Volatile budget

Sources in state agencies say they have been told by the state budget office to prepare new proposed budgets for their agencies at half the present level.

A 50 percent cut in state government by the Gibbons administration would be a dramatic change and would also likely undercut efforts to diversify the state’s economy in a time when the casino industry is fading.

“I haven’t heard the 50 percent number, but the latest revenue projections show us down 50 percent,” said Assemblymember Sheila Leslie, who sits on the Assembly’s budget committee and the Interim Finance Committee that handles legislative money decisions when the full legislature is out of session.

She said it’s not legally possible for all state agencies to make such extreme cuts, so she would assume that if such instructions are going out, they are going to selected agencies.

“You really can’t do that,” she said. “There would be constitutional problems. The DSF [Distributive School Fund] can’t be hit that hard. Medicaid would be in jeopardy, TANF.”

TANF is Temporary Assistance for Needy Families.

In addition, she said, there are various federal requirements for “maintenance of effort”—meaning the states cannot accept federal funds and then allow the state’s share to dwindle. “We have to maintain the state level of contributions,” she said.

“But you could go in and take 50 percent from Cultural Affairs or smaller functions that don’t have federal mandates to meet.”

Leslie said that under Gov. Jim Gibbons, lawmakers are not in as close touch with the budget process as they used to be, and what they do hear is often a source of concern.

“The governor’s budget office sent out an April 30 memo telling most agencies to prepare budgets for 2011 that reflect any cuts made in the special session—so they want to make those cuts permanent—and then cut 10 percent below that,” she said.

In Las Vegas, meanwhile, Mayor Oscar Goodman said the two major party candidates for governor are not leveling with the public about the severity of state fiscal affairs and the difficulties ahead.

When asked by a Las Vegas Review-Journal reporter whether he believes Republican Brian Sandoval and Democrat Rory Reid were being “sincere” in saying they can balance the budget without raising taxes, Goodman said, “I don’t think so. I don’t know how they do it without raising taxes.”

Some legislators are concerned that lame duck Gibbons will try to bind whoever succeeds him to a budget that does not reflect the views of the new governor, whoever it is, or of the voters who elected him. Creating a budget takes many months—the better part of a year—and the process this time started later than usual. Neither Sandoval nor Reid are considered in sync with Gibbons on spending priorities. But the new governor will not gain control of the budget office until just a few days before he must submit the budget recommendations and the Nevada Legislature goes into session, so whoever is elected will inherit Gibbons’ work product. In California, this problem is remedied by the governor-elect taking control of the state budget office several weeks before becoming governor.

Nevada Speaker Barbara Buckley said in the past the new governor has quickly specified his major program priorities over the previous governor and then has submitted budget revisions as the processing of the budget goes along at the legislature.

Economic diversification is becoming more important to Nevada because its 80-year gambling industry can no longer be counted on to produce the revenues it did in the past. Luring new businesses and industry to the state is considered urgent by many state leaders, and a quality higher education system is essential to accomplishing that.

The 2009 Nevada Legislature cut the state higher education budget 23 percent—less than Gov. Gibbons wanted, but still regarded as draconian by nearly everyone else. When the decline in state revenues accelerated as the recession wore on, the campuses made more cuts. In January, Gibbons called variously for cuts of 1.4, 3, 6, 8 and 10 percent.

The university regents last month shut down six programs at UNLV, five at UNR (and suspended a sixth),

Economic development is not the only recession-related consequence of the budget cuts. All this is happening at a time when out of work Nevadans are going back to college in what Nevada higher education chancellor Dan Klaich calls “unprecedented numbers” in order to beef up their appeal in the job market.

Klaich, who became chancellor one year ago, is a product of the system over which he now presides. But instead of spending his time building that system up, he has had to do more dismantling than he ever expected would be necessary and struggles against cuts that could sharply undercut the state’s economic future.

In a letter to the governor on Dec. 8, Klaich wrote, “You have said over and over that we cannot tax our way out of this depression. It is just as true that we cannot cut our way to excellence in education. Governor, I know you have made a promise to the people of this state concerning taxes. However, the current situation and further requests for budget cuts will lead to the dismantling of critical structures and functions of higher education that do not serve the state. There must be another way.”

In a Feb. 8 memo, Klaich wrote what he called a “Paul Revere warning”—that “the new economy may never come if more major cuts to higher education come to pass.”

Lt. Gov. Brian Krolicki said he believes the state can still accomplish diversification in fields like energy in spite of what is happening to higher education.

“Yes, it is a very troubling time when you cannot, you know, just bulk up the academic and higher ed systems in the state, but that doesn’t mean we can’t have successes,” he said. “And I think if we have the private sector successes, the education components will come.”

State legislators say that’s backward—that the state needs a strong higher education system to get businesses to come in. Asking them to bet on the come is not practical, they say.

“If you’re talking about attracting companies that are interested in research and development, in biomedical or any kind of specialized industry, they absolutely are going to look at the quality of the higher education and they’re going to look at the quality before they relocate, not after,” Buckley said. “That has been the result of every discussion I have ever followed, and if you look at successes around the nation, you know, that’s why those companies choose those areas.”