Nevada facing $50 million deficit by June

Wednesday, Feb. 19, 2003 | 11:06 a.m.

CARSON CITY -- The state government will be $50.5 million in the hole by June 30 unless the Legislature passes some early taxes and taps $100 million from the state's "rainy day" fund, a key official said Tuesday.

State Treasurer Brian Krolicki outlined a study of the state's finances that showed the state's cash flow sinking into the red. The state had previously enjoyed a cash flow $200 million to $250 million in the black.

"The state is running on fumes," Krolicki told the Assembly Ways and Means committee. "It's highly imprudent. It's not a way to steer a billion-dollar ship."

Gov. Kenny Guinn has proposed raising cigarette and liquor taxes, increasing fees charged by the secretary of state's office and boosting restricted slot fees by April 1 to keep the state in the black. And he also wants to use $100 million from the $136 million rainy day fund.

Outside the meeting, Krolicki said that if the Legislature did not act, the state would still have enough to pay its bills but there would be delayed payments to merchants and others.

While the state might have a cash flow deficit of $50.5 million on June 30, it will be getting more revenue after that to take care the bills, he said. But the state will be spending money faster than the revenue comes in, he said.

"Everybody should hug a smoker or a drinker," Krolicki said. "These people will get us through (due to taxes on cigarettes and alcohol)."

If the Legislature followed the recommendation of the governor, Krolicki said, there would be a $51.3 million balance on June 30, the end of the fiscal year.

"If the resources are not in place, we're playing a dangerous end game," Krolicki said.

Assembly Speaker Richard Perkins, D-Henderson, said he didn't think the Guinn administration "has made the case to the public that we are as lean as we need to be."

He objected to Guinn's plan to take part of the increase in early taxes and put $50 million back into the rainy day fund.

"To raise taxes to put it in a bank account is a hard sell," Perkins said.

But state Budget Director Perry Comeaux said it was critical to have a rainy day fund to fall back on during tough times.

"It's essential to replace the rainy day fund this fiscal year," Comeaux said.

If the Legislature does not enact new taxes and an emergency arises down the line, there will be nowhere to turn for a quick infusion of money.

The Legislature is scheduled to end its session in June.

Assemblyman Morse Arberry, D-Las Vegas, asked what will happen if the United States goes to war. Arberry, chairman of the Ways and Means Committee, said people may not want to come to Nevada and spend money in the event of war.

"If that happens, we will have problems, no doubt," Comeaux said. "Our economy is tied to tourism." That is one reason why there must be a healthy rainy day fund, he said.

Krolicki said if the rainy day fund is not replenished, Nevada's bond rating might be lowered, costing the state more to borrow money.

But Assemblyman David Goldwater, D-Las Vegas, said, "We're not here to serve the (bond) rating agencies. We're here to serve the public."