By Anjeanette Damon

Gov. Brian Sandoval has done his best to avoid a combative legislative session that will likely come to define his re-election campaign.

He came out early to say he would once again extend temporary tax increases set to expire this year -- eliminating a battle that dominated budget discussions two years ago. And he announced he would expand Medicaid just as Democrats began ramping up a push to persuade him to do it.

But that doesn't mean his agenda he detailed Wednesday in his State of the State address will necessarily be met with open arms by the Democratic majority in the Legislature.

Here's a look at five points of contention that Sandoval will have to negotiate as he heads into session:

Payroll tax cut

Sandoval wants to give Nevada businesses a $25 million tax cut.

Right now, businesses don't have to pay the modified business tax on the first $62,500 of their payrolls. Sandoval aims to up that exemption to $85,000, meaning all businesses will see a reduced tax burden and 2,700 additional small businesses will be free of the tax entirely.

Democrats say hold on a minute.

"Why in the world would we cut the MBT when we can't properly fund our schools," Sen. Debbie Smith, D-Sparks said.

Speaker Marilyn Kirkpatrick, D-North Las Vegas, said the payroll tax is the state's most stable form of revenue, and Nevada's only broad-based business tax. She's loath to reduce it further.

But Sandoval will argue the tax cut is needed to help small businesses afford the increasing costs of health care. And, he points out, Democrats were the first to propose lowering the MBT back in 2009.

"This is something the Democrats supported last session," Sandoval said.

Full-day kindergarten

Democratic leaders and Sandoval agree that education needs more money. They even agree on how to spend some of that additional money.

Both sides want to expand full-day kindergarten in more of the state's public schools.

Sandoval is proposing an additional $20 million to up the number of schools offering full-day kindergarten to 160 from 114. Democrats say the program is critical enough that it should be offered in all of the state's schools.

In fact, Democrats aren't at all happy with the level of additional education dollars Sandoval has proposed.

Of the $135 million in increased K-12 funding, $90 million is because of increased student enrollment and higher costs for things like gas.

"It's not a lot of money when you've cut almost a billion dollars from education over the past five years," said Smith, the Sparks Democrat.

How to pay for it all

Sandoval has been pretty clear that he will not allow a tax increase this session. No tax hikes appear in his budget and he's promised to veto any that come across his desk from the Legislature.

In short, Sandoval has said he will work with whatever money is available in existing tax collections.

That's not to say that his budget is free of maneuvers to increase the amount of revenue he has to work with. Sandoval is extending tax increases that would otherwise expire. He is also diverting money from special funds -- to the tune of $422 million -- to support general state programs.

Democrats are being typically cagey about how they might seek to increase tax revenue, but they are hinting broadly that it's an effort they will undertake.

First, they will look at how existing taxes are both defined and collected.

"How do you define who really pays those types of things?" Speaker Kirkpatrick said. "So we'll be cleaning up those first, which will bring some revenue."

Rainy Day Fund

Nevada's tax revenues have come in at a slightly faster clip than originally projected, meaning the state will have some funds left over to apply to the budget for the next biennium.

Nevada's Rainy Day Fund -- an automatic savings account for the state to use when times are tough -- also will have about $84 million in it at the end of this fiscal year.

Sandoval proposed spending all but $15 million of it.

"The caseload growth is massive and the governor will have to use some resources to cover that growth," his budget director, Jeff Mohlenkamp, said.

Some Democratic leaders think that's a bad idea.

"Why would we eliminate the rainy day fund when we're not in a crisis?" Smith said. "That money is supposed to be for an emergency."

School choice

When he ran for governor in 2010, Sandoval vowed to pursue a voucher program that would allow parents to use public dollars to send their children to private school.

That priority quickly took a backseat to his other initiatives during the 2011 Legislature. Although he had a bill to begin the constitutional amendment process to allow state funds to be used at religious schools, the measure never received a hearing and Sandoval never really fought for it.

Since then, conservatives have been pushing him to pick up the "school choice" mantle once again.

Sandoval agreed to do just that.

He's proposed a new tax credit for businesses that donate to a scholarship fund that Nevada students could use to pay for private school -- one of the ways around the constitutional problem.

Democrats have long opposed voucher programs, whatever the form. Don't expect that to change this session.

"Our schools need to be fully funded before we start subsidizing private schools," Senate Majority Leader Mo Denis, D-Las Vegas, said.

(c)2013 the Las Vegas Sun (Las Vegas, Nev.)