It’s spring in Nevada, the hills are turning green, and the desert is beginning to bloom. It is beautiful, and almost makes one optimistic about growing your garden this Summer. When the dust kicks up in a few months and the wind hits you in the face like a furnace, you may even remember how good it felt to see the new growth.

Green shoots seem to be coming up in the state’s economy too. In the north, hiring at the Tesla plant is ratcheting up. Attending a recent awards dinner for NCET (Nevada’s Center for Entrepreneurship and Technology), several speakers noted how much the state is changing, and how many new and interesting firms are being launched. Agencies like GOED (the Governor’s Office for Economic Development) are trying hard to attract new employers, with some success.

But how fertile is the soil for innovation in Nevada, and how much rain can we reasonably expect? Is the economic growth we see these days sustainable, or do we lack enough topsoil and water to make it last beyond a season?

Employment in Nevada is now almost 7% above the 2007 pre-recession peak, about the same as the state’s population growth since then. The unemployment rate is back down to 4.9%, where it was at the end of 2007.

Personal income in Nevada has grown by 5% over the last two years, in real (i.e., adjusted for inflation) terms per capita. This puts Nevada’s economic growth as a state in seventh place. California is in first place, followed by Massachusetts, New Hampshire, Hawaii, Michigan, and Utah. For Nevada, however, some of the recent growth is just making up for lost ground, as Nevada’s recession was deep and its recovery before 2014 anemic.

What is fueling this growth? Is it low taxes? The website WalletHub recently released their 2017 tax burden, and placed Nevada somewhere in the middle, in between Louisiana and Arizona (coincidentally two states that cut support for higher education even more than Nevada), but their methodology was somewhat suspect. At the same time, they reported the tax rate for the median household, and Nevada came in as the 5^th lowest. The Tax Foundation ranked Nevada as having the 5^th best tax climate for business, so that number is probably closer to the truth.

But even though low taxes may be attractive, particularly for retirees whose children have grown, businesses look at other fundamentals. Cheap land is not worth as much if nothing grows on it. In fact, states where personal incomes have grown the fastest since the Great Recession tend to have a higher tax burden than average. At best, there is no correlation, but at worst the states with low taxes don’t attract businesses because their topsoil is just too thin.

One way in which our topsoil is very thin is in providing future employers with an educated workforce. During the Great Recession, Nevada had only a 62% high school graduation rate, the lowest of all fifty states. This has since improved to 70%, so we are have moved up one spot to 49th. The data suggests that the states that grew fastest coming out of the Great Recession were those with a more educated workforce.

It is hard to pull yourself out of last place, particularly in a state that doesn’t have much of a history of valuing education. Parents too often pass this disregard for the value of education on to their children. Changing such a culture is made all the more difficult when funding for education has remained tight.

Contributing to the lack of funding is that the state’s approach to economic development too often relies on generous tax breaks that prevent local governments from collecting the taxes they need to build schools and provide other basic infrastructure. Sales and use tax collections have been slowly recovering, but our local schools depend heavily on property taxes, and Nevada’s property tax system is a mess.

For one thing, it is the only system in the country in which home values can depreciate as market prices rise. The result of this is that an older home worth $500,000 can have a smaller tax bill than a new home worth $300,000 in the same town. So it is not really a surprise that the Washoe County School District just announced a big deficit in its operating budget even though voters passed a tax last November to help it fund a capital budget to pay for new school construction.

It’s not just high school. Nevada is also in 50^th place for the number of students going to college, having dropped from 48^th place before the Great Recession. Since then, the state’s real appropriations per student dropped by 31% in Nevada. Our topsoil is blowing away. Nevada isn’t alone in this regard, of course, but most other states that cut their higher education spending didn’t start near the bottom.

At both the state’s two universities, operating budgets have declined significantly since 2008. The current real operating budget per student FTE at UNR has fallen by 31%, and at UNLV it has fallen by 16%. Average class size has grown, administrative support has been cut, and the average real pay for faculty has fallen.

Even though they could be major contributors to a more-skilled workforce, our community colleges have also been hit by funding declines, to various degrees. Adjusting for inflation and student FTE, spending has declined by 4% at CSN but by 22% at TMCC, 30% at WNC, and 33% at GBC. The smaller institutions used to spend more per student, but that disparity is now mostly gone.

For higher education, it could have been worse. Student fees have filled in part of the hole that the decline in state appropriations has created. After adjusting for inflation, students now contribute almost 30% more towards their education than they used to. Tuition is still a relative bargain for in-state students, but for some reason too few of them are still choosing to get a college education, and many of those who are choose to go out of state.

In spite of the green shoots, the composition of Nevada’s economy has not changed much. As a share of the state’s economy, construction has declined significantly, of course, but the only sectors that have really increased are health care, warehousing, retail trade, and food service. We are still mostly growing the same cash crops.

If you need fertile topsoil for economic development, you also need rain in the form of new investment. Scattered showers do fall, but it is hardly sustainable, and much of the state remains pretty dry. There is some growth in construction jobs, but this comes after many years of drought.

Still, maybe this year will be different. Maybe our fruit trees won’t freeze, maybe the new grass won’t burn, and maybe the rains will come at the right time. Maybe it won’t all blow away when the winds come. It doesn’t hurt to be a little optimistic.

Elliott Parker, Ph.D, the author of this op-ed, is a Professor of Economics in the College of Business at UNR .

This op-ed is one of three on the Nevada economy published on Monday, April 10, 2017. The columns are written by Nevada economists and are Part Three of a series we’re calling THE INDY OUTLOOK.

Feature photo: “Green Seedling Pea Gravel Garden Macro June 23, 2018” by Steven Depolo is licensed under CC BY 2.0