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October 25, 2014

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$2.5 billion state budget deficit: ‘Best-case scenario’

Andrew Clinger

Andrew Clinger

During Nevada’s last knockdown, drag-out tax fight, in 2003, a key attack on those seeking to raise taxes was that they had inflated the state’s deficit to justify their proposal.

With budget officials estimating the state will face a $2.5 billion to $3 billion shortfall when the 2011 Legislature convenes, some conservatives are casting doubt on those figures — even though the source is the budget office of Gov. Jim Gibbons, hardly a pro-tax source.

Considering the state’s current biennial general fund budget is $6.4 billion, the alarming nature of the estimate comes into sharp relief. It’s also why most veterans of the state budget process think a tax increase is all but inevitable, regardless of ideology or campaign promises from governors and legislators.

So what is the deficit number?

State Budget Director Andrew Clinger is responsible for the $2.5 billion to $3 billion estimate that has been circulating. He said this week, “We’ll be lucky if we’re only at

$2 billion. I think $2.5 billion is the best-case scenario.”

The following are examples of money the state is currently relying on to fund operations that won’t be available as the state builds its next budget:

• $649 million in one-time federal stimulus funding the 2009 Legislature used to balance its budget but won’t be available unless there’s another federal stimulus.

• $939 million in new taxes passed by the 2009 Legislature, which will expire beginning in 2011.

• $220 million in room-tax revenue, which was used for the general fund in 2009 but will now be dedicated to K-12 education.

• $287 million in one-time gimmicks — emptying bank accounts and raiding local government accounts, carried out during this year’s special session.

• $300 million in savings from furloughs passed by the Legislature that are scheduled to expire in 2011.

That totals $2.4 billion — before the recession’s effect on tax revenue is factored in.

Increased costs of state programs, such as more people enrolled in Medicaid or in schools, higher utility bills, building maintenance, health care costs and employee salaries have historically added about another $1 billion in “roll-up costs” to the state’s budget. During the 2009 session, that was reduced to $469 million, according to news reports.

The final projections the governor and Legislature will use to set spending levels won’t be made until December. In those discussions so far, Clinger’s office has been the most pessimistic, and, it has turned out, the most accurate.

Will his predictions be accurate again?

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  1. NOPE! But I was... :)