Gibbons’ tax breaks run smack into reality

Tuesday, April 3, 2007 | 7:12 a.m.

CARSON CITY - The state's financial picture is worse than painted by Gov. Jim Gibbons, putting his proposal to give tax breaks to business and banks in jeopardy.

"It seems unlikely that any tax breaks will be passed this session in view of declining revenues," said Assembly Speaker Barbara Buckley, D-Las Vegas .

Other Democratic Assembly leaders agreed.

"We can't be promising to give any money back," said Assemblyman Morse Arberry, D-Las Vegas, chairman of the budget-writing Ways and Means committee.

New fiscal projections show that over the next two years Nevada will be $136.6 million short of original budget estimates. Last week Gibbons predicted a shortfall of $111.8 million and directed his agencies to start cutting their budgets.

In light of the bleaker budget figures, the Legislature is "going to have to reduce expectations," said Senate Majority Leader Bill Raggio, R-Reno. There simply is not enough money to pay for some of the things suggested in Gibbons' budget, he added.

Gibbons has proposed reducing the tax rate on general business from 0.65 percent to 0.62 percent, which would cut state revenue by $28 million. He also has recommended scrapping the excise tax on bank branches, saving the industry - and therefore costing the state - $6 million.

Mike Dayton, Gibbons' chief of staff, has said the administration will continue to push for the $34 million in business tax reductions over the next two years, and will make cuts in other areas.

State Budget Director Andrew Clinger said he hopes to present the recommendations for reducing Gibbons' budget by Friday.

The new revenue projections, presented Monday by the Legislature's fiscal analyst staff, show the state's sales and use tax is not producing the collections anticipated. Among other things, the shortfall means the state will have to allocate an additional $81 million over the next two years to school districts, Raggio said.

Since presenting his $7 billion two-year budget in January, Gibbons has added $10 million in spending adjustments. His budget also failed to include utility costs in the coming two years, projected to be $11.6 million.

In addition, bills calling for more than $600 million in spending on items not in the governor's budget are before the Legislature.

Democratic leaders, who questioned Gibbons' proposed business tax cuts from the start, now say Gibbons' ideas face even higher hurdles.

"Any tax reduction is not going to get much traction," said Assemblywoman Sheila Leslie, vice chairwoman of the Ways and Means Committee. "When we're in a shortfall and when we have to cut $130 million, that's not a good climate for tax relief."

But even with the shortfall, the Democrats' plan for full-day kindergarten is not dead. Leslie said the Assembly Democrats are looking for ways to shift money in the budget to provide more funds for education, not just full-day kindergarten.

She acknowledged there may not be enough money to provide full-day kindergarten to every school in the state, but said she expects the Legislature to make improvements over last session. Funding for full-day kindergarten is estimated at more than $90 million for the two years. That money is not in Gibbons' budget.

Sen. Bob Beers, R-Las Vegas, noting that the new projections still show state revenue rising 5.5 percent next fiscal year and 6.5 percent in fiscal 2009, said he believes any budget cuts would be in agencies' requests for additional spending, not in current levels of expenditures.

"We will be able to provide every program in the state a healthy increase," he said.