Lawmakers reach agreement on $340 million deal

By Cy Ryan

Published Monday, Dec. 8, 2008 | 10:47 a.m.

Updated Monday, Dec. 8, 2008 | 7:21 p.m.

CARSON CITY – In a special session that lasted less than nine hours, the Nevada Legislature plugged a pending $340 million deficit but lawmakers agree the tougher questions come next February.

Assembly Speaker Barbara Buckley, D-Las Vegas, called it a Band-Aid, but tax revenues will be down by 34 percent in the upcoming two fiscal years with a growing population.

Senate Minority Leader Bill Raggio, R-Reno, said the 2009 Legislature “will be more difficult and there will not be the agreement we have today.”

In Nevada’s 25th special session, the lawmakers today cut $72.8 million from state budgets, swept unused money from other accounts and authorized borrowing up to $160 million from a local government investment fund.

Senate Majority Leader Steven Horsford, D-Las Vegas, said the lawmakers met the challenges, enabling the state to continue to provide “vital services” to its citizens. And he praised the “collegiality” of the proceedings.

Leaders of both parties in the Senate and Assembly put together the plan, which avoids a general tax increase but does hit some businessmen and rental car owners. And there won’t be major layoffs of state workers.

But local governments will be hit with more expenses, because the state was required to balance its budget.

Raggio said some of the proposals passed today give lawmakers “political heartburn,” but the Constitution requires the state to have a balanced budget.

One of the most discussed was the idea hatched by state Treasurer Kate Marshall to borrow up to $160 million from a local government investment fund to be repaid in four years.

Sen. Mike Schneider, D-Las Vegas, said the state is a business and every businessman has a line of credit. “We don’t like it but we have to do it.”

Sen. Bob Coffin, D-Las Vegas, said the state has borrowed money for operation nine to 10 times in the past, including during the mining downturn in the 1880s and 1890s.

Marshall said it would be cheaper to borrow from this local government fund, avoiding a $640,000 issuing cost that would be charged on going into the commercial market. The state will pay one-quarter of one percent higher interest rate to the fund, which on Monday earned a return of 1.97 percent.

Gov. Jim Gibbons will have to suggest a plan to the 2009 Legislature on how to repay the loan within four years.

Today's session opened at 9 a.m. and closed at 5:54 p.m.

There were long lines of lobbyists to sign up in the morning and 202 had registered. But a spokeswoman for the Legislature said most were pre-registering for the 2009 session. There were more than 800 lobbyists registered for the 2007 Legislature.

Besides the cuts in government spending, businessmen and car rental agencies will be docked. At present, merchants who collect sales tax for the state are allowed to keep 0.5 of a percent as their fee. That will be reduced to 0.25 of a percent, generating more than $2 million in extra revenue. But this reduction expires next June 30.

Car rental agencies now charge a 6 percent sales tax that goes to the state and an additional 4 percent that they are allowed to charge to offset their registration and other expenses. That was reduced to 3 percent at a prior session and this Legislature took away another 1 percent, leaving it at 2 percent.

Leslie Pittman, representing a number of small car rental agencies, said this business is hurting with the downturn in tourism. And Bob Ostrovsky, also representing the industry, called it a tax. They suggested the lawmakers let them pay the $1.8 million up front, in order to help them with their cash flow. But that suggestion was rejected.

Mining companies however were allowed to prepay their tax of $28 million to help the state get through this fiscal year. But that will expire in two years.

All 14 Republican Assembly members voted against Senate Bill 1, which changed the distribution of the revenue received from leasing federal lands, and Senate Bill 2, which called for reducing the allowances now given to business.

Nine Republican Assembly members and Assemblywoman Peggy Pierce, D-Las Vegas, voted against Assembly Bill 2, which allows the state to borrow the $160 million. Sen. Barbara Cegavske, R-Las Vegas, was the lone member of the Senate that opposed AB-2.

One of the major cuts calls for eliminating $25 million this fiscal year that is used to help hospitals pay for indigent persons injured in accidents or those without insurance.

Bill Welch of the Nevada Hospital Association said that 40-50 percent of the acute care hospitals are now operating in a deficit. He said he realized the state was in financial trouble but added the 2009 Legislature will have to way to cure these problems.

“The hospitals are making decisions now on what services to be retained,” he said. There have already been applications from hospitals for $2.8 million reimbursement, but that won’t be paid.

And he said the counties in many cases make up the deficits.

The 2009 Legislature will also be asked for $38 million to keep the Medicaid program solvent for the rest of this fiscal year. And another $15 million will be needed for the Division of Children and Family Services, said Mike Willden, director of the state Department of Human Resources.

While there will be cuts in many health and welfare programs, Willden said only a few will result in longer waiting lines. For instance, there will be a $500,000 reduction in disability services that will result in longer wait times to qualify for services such as personal assistance, autism therapy, independent living programs and traumatic brain injury.

There will be a $2.8 million cut in the budget of the state Tourism Commission, reducing promotion and advertising and eliminating $75,000 for an office in China. The state Commission of Economic Development will give up $1.3 million and of that $471,797 will be deleted from the Nevada Development Authority in Las Vegas.

The four bills that were passed now go to Gov. Gibbons.

(Below is an earlier story.)

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CARSON CITY – The special session of the Legislature opened today with businesses and the accounts of tourism and economic development in lawmakers’ sights.

The Legislature must come up with $340 million to get the state through this fiscal year.

Their plans include a variety of plans to reduce spending, including taking $2.3 million from the state Economic Development Agency and $2.8 million from the state Tourism Commission.

Also, businesses, who retain 0.5 percent of the amount they collect in sales tax as a reimbursement, could see that amount reduced to 0.25 percent.

Gov. Jim Gibbons said the plan to reduce the collection allowance for businessmen was brought to him by legislative leaders. “It’s not a tax increase,” he said. “I would not support it if it were a tax increase.”

The governor said the reduced allowance would be repealed on June 30th. Otherwise if nothing is done in the regular session in 2009, the allowance would be returned to 0.5 percent.

“These are taxes paid by people buying materials,” he said. “They already pay this tax. All we’re doing is short term taking a portion of what was reserved to assist with the state’s deficit.”

The lawmakers intend to borrow $160 million from a local government investment fund and pay it back at 2.75 percent. And they will sweep $76 million in excess accounts of the various agencies.

Assembly Speaker Barbara Buckley, D-Las Vegas, said there will be “minimal” layoffs, if any, under the plan developed behind closed doors by the leaders of both parties.

Buckley said officials found $30 million in general fund dollars allocated to the state Transportation Department. Lawmakers plan to take the cash and instruct the agency to issue bonds for the projects.

The plan also calls for stripping $11.3 million from the drug budgets of the mental health hospitals in Las Vegas and Sparks. But Buckley said she has been assured by state Human Resources Director Mike Willden that this will not reduce medications for those in treatment.

Other reductions will be revealed as the session rolls into full gear.