Guinn nixes special session, but concern over budget shortfall grows

Thursday, April 11, 2002 | 10:59 a.m.

CARSON CITY -- Gov. Kenny Guinn won't call a special session of the Legislature this fiscal year to deal with the growing deficit in state revenues, but he didn't rule out convening the lawmakers after the start of the next budget year to bail out the state.

State Budget Director Perry Comeaux said the governor is going to have to make some very difficult decisions this fiscal year in cutting programs. The fiscal year runs through June 30. Guinn and Comeaux outlined the state's financial problems to the Legislative Interim Finance Committee on Wednesday.

Guinn told the committee the state would be short $115 million this fiscal year, and $129 million next fiscal year. But the fiscal experts in the Legislature are estimating the shortfall would be about $50 million higher than Guinn's estimates.

Sen. Bob Coffin, D-Las Vegas, suggested the governor call the Legislature into session to tap the $136 million "Rainy Day" fund. He said people are going to be hurt by the program cuts.

"You could dip into it and solve a lot of these problems," Coffin said. The law would have to be changed to permit the fund to be used in this manner but Coffin said that could also be done at the special session.

Guinn said it was too early to call a special session. He said he may call a special session of the Legislature to deal with issues after the start of the new budget year but before the Legislature returns for its 2003 session in February.

The governor said he wants to wait to see what economic trends are developing and whether the state can limp through until the regular session. Taking money out of the "Rainy Day" fund now might leave the state short of money if a greater budget emergency arises next fiscal year, he said.

Guinn has taken several steps to soften the downturn in tax collections. He told the committee he is going forward with the plan by state Treasurer Brian Krolicki for a one-time $30 million bonanza this year. Legislators questioned whether this was legal. Guinn assured them the plan met the law.

In a testy response to Assemblyman David Goldwater, D-Las Vegas, Guinn said, "We're not asking for your approval. This is an executive decision."

Goldwater had suggested that this may be a short-term benefit but that it could be detrimental in the long run. The commission directed its attorneys to look at the legality of the plan. Krolicki plans to sweep interest that has been accumulating in the state's bond redemption fund for many years.

That should amount to $10 million, which would be transferred to the state's general fund. The state collects 15 cents from the property tax to pay off bonds used to finance construction. Krolicki said those revenues mingled with other state funds have earned an average interest rate of 5.8 percent.

Krolicki said he would contract with a private company that would take the revenues from the 15-cent property tax and invest them. The private company would pay the state $20 million, which equates to a 6 percent interest rate. The private company would then invest the money, hoping to realize a greater interest return.

Goldwater suggested the state in the future might be able to make a return better than 6 percent. But Guinn heatedly told Goldwater this plan was "essential" now to help balance the budget.

Mike Willden, state director of human resources, outlined some programs that will be deferred next fiscal year to save money. The state will not grant reimbursement increases to doctors, hospitals and nursing homes that treat Medicaid patients, and it will continue to require that women and children applying for Medicaid be scrutinized to see if they have too many assets.

The state originally had planned to junk these asset tests starting July 1 so women could get prenatal testing earlier. Still, Willden said the Medicaid and welfare programs will be $22 million in the hole by June 30, 2003.

Other financial problems cropped up during the meeting of the finance committee. The state will have to pay school districts an additional $45 million over the biennium to make up for the lower than expected collections from the school support sales tax.

The state prison system said it would be $500,000 short in its budget because of higher than expected costs. And the program that provides health insurance for state workers and their dependants is facing financial difficulties.

Woody Thorne, director of the health insurance program, said it may have to increase rates to dependants and retirees in the middle of this year instead of waiting until 2003. He said the program's cash reserve has diminished to $6 million and there is a severe cash flow problem.

He said payments to vendors will have to be delayed from the second week of the month to the last week of the month to carry the system through. Guinn has already frozen new hirings in state government and has put off spending money on such things as new cars.

Comeaux said the governor will have to make further reductions in some of the plans he championed at the 2001 Legislature.