By David McGrath Schwartz

Wed, Jul 9, 2008 (2 a.m.)

The next round of budget cuts will make the past round seem mild, with Gov. Jim Gibbons’ senior staff projecting a shortfall of more than $1 billion.

The governor’s office is assembling a budget for the 2010 and 2011 fiscal years. Without a sharp upturn in the economy or higher taxes, the cuts will be historically steep.

Andrew Clinger, the state’s budget director, said his office expects some uptick in tax revenue for the two years starting July 1, 2009. But the increases in revenue will be gobbled up by rising public school enrollments, higher caseloads for Medicare and other social programs and higher wages for employees as they get more experience.

To prepare, Gibbons asked departments to find ways to cut 14 percent from the budget the Legislature approved in 2007. Those cuts would reduce spending by about $800 million in the July 2009-June 2011 period — still at least $200 million shy of the projected shortfall.

“These appear to be the worst budget cuts for Nevada state government since the Great Depression,” said Guy Rocha, the state archivist. Records for earlier years are not complete enough for comparison.

Gibbons and legislators have cut $1.2 billion from the current two-year budget cycle and, so far, have avoided significant layoffs. But that is largely because the reductions relied mostly on delaying one-time expenses, such as building construction and other capital projects, and on the transfer of money between accounts and draining the state’s rainy day fund.

In total, only about a third of the cuts reduced continuing expenses, Clinger said.

In other words, the easy choices have been made.

The state has offered few hints about what the 14 percent cuts would look like. Preliminary projections, delivered to department heads last week, are not public documents under state law, according to the governor’s office.

Department heads are similarly saying they are not at liberty to discuss their proposals, except in broad terms.

But Howard Skolnik, director of corrections, said Tuesday he would have to close facilities.

An example of the bind Skolnik and other department heads find themselves in was apparent at Tuesday’s meeting of the State Prisons Board. Skolnik was questioned about decisions he made in the round of budget cuts just completed. Gibbons asked where Skolnik could find additional savings, other than closing facilities or ending a pay bonus for correctional officers working swing shifts.

“I guess we could stop feeding the inmates,” he said. “Seriously, we’re out of options.”

Mike Willden, director of the Health and Human Services Department, said his department has been asked to prepare a budget with

$150 million less in spending a year than the current level.

“We’ll see significant program cuts, downsizing in the workforce,” Willden said. “I can’t say if there will be layoffs or the elimination of vacancies.”

To meet the current round of cuts, his department has frozen 700 vacancies out of 5,300 positions, stopped new programs from coming online and reduced payments to doctors who take patients on public assistance. Meanwhile, caseloads in services such as food stamps, welfare and other government assistance have climbed by as much as 50 percent.

Willden said the state faces federal oversight or lawsuits if staffing ratios get too low or wait lists for programs get too long.

“We have federal rules and state laws hanging over our head, and we have to provide services in a certain manner,” Willden said. “We’re reaching a point where that will be difficult.”

Gibbons, in a brief interview Tuesday, said the cuts would not be ordered across the board.

“They have to reflect our priorities, like education, children’s health care and public safety,” he said.

Department heads will provide the governor’s budget recommendations by Sept. 1 and the governor will release his budget in January.

The 2009 session is shaping up to be bloody.

Gibbons will not support new or higher taxes.

His chief opponent in the Assembly, Speaker Barbara Buckley, D-Las Vegas, has declared that she will never again approve cuts like those made during last month’s special session. She has called for a review of the state’s tax structure.

During the financial crisis in the 1990s, then-Gov. Bob Miller made cuts of about 11 percent. Mental health facilities were closed and patients ended up in emergency rooms, Buckley said. Lawmakers have spent years trying to rebuild those services, only to have to cut them back again.

“This boom and bust cycle doesn’t make sense,” she said.

Most state observers are predicting an ugly period ahead.

“The budget situation is going to dictate a very hard look at expenditures,” said Carole Vilardo, president of the Nevada Taxpayers Association. “It’s trite, but hard times are going to call for hard choices. And nobody is going to like them.”