutoring, but they should also in- sanctions and create additional clude an avenue for reintegrating 7,000 alternatives to incarceration. previous offenders into school 6,000 Other efforts could include systems and society. 01 02 03 04 05 06 07 15 20 30 improved data collection to An existing program in Las Sources: Census Bureau, Federal Bureau of Investigation identify effective prevention or Vegas, Partnership for Youth at FROM MOODY’S ECONOMY.COM 2 rehabilitation programs. Data Risk, could be expanded or used collection and database man- as a model for other jurisdic- agement offer a chance to de- tions. The month-long program exposes participants to the jus- 1 Active in Washoe and Clark counties, the tice system, having them meet Juvenile Detention Alternatives Initiative inmates, visit a burn unit, visit is funded by the Annie E. Casey Founda- tion. The program attempts to eliminate a psychologist, and participate inappropriate or unnecessary detention, in programs with their parents. minimize re-arrest and failure-to-appear rates, ensure appropriate conditions of The program is funded through confinement, support public funding of grants, highlighting the need to successful reforms, and reduce racial and ethnic disparities. More information on the build grant-writing expertise. program is available at http://www.aecf. org/MajorInitiatives/JuvenileDetentionAl- ternativesInitiative.aspx.

84 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Public Safety

GOAL 1 Improve the level of public safety.

OBJECTIVE #3 Foster safer roadways.

Residents’ safety needs extend beyond homes, schools and workplaces to the state’s road system.

METRIC STRATEGY

Fatal traffic injuries per billion miles traveled. Encourage agencies to work Combining Federal Highway Administration data on traffic in cooperation in response fatalities and total miles traveled, this metric gauges the safety to roadway accidents. of the state’s roads. It has some limitations; the measure does Coordinating traffic accident not capture the overall rate of accidents either with or without responses requires commu- injuries or pedestrian fatalities. It also includes highway fatalities nication among public safety that might not have been preventable with a faster response agencies. Emergency response time. The goals are to extend recent improvement through 2015, training offers another chance halve the gap with the nation by 2020, and meet the current for agencies to collaborate. Joint U.S. average by 2030. response exercises will not only help each department improve Foster Safer Roadways but will also foster closer rela- Fatality rate per bil vehicle miles traveled tionships that can streamline 22 accident response. 21 Nevada 20 U.S. 19 18 17 16 15 14 13 12 00 01 02 03 04 05 06 07 08 15 20 30 Sources: Federal Highway Administration, Moody’s Analytics

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SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 85 FOCUS ON �� Public Safety

GOAL 1 Improve the level of public safety.

OBJECTIVE #4 Reduce substance abuse.

Reducing the incidence of substance abuse will lower crime rates, improve public health, and lessen demand for state-provided social services.

METRIC STRATEGIES

Illicit drug use rate. Promote agency Expand rehabilitation Data from the Substance Abuse and Mental Health Services collaboration to reduce options for those arrested Administration’s survey show the level of substance abuse in substance abuse, to include for drug use. Nevada. Lowering that level will improve the quality of life for rehabilitation options. Communities and agencies families and communities as it reduces the state’s crime rate. Cooperative efforts on sub- can work together to aid those Because Utah’s substance abuse rate is the lowest within the stance abuse should extend struggling with addiction and Mountain West, Nevada’s goals focus on narrowing its gap with beyond public safety agencies. their families. Ensuring access to Utah. The goals are to extend recent improvement through The aid of social work, health, rehabilitation programs will pay 2015, halve the gap with Utah by 2020, and meet that state’s and children and family services dividends in public safety. Rein- current average by 2030. agencies is critical for both tegrating individuals into their prevention and rehabilitation. communities can also be positive Minimize Substance Abuse Joint communication between for workforce quality. Providing Illicit drug use in the past month, %, 12 yrs and older agencies and the families of youth rehabilitation options will 10 substance abusers can also be prevent later substance abuse Nevada important. Interagency task problems and mitigate criminal 9 forces can be deployed to com- activity. Community-based sub- bat substance abuse as well as stance abuse programs could drug trafficking within the state benefit from cooperation among 8 and externally. federal, state and private groups Nevada was chosen as one and the creation of public- 7 of seven states to participate private partnerships. As in many in the Rural Law Enforcement of the strategies discussed in this 6 Meth Initiative, a program report, grant-writing expertise 03-04 04-05 05-06 06-07 15 20 30 created from the American Re- would be beneficial. Sources: SAMHSA, Moody’s Analytics covery and Reinvestment Act FROM MOODY’S ECONOMY.COM 4 of 2009. The program works to prevent methamphetamine use, particularly in rural com- munities. The state should work to take full advantage of the chance to strengthen its rural communities through inclusion in the program.

