Editorial: Surpluses, or a mirage?

Wednesday, May 4, 2005 | 9:17 a.m.

Although many critics predicted that the state's $833 million tax increase in 2003 -- the first in 12 years -- would send Nevada's economy into a tailspin, nothing even remotely close occurred. Business has been booming over the past two years. And along with booming business came booming tax collections, so booming that the state will have generated an estimated two-year surplus of $591 million by June 30, the end of the 2005 fiscal year.

This sounds like a lot of money with which to begin building up the state's services, which have lost much ground over the years because of inadequate funding. Unfortunately, however, Gov. Kenny Guinn is proposing a $300 million rebate to taxpayers. Also, state law requires a minimum reserve of $126.8 million, which Guinn wants built to $200 million. Money from the surplus is also planned to be used for construction of some state buildings and for paying the $17 million cost of the 2005 Legislature. If all of these expenses are approved, the so-called surplus will be pretty much wiped out.

Guinn's 2006/2007 budget, though, has another resource. Owing to the tax increases of 2003 and the swelling economy, projections show that tax revenues should remain healthy. The Economic Forum, a group of financial experts whose projections are used by the state in setting its spending plans, forecast on Monday that the state will take in $265 million more in the next two and one-half years than the group had projected just six months ago.

This is good news, but it's also sobering in light of some lawmakers' projections that the Economic Forum would forecast an extra $500 million. There is a good possibility of very tight times ahead.

Education funding, for example, needs to be increased by as much as $190 million over the next two years because of miscalculations contained in the budgets presented by the Washoe and Clark school districts. The state Millennium Scholarship program for college-bound high school students is short by at least $40 million (some Democrats say the program needs an extra $100 million). Full-day kindergarten, hopefully to be paid with rising tax money, would cost $72 million over the next two years. The biennial budget for Medicaid is short by an estimated $30 million, and there are reasonable requests by state workers for salary increases beyond the 2 percent already budgeted. Moreover, there are spending requests from lawmakers amounting to $4 billion more than the governor's proposed $5.9 billion budget over the next two years. Of course, most of those reques ts will be denied, but many deserve approval.

Guinn says he will not sign off on a budget for 2006/2007 unless it includes his proposed rebate, which, unfairly, would go only to those who registered automobiles with the Department of Motor Vehicles. And some lawmakers are talking of more rebates. In our view, residents would be much better served if the state used its tax revenue to improve its currently marginal services.