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Sunday, Dec. 5, 2010 | 2 a.m.
Andrew Clinger
Sheila Leslie
Sun Coverage
Sun archives
- Panels propose ideas to squeeze state budget (12-4-2010)
- Sandoval budget assumes 10 percent cut to state, higher ed and furloughs (12-2-2010)
- Polished knife still cuts deep into state’s budget (11-28-2010)
- Expect Sandoval to flex his newfound political capital on his anti-tax pledge (11-10-2010)
- Let Sandoval take heat for budget, Democrats say (11-5-2010)
- Brian Sandoval defeats Rory Reid in governor’s race, now must govern (11-2-2010)
- University system snubs governor, won’t submit budget with cuts (10-28-2010)
- State’s budget woes could end programs targeting seniors (10-27-2010)
- Reid, Sandoval clash over state budget in lively governor’s debate (10-26-2010)
- Home assistance for disabled among services on budget chopping block (10-21-10)
- Museums hit under proposed cuts to state budget (10-19-10)
- Governor’s race tightens as budget debate avoided (10-5-2010)
- $2.5 billion state budget deficit: ‘Best-case scenario’ (4-23-2010)
- Gibbons: School districts should brace for 10 percent cuts (2-2-10)
- Brian Sandoval, Rory Reid spar over budget solutions (1-27-2010)
Instead of providing clarity, the Economic Forum’s ruling on how much money the state can spend over the next two years set off an even more heated debate on the actual size of the budget deficit.
On one side, there’s Gov.-elect Brian Sandoval and conservatives who say the state has a deficit of $1.2 billion.
On the other side, Democrats and advocates for maintaining current government services say the deficit is $3 billion.
The real number is somewhere in between, about $2.2 billion, according to a Sun analysis.
The budget office, which is supposed to be an impartial authority in such matters, said in October that the deficit will actually be $3 billion. That figure reflected the cost of maintaining government service levels and ending the state worker furloughs initiated in 2009, set to expire in 2011.
Both sides have accused the other of using fuzzy math to further their ends.
“This is clearly the spin coming from the governor’s office to minimize the budget hole, so he can maintain his no-new-tax pledge and convince the public that the problem isn’t as big,” state Sen. Sheila Leslie, D-Reno, said.
Heidi Gansert, Sandoval’s future chief of staff, said it’s wrong to assume that government services will automatically go up in cost.
“The numbers are the numbers,” she said.
But numbers inevitably take on political tinges. They can be manipulated in multiple ways to make a point.
So how big is the state’s money problem?
It’s likely somewhere between the two figures being tossed about — probably about $2.2 billion. In an ideal world people would have the facts before forming opinions, so here’s the math both sides use to bolster their positions, plus why the actual number is likely somewhere in the middle.
$1.2 billion
Sandoval’s team, including state Budget Director Andrew Clinger, on Thursday issued the latest on the state’s financial position. Including some leftovers from the current budget, Clinger said the state will have $5.46 billion to spend.
On the spending side, Sandoval’s staff made some assumptions, including:
• Ten percent cuts in all state agency budgets, which the budget office requested in October. That’s worth $820 million.
• A cut in the Nevada System of Higher Education of $175 million.
• A savings of $480 million by extending furloughs and pay freezes for state workers and teachers.
The problem with that number? The 10 percent cut in state agencies is no slam dunk.
In fact, Sandoval has ruled out some cuts proposed by agencies to protect “the most vulnerable people,” Gansert said. For example, personal care attendants for the elderly and disabled, which cost the state $55 million, would not be cut, she said.
But for every “ugly” cut that Sandoval objects to, his team will have to find a cut someplace else. The university system will protest a $175 million cut, which would likely mean higher tuition and the elimination of more programs.
$3 billion
The Economic Forum projected the state will collect $5.3 billion in taxes over the next two years, assuming that the tax increases passed in 2009 expire. Meanwhile, state agencies said in October they need $8.3 billion to preserve services, according to the budget office.
That figure assumes a loss of $600 million in federal stimulus funding; declines in sales and property taxes will cost school districts $551 million; and furloughs and pay freezes for state workers and teachers end.
The problem with that number? The governor and lawmakers will likely extend the furloughs or some other salary savings. That translates into an easy $480 million cut.