86 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Public Safety

GOAL 1 Improve the level of public safety.

OBJECTIVE #5 Ensure cost-effective firefighting and fire prevention capabilities.

Fires, both arson and accidental, diminish Nevadans’ safety at home and work. Having an efficient and effective fire department can help minimize injury and losses from fire.

METRIC STRATEGIES

No metric available. Encourage fire departments tiveness. Attention to response to consolidate. times will be more of a concern Nevada’s firefighters face a in Nevada’s rural areas. unique set of needs and environ- ments to protect, from high-rise Encourage greater resource urban centers to vast open, rural sharing. areas. Because of this wide vari- While resource sharing would ety of situations, the state’s fire be a natural outcome of depart- departments should be allowed ment consolidation, this ap- flexibility in their approach to proach can be encouraged even firefighting. The state should in the absence of consolidation. examine the current model that Since training and preparation makes significant use of over- are critical to firefighting, it is -im time for staffing purposes. This portant to have a properly pre- skews some comparisons such pared workforce. When residents as pay or per capita coverage. call for help, departments need to Any examination of Nevada’s fire ensure the response is appropri- capabilities should consider this ate. Joint training efforts not only unique situation. improve departments’ capabilities Fire departments should be but also foster closer working rela- sure to focus on maintaining tionships. The state should work safe response times, even when closely with the Nevada Fire Safe there has been consolidation Council and its chapters to sup- among fire departments. The port the council’s mission of serv- national standard, as recom- ing as a bridge among fire services, mended by the National Fire public agencies, and local commu- Protection Association, for a fire nities threatened by wildfire. department to respond to a call Departments can also work is within four minutes. This is jointly on supply acquisition. Fire particularly important because departments’ equipment needs of the high share of medical are similar, and a joint facility calls to which fire departments could streamline ordering and respond. Ensuring that respond- purchasing. This could be mod- ers are there within four min- eled on the U.S. Army’s approach utes will increase their effec- to centralized supply.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 87 FOCUS ON �� Public Safety

STRATEGIES (Continued)

Ensure efficient use of Focus on preventing youth technology. from setting fires. Coordinating the use of As mentioned under the technology across agencies is objective to discourage ju- another key strategy for improv- venile crime, the existing Las ing the compatibility of commu- Vegas Youth at Risk program nication and database systems, could be expanded or used as enabling efficient cooperation a model for other jurisdictions. among public safety agencies. This is ­particularly relevant to fire The fire alarm office is one area safety because, among its other for IT innovations. Upgrades to ­objectives, the program ­focuses this joint agency venture would on preventing youths from not only help improve responses ­starting fires. to calls but would also be more financially efficient, if appropri- ately implemented. Fire departments would also benefit from widespread use of geographic information systems, which would allow effective use of and proper analysis of the overall emergency management system. Used to map out plans for fire departments, GIS would also allow departments to better serve their communities.

88 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 FOCUS ON �� Public Safety

GOAL 1 Improve the level of public safety.

OBJECTIVE #6 Export Nevada’s public safety and firefighting knowledge.

Nevada’s public safety workers face unique challenges stemming from the state’s vast geography, as well as its large inflows of tourists. The state could leverage this knowledge through an interstate academy.

