Budget crisis getting worse

Thursday, Aug. 15, 2002 | 11:13 a.m.

CARSON CITY -- Gov. Kenny Guinn has ordered state agencies to reduce their budgets this year by 3 percent, meaning possible layoffs and slower services to the public in such areas as welfare and health.

Guinn's Chief of Staff Marybel Batjer said the state is in "terrible shape" financially, facing a deficit of $138 million for the fiscal year that began July 1.

The announcement came two days after the state learned that gaming wins for the last fiscal year were down 3.7 percent statewide from the prior year. Strip casinos experienced a decline of 7 percent for the year. Taxes on the gaming wins are a major source of revenue for the state.

"We're trying to sustain programs but we can only do so much with no money," Batjer said.

The state now is facing a $275 million shortfall in revenue this biennium, said Budget Director Perry Comeaux, who with Batjer outlined the state's money picture this morning to reporters in Carson City. Guinn was in Las Vegas.

Guinn issued the order Wednesday to his cabinet, Batjer said, but did not direct layoffs or cuts. It will be up to the individual agencies to decide how reductions will be made.

The reductions apply to general fund agencies, not those such as the Transportation Department and the Motor Vehicles Department, which are financed mainly by federal funds and user fees.

Comeaux said he thinks the agencies "will make surgical cuts and not meat-ax," though he admitted the budget reductions could lead to layoffs.

Batjer said there could be delays for those seeking welfare, mental health and children services.

The governor is not asking for any reductions in the public schools.

Batjer said the reduction will probably hit some of the human resource programs the governor advocated in the 2001 session. "There will be longer waiting lists for human resources," she said.

But it is too early to tell what will be cut and what services will be affected.

The 3 percent cuts are "painful" because they come on top of a flat biennial budget in many agencies, Batjer said.

The reductions should produce $40 million. Comeaux said the governor then intends to tap the "Rainy Day" fund for $100 million in the next year to cover the state's growing financial dilemma. That would leave $36 million in the "Rainy Day" fund.

Guinn last week ordered $57 million in cuts in one-time expenditures, canceling proposed purchases for equipment such as computers, cars and other items. But these things will eventually have to be acquired in the future.

Tax revenues are expected to come in $162 million lower than predicted and there are higher required expenditures. The state must pump an additional $45 million into the public schools to make up for their shortfall in the sales tax. And there's a need for an estimated $21 million for Medicaid, the medical program for the needy.

The Guinn administration already saved $12 million by freezing a fund that would have provided agencies with additional funds if their energy bills escalated this fiscal year.

State Treasurer Brian Krolicki swept some bond accounts and contributed an extra $30 million to help with the deficit. And the state started last fiscal year in July 2001 with more money than it expected.

Those changes, plus the 3 percent reduction, should reduce the shortfall to about $100 million.

Comeaux said the state's economy "hit the deck" after Sept. 11 when tourist trade dropped. In sales tax collections, he said, "We've been taking a beating every month." There were some good months late last year when auto dealers offered free or reduced financing that encouraged the public to buy new autos.

The tourist traffic in Las Vegas "is still down but back to a more normal level," Comeaux said.

He expects the economy to "return to a more normal rate of growth but on a smaller base," meaning the percentage may increase but it will still be less money.