Editorial: Rainy day bills show big picture

Friday, March 21, 2003 | 5:15 a.m.

WEEKEND EDITION: March 23, 2003

The governor and Legislature resisted pressure in 1995 to use money earmarked for Nevada's "rainy day" fund to shore up school programs. They have resisted using the fund for actual rainy days, such as in 1997 when flooding in Northern Nevada reached disaster proportions. They held off Sen. Bob Coffin in 1999, when he pressured them to use the fund to relieve a budget crunch. They held fast in 2002, when Coffin again advocated tapping into it to lessen budget cuts. In fact, in the eight-year history of the fund, which now contains $136 million, the governor and Legislature have never extracted a penny.

Today, however, the Legislature finds itself facing even more pressure to use the fund. There is a shortage of budgeted money to get the state through its current fiscal year. Additionally, there is a projected $700 million-plus deficit over the 2003-2005 biennium starting July 1. In voting last week, the 2003 Legislature could no longer resist, could no longer hold fast. The Assembly unanimously passed a bill to tap the fund for $100 million so that the state could keep paying its bills until June 30, the end of the fiscal year. And the Senate went further, unanimously amending the bill to add $35 million -- effectively draining the fund.

Known formally as the Fund to Stabilize the Operation of State Government, the rainy day fund has always stood as a safety net protecting against sudden drops in tourism or natural disasters. Without the fund, Nevada's fall into the abyss of massive layoffs and program cuts is a certainty if the economy, for whatever reason, goes south. The $135 million extraction, leaving just $1 million, will become final if the Assembly approves the Senate's amendment and if the governor signs the legislation. Underscoring the state's fiscal crisis is that this money will not bring long-term relief to the budget. It is needed just to get the state through until June 30.

In our judgment, the Legislature should have jumped at an alternative offered by Gov. Kenny Guinn. Early in the legislative session he submitted his long-term plan for the state's fiscal health. This plan would raise $500 million a year in new and increased taxes, enabling Nevada to avoid massive cuts in such vital services as education and health care. Because this plan kicks in gradually and only after the end of the fiscal year, Guinn also proposed a series of taxes that would be collected from April 1 to June 30. These collections would have prevented a raid on the rainy day fund. The Legislature, perhaps fearing a voter backlash, instead opted to use the rainy day fund. By doing that, it is gambling that nothing will happen over the next 100 days that would require a safety net. Quite a gamble, considering that the United States is at war with Iraq. After the first Gulf War the state had to cut its budget by $270 million during a national recession.

The fact that for the first time ever Nevada is about to tap into its rainy day fund underscores the urgent need for new and increased taxes on the level that Guinn has proposed. Already the state is failing in its ability to adequately fund such services as education, child welfare, mental health, assistance for needy families, prisons and health care. New needs associated with homeland security are on the horizon. Tapping into local governments' revenue, as has been proposed by Senate Majority Leader Bill Raggio, is not an answer -- local governments cannot keep up with growth as it is. Continued reliance on sales taxes, particularly in this unstable world where tourism could suddenly drop, is not an answer. We hope the legislators who have been in denial about Nevada's need for more tax revenue understand what draining the rainy day fund really means. W e've used up our quick fix. The time for a long-term fix has arrived.