Published Tuesday, Nov. 25, 2008 | 5:39 p.m.
Updated Tuesday, Nov. 25, 2008 | 6:53 p.m.
CARSON CITY – Gov. Jim Gibbons says a “broad based agreement” has been reached with top legislators to borrow up to $150 million and make further cuts in government, possibly up to 100 employees, to address the $340 million state budget deficit this year.
After a two hour meeting with legislative leaders, Gibbons said he would convene a special session of the Legislature Dec. 8-9 to approve the plan. And he says this should get the state through this fiscal year without new or increased taxes.
Assembly Speaker Barbara Buckley, D-Las Vegas, said there’s a “framework” agreed upon and now “We have to make sure it’s balanced.”
Buckley said there were recommendations that the state issue bonds to get it through its financial troubles. But that was rejected.
The agreement, which was suggested by State Treasurer Kate Marshall, would have the state use a “line of credit” up to $150 million to get through this fiscal year. This money is in the state’s Local Government Investment fund where cities and counties put their cash to invest.
Buckley said the tentative agreement will permit the state to survive this fiscal year and give the 2009 Legislature a chance to work out long term solutions. Gibbons agreed this was only a short term solution.
Gibbons said he hopes the state can avoid new taxes in the next biennium. And there may have to be consolidation of agencies.
The lawmakers and the governor are waiting for the projection of the five-member Economic Forum that meets Monday and decides how much the state will collect in taxes for the rest of this fiscal year and for the next two years.
The governor and Legislature must abide by the Forum’s projections, unless they raise taxes.
Assemblywoman Sheila Leslie, D-Reno, said the decision reached Tuesday “postpones the inevitable” and the 2009 Legislature will have to come up with a “comprehensive solution.”
Leslie said lawmakers rejected some suggestions from the Gibbons Administration. For instance, she said the legislators would not approve closing Summit View, the juvenile detention facility in Las Vegas.
She said “This still leaves a big (money) gap we will have to wrestle with.”
Under the plan, the state would use a line of credit and borrow from the local government investment pool at an interest rate of 2.5 percent. The money would have to be repaid in five years. The governor said the state could draw down the money as it is needed.
Gibbons said the treasurer’s office feels this is legal. But he said he wants his legal staff to look at it.
The top lawmakers will meet next Monday after the Economic Forum makes its predictions to see how much they will definitely need to get through this fiscal year.
Buckley said Gibbons will be in Philadelphia for a meeting of governors. And if there are any hitches, another meeting will be called for Wednesday.
Gibbons said every account in government with extra money will be swept clean. So state agencies won’t be returning any unspent money to the general fund at the end of this fiscal year.
He said state agencies will be trimmed further but less than 100 employees would be laid off.
The governor conceded this was a short term fix. For one part of a long-term solution, Gibbons suggests that state workers forfeit part of their salaries. That’s better than layoffs, he said.
Each 1 percent cost of living raise paid employees costs the state $32 million. He said if they gave up one-half of a percent, the state would realize $16 million. An employees union has rejected this suggestion.
There was also discussion, he said about cutting back the 120 day regular session. That costs $20 million. And reducing it to 90 days would save some money.
When asked if he requested the lawmakers to take a cut in salary, Gibbons just laughed. They earn $7,800 for the full 120 days.
Marshall said she has discussed with her legal staff the state taking the “line of credit” with the investment pool. The local governments would still be earning the same 2.5 percent interest as now plus an additional quarter percent.
Marshall says the line of credit allows the borrower to determine at a later date if money is actually needed and only ask for the amount required at that time. She said if the state issued bonds, the interest rate starts immediately at a much higher rate and the state might be asking for more money than is necessary to cure the shortfall.
The portfolio of the local government investment poor has a par value of $768.8 million.
Gibbons said these steps were “not pretty or easy” but they must be taken to balance the budgets.