Rainy day fund gets boost from economy

Tuesday, Dec. 7, 2004 | 11:05 a.m.

CARSON CITY -- A strong economy is helping to rebuild the state's rainy day fund that was drained by Gov. Kenny Guinn and the Legislature in 2003 to meet government expenses.

By the time the Legislature convenes in February, there is expected to be $120 million in the fund created to stabilize state government.

Guinn has said one of his priorities at the Legislature is to replenish the fund. But that will be accomplished even before he gets a chance to address the Legislature.

A 2003 law provides that if there is higher-than-expected tax revenue and a state bank balance, then the account should be restored first.

Assemblyman Morse Arberry, R-Las Vegas, said Monday that "this shows the state is getting stable" after its economic problems two years ago.

"The first thing we want to do is show some stability," said Arberry, chairman of the Assembly Ways and Means Committee that drafts the budget.

Last week the state controller's office transferred $70.6 million to the account. And the Legislative Interim Finance Committee is expected to ship another $50 million to the fund when it meets Jan. 12.

The governor in 2003 asked and the Legislature agreed to take $135 million out of the fund, leaving only $1.3 million available to meet emergencies or downturns in the economy.

The 2003 Legislature predicted there would be a state balance as of June 30, 2004, of $133.4 million. But preliminary figures showed the balance could balloon to $291.8 million.

After the Economic Forum last week made its predictions of tax collections for the coming two years, legislative fiscal experts estimated there will be $330 million extra on June 30, 2005, the end of this fiscal year.

That $330 million doesn't include the $127.3 million the state must keep in the bank to cover such things as the cash flow. The law requires the state to keep 5 percent of the budget each year.

Arberry said, "If the revenue keeps coming in, I would love to put more into the account."

He said bond rating firms look at the financial stability of the state. A state that is in good financial shape usually receives a better rating when it issues bonds.

Greg Bortolin, press secretary to Guinn said, "The numbers look good right now. The governor feels good she will be able to cover the challenges and needs of the state."

He said the governor is still looking at putting more money in the reserve fund since it is not at the level ($135 million) when it was depleted two years ago.

He said the governor is now starting to build his budget and he must have more for 35,000 more students in the school system in the coming two years. He said "there a Medicaid factor" referring to the program that provides medical care for the poor. That program has grown in numbers and has needed financial help in the past.

In addition, he said the governor and legislators are going to "address" some plan to limit property tax increases.

"The governor is working to see how it all fits together," said Bortolin.

Guinn has said he may use some of the added money in the bank for public schools for 1-6 grades. There are more than 200 schools in Nevada that are not measuring up on the required federal testing, he said. And he wants to improve them. But he said he wants to see a plan from the schools to show this would be effective.

Part of the estimated $330 million available by next June 30 comes from unspent funds by state agencies, the university and the public schools. For instance, the public schools get so much money from the state and also receive part of the state's sale tax receipts.

If the sales tax receipts are higher than expected than the schools keep that money but the state lowers its school aid allocation. The public schools are expected to revert $131.8 million at the end of this fiscal year.

Both public school administrators and university officials have said they should be able to keep any unspent funds at the end of each fiscal year.