Revenue rhetoric shifts a bit

By David McGrath Schwartz (contact)

Sunday, Nov. 9, 2008 | 2 a.m.

CARSON CITY — As new and more dire projections for the state budget shortfall came in last week, a consensus began to form that the strategy pursued by officials to this point — cutting spending without considering additional sources of tax revenue — is unsustainable.

State Budget Director Andrew Clinger delivered the dismal news: The current budget is short $300 million. The fiscal 2010-11 budgets will need to be cut by $1.5 billion, or 33 percent, to bring spending in line with slumping revenue.

State Senate Minority Leader Bill Raggio, R-Reno, called cuts of that magnitude “impossible.”

Assembly Speaker Barbara Buckley, D-Las Vegas, said, “There’s some point at which we no longer can cut services.”

Even Gibbons administration officials, who have rallied around the governor’s no-new-taxes pledge, wondered whether, after removing a third of state government’s funding, you still have a government.

After emerging from a meeting Friday with legislative leaders, Gov. Jim Gibbons gave the clearest signal that officials doubt the cuts-only strategy can see them through another round of budget balancing. Everything — including tax increases — will be on the table as state leaders deal with the budget crisis, Gibbons said.

The question now confronting the governor and lawmakers is what level of cuts the budget can absorb while still funding a minimum of government services.

“It’s hard for me to speculate what percentage” the state can cut, Buckley said earlier in the week.

But, she noted, with 14 percent cuts — which earlier economic projections indicated would be enough to balance the upcoming budget — some elderly poor would lose housing assistance.

“I believe the (breaking) point is before we give eviction notices to senior citizens in nursing homes,” Buckley said.

In the Health and Human Services Department, which provides the state’s social safety net, the state risks violating federal regulation if services are too thin.

Buckley pointed to the possibility of releasing prisoners early and evicting mentally disabled people from group homes.

Carole Vilardo, president of the conservative Nevada Taxpayers Union, said she also didn’t know whether the state could cut spending by 30 percent. “That level of cuts would be extremely difficult,” she said.

But, she said, there are tough cuts that can still be made — forcing workers to take unpaid leave, reducing travel, taking away cell phones.

“There are hard choices that are going to have to be made,” Vilardo said. “I don’t think there’s any question about that.”

Gibbons’ spokesman Ben Kieckhefer said it was too early to know how much more can be cut. (Revenue projections the governor must abide by in building the state spending plan will be made by the Economic Forum, five outside business experts, on Dec. 1.)

Gibbons’ remarks on Friday signal that taxes are now part of the debate. Yet even as the governor softened his position, he tread lightly.

“I don’t want to raise taxes. Everybody knows that’s a terrible, terrible thing to do in times of a recession,” Gibbons said. “But we have to look the impact of any kind of proposal like that.”

His statement reflects the ideological and financial fix the Gibbons administration finds itself in: On one hand, the boss has steadily proclaimed he won’t raise taxes. On the other, even as an advocate of limited government, Gibbons believes government has a role, supporters say. Citizens expect government to lock up prisoners, educate children, keep the public safe and provide a minimum social safety net.

Gibbons has told senior staff he is “adamant” that the Corrections and Health and Human Services departments not endure more spending reductions, according to his deputy chief of staff, Mendy Elliott.

That’s good news for those departments, but it would also mean more drastic cuts to K-12 schools and higher education to meet the 33 percent figure.

Last month, Gibbons wrote Nevada’s congressional delegation, asking for direct federal assistance to state governments. The move surprised, and angered, some Republicans who thought the governor had betrayed his ideals in asking for the money.

But veterans of the budget process say the move highlighted the limited available paths to a balanced budget.

In early October, Corrections Department Chief Howard Skolnik, who has been a loyal Gibbons supporter on the budget cuts, told the Prison Board he would resign if he were required to cut more than 14 percent from his department’s budget.

“We can cut 14 percent without jeopardizing staff and inmates,” Skolnik said. But he would “draw the line in the sand” at 14 percent.

As cuts deepen, more department heads will likely follow Skolnik’s lead and draw their own lines in the sand, marking the point at which they think government can no longer function.

Where will the governor draw his line?

Sun reporter Cy Ryan contributed to this story.