Guinn outlines $704 million budget deficit

Wednesday, Jan. 8, 2003 | 11:13 a.m.

CARSON CITY -- Gov. Kenny Guinn said today the state faces a $704 million deficit in the next two years just to continue existing services and to pay for growth in such areas as public schools and medical care for the needy.

"This is not a pie-in-the-sky number," Guinn told a press conference called to explain what the state needs just to keep going at its present level.

In his first specific discussion on the budget shortfall, the governor did not outline how he intends to pay to offset the shortfall in tax revenue. His staff has said he will talk about that in the State of the State address on Jan. 20.

"This does not portend anything for the future of the state," Guinn said of the $704 million deficit. "If this is all we do, we will remain a very financially fragile state."

He said there are other "serious issues" he will consider proposing to the Legislature that would require more than the $704 million to cover existing services.

More than 58 percent of the $704 million is needed to pay for enrollment increases at public schools and the University and Community College System of Nevada, he said.

The governor estimates that there will be 26,000 new students in public schools and that enrollment growth in the university system will increase by 8.5 percent.

Included in the figures is money for a 2 percent pay raise in July for teachers that will cost from $34 million to $35 million. The salary boost was promised by the governor and the 2001 Legislature. The teachers did not get a raise last July because of the stagnant economy.

Also included is a continuation of the $2,000 bonus for new teachers who sign up in the school districts.

To handle the growth in the public schools, Guinn said $311 million is needed, of which more than $200 million will go to Clark County.

The university system will get $90.6 million to handle the higher enrollments. Guinn said the system faces a "serious problem."

The 2001 Legislature used $74 million from estate tax funds to fund university projects, many of them on-going programs. That fund is diminishing because of federal legislation to phase out the estate tax. He estimated there is only $30 million now in the kitty.

His budget does not make up any of the shortfall from the estate tax account. He said he will deal with that later in putting together his final budget for presentation to the Legislature Jan. 20.

Guinn said the state will need another $108.5 million to cover higher enrollments in Medicaid, the federal-state program to provide health care to the needy. It had been estimated earlier that the deficit in this program would be $200 million. But the federal government has notified the state it will pay an increased share.

Instead of the 50-50 federal-state match, the federal government will kick in 54 percent next fiscal year and 56 percent the following year. That meant an extra $90 million over the biennium to the state.

Mental health programs need an additional $41 million to take care an increased number of patients and to meet the higher costs of prescription drugs.

An extra $4.7 million is going to the state Fire Marshal's Office to hire additional inspectors. The governor said the Legislature directed that more than 30,000 businesses be inspected but it never gave the office the money to do the work.

The said the growth in welfare numbers will require $65 million; there is $21 million to pay for group insurance in the university system which was cut during the budget reduction cycle and $37.5 million is needed for such things as paying for higher cost for health insurance for state workers and worker compensation coverage.

Guinn emphasized this was a base budget and does not include any enhancements. Some lawmakers have said that they think there may be room to cut in the budget.

The governor intends to ask the Legislature for $100 million from the $136 million rainy day fund early in the 2003 Legislature to cover expenditures for this fiscal year. The $704 million, which is subject to change, is the shortfall over the next two fiscal years.

The state Economic Forum estimated the state will receive $3.8 billion in tax revenue in the next biennium. And Guinn said there should be $77.7 million in reversions -- money that is unspent by the state agencies at the end of the fiscal year.

That allows $3.966 billion in revenue or $704 million short.

There has been speculation that Guinn will present a budget that will need $1 billion more in tax revenue because he wants to expand or increase services. But Guinn declined to touch on that subject.