State falls $550 million short in funding governor’s budget

By David McGrath Schwartz

Published Friday, May 1, 2009 | 6:05 p.m.

Updated Friday, May 1, 2009 | 6:55 p.m.

The final amount of tax revenue the state will get is set, and it's more bad news: Nevada will have to find another $550 million in cuts or tax increases just to fund Gov. Jim Gibbons' budget, his budget director said Friday.

The state's Economic Forum said state government will have $445 million less than what the governor included in his budget in January.

On top of that, the state will have find $181 million for school districts because of lower-than-expected sales tax, and "over $200 million" to school districts because of down property tax, according to Andrew Clinger, the state's budget director.

In total, that amounts to $900 million less than what was in Gibbons' budget in January.

Clinger said the federal stimulus will offset that number by $350 million.

Clinger said the governor's office will submit budget amendments to meet the hole without raising taxes. He said they had discussed another 5 percent cut to salaries of state workers, teachers and higher education employments, on top of 6 percent cuts he recommended earlier.

The state's Economic Forum, five private business leaders tasked with setting tax revenue for the state, issued dour projections Friday of the state's economy over the next two years.

Members said they don't expect the economy to start rebounding until the summer of 2010.

The members, chosen by the governor and Legislative leaders, said sales tax collections would drop until the 2011 fiscal year, which starts July 1, 2010.

The gaming tax, they determined, would rebound quicker, with an eye toward CityCenter's opening in December.

Yet the news for the budget is grim.

Gov. Jim Gibbons submitted his budget in December based on projections the Economic Forum made in December. Since then the state has been smacked by bad news.

The Forum on Friday downgraded its predictions for nearly all major revenue sources, creating an additional budget hole that the governor and Legislature will have to fill with more cuts or tax increases. The Forum also predicted a $57 million budget gap for the current fiscal year, which ends June 30.

The Forum also projected the increased room tax that the Legislature passed earlier this session. While Gibbons had budgeted that the 3 percent increase would bring in $292 million, the forum predicted it at $219 million, creating a $73 million hole.

Gibbons said Thursday that he would not support a tax increase to deal with the additional budget hole. Instead, he said he would propose more cuts to agencies and additional pay cuts for state workers, teachers and higher education employees on top of the 6 percent pay cut he already recommended.

Legislators, both Democrats and Republicans, have been going over Gibbons' budget and adding back some items, currently totaling about $72 million.

They have said tax increases are necessary to provide for essential services.

Democratic lawmakers have said his 6 percent proposed pay cut for teachers, state workers and university employees is too much. They have recently put the proposed reduction at 3 percent.

Assembly Speaker Barbara Buckley, D-Las Vegas, said the Economic Forum confirmed the state faces a "staggering decline" in revenue.

"I think we stay the course of examining what is essential in Nevada, developing a plan to fund the needs of the state," she said.

Buckley said legislative staff believes the federal stimulus can give $800 million in aid to the state's budget gap, not the $350 million that Clinger suggested.

Still, she said, in addition to cuts, policy reforms and the use of stimulus, more revenue would be needed.

A core group of Republican and Democratic legislators have been meeting in private to come up with a list of which of Gibbons' cuts to restore.

"We've not yet decided how much in new revenue we can raise," he said. She said legislators have been talking with business leaders, who, she said, have agreed that Gibbons' cuts go to far and new taxes are needed.