METRIC STRATEGY

No metric available. Establish a national fire academy. The West could benefit from an alternative to the nation’s only National Fire Academy, which is based in Emmitsburg MD. Establishing such a pro- gram in Nevada would serve this need while supporting the state’s economy. A public safety academy would bring additional visitors, generating revenue at the facility and nearby. It would also create opportunities for Nevada’s public safety work- ers to train and advance their capabilities. The Nevada Vision Stakeholder Group feels that locations in Carlin or in the Mc- Carran Airport area could serve this function.

SEPTEMBER 2010 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS 89 APPENDIX

Appendix

The Moody’s Analytics State Model System

oody’s Analytics maintains economic forecast models that are updated on a monthly basis for all 50 states plus the District of Columbia, as well as a U.S. macroeconomic model and models for all 384 M metropolitan areas. The Moody’s Analytics economic and Simultaneity in the models is controlled by the The ability to model the location of in- demographic projections for U.S. states are Gauss-Seidel algorithm, which iterates toward dustrial output and its subsequent impact on produced each month with a quarterly fre- a stable solution as determined by preselected establishment employment is a key feature quency large-scale simultaneous-equation convergence criteria. In practice, the system is of this system. It enhances the quality of econometric model system. The state model very stable—requiring a minimal number of it- state output forecasts and makes for a very system is designed to reflect each state’s erations at standard convergence criteria. flexible platform for policy analysis. comparative economic advantage to fully In the solution process, output influences Personal income is the link between model the unique economic structure of employment, employment influences migra- state employment and demand for con- each state, and to account for the effects of tion, migration influences population, popu- sumer goods and services. Wage and salary macroeconomic assumptions on the indi- lation creates demand for output, and so on. income makes up the majority of personal vidual state economies. Comparative advan- Key factors that determine relative state per- income and is directly related to employ- tages are estimated through relative business formance within this construct are industrial ment levels. In the state models system, costs and demographic characteristics. State mix, labor costs, energy costs, tax rates, net wage and salary income is the product of industrial structure is captured through de- migration, and other demographic factors. total employment and the effective wage tailed specifications of output and employ- The major benefit of the output-based rate. The historical effective wage rate is ment by industry. structure of the model is that it allows for calculated as the total wage bill divided by The state model system is fundamentally an the inclusion of cost-of-doing business vari- total employment; it is forecast as a func- output-based industry model that is simultane- ables and productivity variables as key deter- tion of U.S. average hourly earnings and ously interactive with a demographic model. minants of output and employment. state and U.S. productivity.

Methodology for estimating clean energy jobs

hese estimates are based on the PEW Charitable Trusts’ definition of the clean energy economy. PEW identifies five segments of the clean energy economy: clean energy, energy efficiency, environmentally T friendly production, conservation and pollution mitigation, and training and support. PEW reported ­state-level clean energy economy employment for the years 1998 through 2007. For the years prior to 1998 and after 2007, an estimation technique was developed.

A list of NAICS codes was generated NAICS codes was calculated in both 1998 employment estimates for the years to match the descriptions of clean energy and 2007. For the years prior to 1998, ­following 2007. economy occupations. Because not all the ratio of total clean energy economy For the full report on PEW’s clean en- employment in those NAICS codes is in jobs to total jobs within the clean energy ergy economy estimates see: http://www. the clean energy economy, the ratio of economy NAICS codes was used to gen- pewcenteronthestates.org/uploadedfiles/ total clean energy economy jobs to total erate Moody’s employment estimates. clean_economy_report_web.pdf jobs within the clean energy economy The 2007 ratio was used to generate

90 NEVADA VISION STAKEHOLDER GROUP / moody’s analyticS SEPTEMBER 2010 About Moody’s Analytics

Moody’s Analytics is a leading independent provider of economic research, ­analysis and data. As a well-recognized source of proprietary information on national and regional­ economies, industries, financial markets, and credit risk, we support strategic ­planning, product and sales forecasting, risk and sensitivity management, and investment ­research. Our clients include multinational corporations, governments at all levels, central banks, retailers, mutual funds, financial institutions, utilities, residential and commercial real estate firms, insurance companies, and professional investors.

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