State drains ‘rainy day’ fund of $135 million

Friday, March 21, 2003 | 11:29 a.m.

CARSON CITY -- With the state quickly running out of money, the Senate Finance Committee Thursday voted unanimously to nearly drain Nevada's "rainy day" fund to help government limp along until June 30.

Assembly Bill 252 would allocate $100 million from the fund, and the committee voted to increase that amount to $135 million to go toward the operation of government. That would leave only $1 million in the fund to meet emergencies.

"We're a gambling state, but we don't gamble with state finances," Sen. Ray Rawson, R-Las Vegas, said.

Senate Majority Leader Bill Raggio, R-Reno, said the bill should carry a high priority. If passed by the Senate, it would return to the Assembly for agreement on the amendment of the additional $35 million.

Raggio said the state's tourist economy is likely to suffer because of the war in Iraq, with travel being curtailed and gas prices at an all-time high. He said the Legislature and the tax committee should "shift into high gear" so the future needs of the state are taken care of.

Raggio said the Legislature has "no option" but to raid the rainy day fund in order to get through this fiscal year. State Budget Director Perry Comeaux, in fact, asked the committee to drain the full $136 million from the fund.

If tax receipts come in at predicted levels and the rainy day fund is drained, the state would end up with a balance on June 30 of $107 million, just slightly above the required 5 percent of the yearly operating budget, Comeaux said.

This balance is needed to pay on-going bills, Comeaux said. If revenues suffer a downturn in the coming months and taxes are not increased, the state will not have adequate money with which to operate, he said.

Legislative Fiscal Analyst Gary Ghiggeri said if there is "a burp or a hiccup" in the economy, the state could wind up with a balance below the $107 million predicted by Comeaux.

Rawson said the state needs at least an additional $50 million in taxes this fiscal year to cushion a potential downturn in tax revenues.

Gov. Kenny Guinn had originally proposed a series of temporary taxes to help with the budget crunch, but it now appears that lawmakers are unlikely to enact those "bridge" taxes.

Michael Hillerby, Guinn's deputy chief of staff, said today there was a "good possibility" that there will be more budget cuts within the next two weeks unless the Legislature passes the "bridge" taxes to get the state through this fiscal year.

He said the budget office is talking to agencies to see where reductions can be made.

"If there are layoffs, there will be a lot of them," he said. It is late in this fiscal year that ends June 30 and there is not enough time to save a lot of money if the war puts a dent into sales and gaming taxes.

Guinn recommended increases in the cigarette, liquor, business activity and slot tax to go into effect April 1.

Guinn has also proposed nearly $1 billion in taxes over the next two years to fund the state budget. No action has been taken.