Nevada budget numbers get worse

State legislators cope with revenue numbers in free fall

Nevada Assembly budget chief Morse Arberry leads the effort to adjust to the moving target the state budget has become.

Nevada Assembly budget chief Morse Arberry leads the effort to adjust to the moving target the state budget has become.

Photo By Dennis Myers

The Nevada Economic Forum, a panel that predicts how much money state government can expect over the next two years, reported Monday that the bottom has fallen out.

The Forum’s numbers, which are binding on the lawmakers, predicted revenue more than $400 million lower than the governor’s budget recommendations spend—and he balanced his proposed budget with imaginary money he hoped would come from the federal government.

At the same time, numbers coming in from the local governments show falling sales and property tax revenues, a shock to school districts.

The atmosphere was described by one Las Vegas newspaper as “surreal,” and some lawmakers were taken aback at the news. State budget director Andrew Clinger said candidly he didn’t know what the administration was going to do.

Others, however, had expected the news, having watched the work legislative staffers had been doing in tracking the numbers.

“We’ve been anticipating it right along because we keep asking our fiscal staff to monitor those kind of revenues,” said Senate Republican floor leader William Raggio.

For Gov. Jim Gibbons, the news could scarcely have been worse—the drop in revenue was so severe that even to fully fund the budget recommendations he made in January—which most legislators regard as inadequate—the lawmakers must raise taxes. How much of a raise it would take to reach that point was estimated from $600 million to $1 billion.

If Gibbons insists on continued cuts and no taxes to adjust to the Forum’s declining figures, he would almost certainly subject the state to a flurry of lawsuits and federal sanctions—as well as to citizens lining up at social service agencies with no resources to serve them. As businesses lose customers, government is gaining them.

That, however, is not going to happen. There appears to be a bipartisan consensus in both houses to do whatever is needed to keep what is being described as “essential services” intact and to defy the governor’s veto to get it done. The news from the Economic Forum, if anything, hardened legislative resolve to face down the governor. And after 16 weeks of the members of the two budget committees working in close quarters together, there is substantial agreement on what constitutes essential services.

“We understand that we are going to have to fund essential services and that there’s caseloads and things of that kind that we need to address that really aren’t addressed, in our opinion, appropriately, in the governor’s budget,” Raggio said. “And so that means that we are going to be looking for some revenues to fill that hole.”

At press time, in reaction to the falling revenues, legislators had agreed to the equivalent of a 4 percent teacher pay cut, a mandatory furlough of one day per month for state employees, and suspended merit and longevity raises for state employees outside the higher education system. Discussions were still ongoing regarding a 3 to 4 percent pay cut for state employees.

They acted as the recession neared 17 months, longer than the last two recessions, with little indication of an end in sight.

Nevada’s legislature meets only every other year, with the result that the lawmakers must build budgets passed on predictions (known as “projections” in bureaucratese) of how much money will be coming in over a two-year period. For many years, the state’s governors made those predictions as a part of their budget recommendations. But putting governors in charge of both revenue predictions and budget recommendations was a conflict of interest. Legislative leaders became convinced that governors abused the system, “adjusting” predictions to get pet programs passed. There was a substantial body of evidence to support the legislators’ suspicions.

The legislature in 1993 finally created the Economic Forum, made up of businesspeople, to make the predictions. That body has been more cautious, but legislators say they prefer to be wrong in that way than to chronically fall short of revenue halfway through to the next legislature.

Many of the cuts proposed for state programs are regarded by legislators as reversing progress that has been made in recent years in raising Nevada’s standing in various national rankings. As they plow through budgets dealing with everything from autism to immunization to foster families, an awareness of how the line items affect people in their daily lives is in the legislators’ minds. (One line item dealing with autism affects exactly 14 Nevada families.)

One item deals with the 2008 scandal over slipshod inspections of outpatient medical centers, causing several hepatitis cases in Las Vegas. Gibbons’ recommendations call for inspections every 18 months, while many legislators are pushing for annual checks.

After one session on such items, a legislator said, “The no-tax people never immerse themselves in this kind of thing, so it’s easy to say no taxes.”

The governor has been lobbing renewed anti-tax rhetoric at the lawmakers, eroding his already strained relationship with members of his own party, who often question his work ethic. One GOP lawmaker questioned whether Gibbons is “a responsible person.” Another Republican said, “He’s out there campaigning while …” she shook her head in exasperation without finishing the sentence. She was referring to a tour of the state the governor announced last week. “Do you know how much I get to see my kids?” she asked. “He doesn’t even keep office hours.”

One long-term assemblymember said he could not remember a governor leaving the capital city in the last month of a legislature, though in fact Gibbons is going only to nearby Lake Tahoe and Douglas County over the three days of the “tour.”

The belief that Gibbons’ budget recommendations were uncooked and not competently prepared for the lawmakers is pronounced among Republicans, who don’t often voice the sentiment because Clinger—who is highly regarded—had the difficult task of producing a budget that would have credibility with legislators while trying to accommodate Gibbons’ ideological demands.

Raggio said, “[Federal] stimulus money is limited, and its use is limited. The amount is limited. One-time money, also. … The room tax doesn’t provide as much as he [Gibbons] had plugged into the budget. … He’s taken the marker issue off, so that’s another $30 million budget or so. So there are holes in his budget.” (The marker issue refers to Gibbons’ own plan to require casinos to pay the tax on credit extended to gamblers—“markers”—immediately instead of when markers are collected. The governor dropped the plan a month after he announced it.)

At a meeting of a subcommittee on human services, Gibbons also came in for criticism from Democrats for cutting social service benefits without legislative approval.

“I don’t go along with approving what the governor did on his own,” said Sen. Robert Coffin. “So what do we do, how do we help these folks who’ve had their benefits cut?”

Assembly Speaker Barbara Buckley said, “I share the senator’s concerns. … We’ve made a priority of not cutting people off.”

Members of both parties are likely to disappoint their most vocal members. Democratic activists are going to have to live with a maintenance budget, and Republicans are going to see taxes raised. “We’d like to please the base, but that task comes after being conscientious,” said a Democrat. Raggio argued that there is a difference between factions and the parties themselves. “Unfortunately, none of them have to vote or be responsible for these decisions, nor do they have to respond to potential federal court actions where mandates could be put into effect for some of these essential areas.” He said the state has previously had to live under court mandates in prison spending.