Plus, Clinger said the state budget outlook has improved in some respects — such as people applying for Medicaid or unemployment.
Why the truth’s in the middle
The $480 million savings from furloughs and pay freezes is virtually assured to be extended. So we can subtract that from the $3 billion.
The state has made new projections improving the budget outlook, further reducing the number. Still, the 10 percent ($820 million) cuts Sandoval is including seem a generous assumption — especially considering such a proposal will have to make it through the Legislature.
Same goes with the $175 million cut in higher ed. Students, faculty and school boosters won’t let that happen without a fight.
So add back that combined $1 billion in proposed cuts to Sandoval’s number. That leaves a $2.2 billion deficit — and tough decisions for legislators and the governor to make.
"Reagan proved that deficits don t matter."
--VP Dick Cheney, 2002
Yeah, deficits that decline as a percentage of GNP don't matter, but that's not what going on in Washington or Carson City.
Thank you for the analysis of the real scope of the problem.
The governor plans to fund his 'no new taxes' budget on the back of public education from K-college and the public employee's retirements. He is supported in his plan by the Chamber of Commerce that has been after PERS state retirement funds for many years; the Chamber favors importing illegal alien invaders as the cheap labor source for Nevada and placing the burden of social services for these invaders entirely on the backs of the legal state residents and tax payers. There is a need to evaluate the taxes being imposed on the resort industry since many pay much greater taxes levels in other states and countries than in Nevada. Expansion of local resorts into other countries has been funded by profits gained in Nevada and at the expense of Nevada residents; it is time we made them cough up a far greater share in this state to match what they have to pay in other areas outside Nevada. The mining industry has been immune the heavy taxes but garners huge billion dollar benefits for the mineral riches mined in Nevada; this is a tax source that needs to be tapped to a much greater extent than currently practiced. Brian Sandoval had better take a very close look at the CCSD overload of administrators, superfluous administrative positions and programs wasted funding on programs like no student failure-50% work=50% grade program. There is great waste of money in this district but it most certainly is not centered in classrooms, school supplies, educational classes and expenditures for the hiring of fully certified teachers. With Terri Janison now as his inside former school trustee dummy to tell him how to work with the school district I doubt that there will be much of a benefit to improve local education.
Stop looking at the general fund. If you want the big picture look at total state spending.
it's time to grow up and face the fact that prostitution exists and runs rampant in the Las Vegas area. it needs to be legalized, taxed, and regulated for the entire state for everyone's health and safety.
same goes for the medical marijuana situation: despensaries need to be established, licensed, and taxed.
i'd bet those two sources of revenue would make a big dent in the deficit.
as it stands now, all potential revenue is wasted on those operating illegally.
in the case of prostitution, it is out of control in the LV: the cops know about it, it is outright advertised by most news media, and there are too many to count, much less prosecute under the current climate.
the MMJ people need a VIABLE method to receive their perscription medicine without breaking the law, while contributing to the NV tax base.
it's time to grow up nevada, and get real with yourself.
1. Does the $2.2 Billion estimate include unfunded and underfunded Pension Benefits? I suspect that is a very big number.
2. Is the $2.2 Billion estimate of the deficit only in the general fund? What would the deficit be if all state spending were included?
It is time for Nevada to get real:
Legalize and tax the s**t out of marijuana.
Legalize and tax the s**t out of prostitution in Las Vegas.
Millions of dollars gained AND state budget funds saved.
This is Nevada and we should be the State to do this first people, seriously..
For over a year I been trying to figure out why Mr. Sandoval would not release his plan to balance the state budget. He kept saying he would cut $500,000 out of the budget but would not tell us how.
I finally figured out why he would not tell us what he is really going to do. He is going to cut many services out of the state budget and make the counties/cities responsible for those services but he won't fund them from the state any longer.
If he had disclosed that I have a feeling he would not have been elected. I hope I am wrong but it is starting to look like that is the real plan he had all along. Please Mr. Sandoval, prove me wrong next month.
All very interesting, but what many people are not mentioning that could wreck the state budget in Nevada and states across the country is off balance sheet liability due to the underfunding of public pension plans. This is due, among other things, to the use of discount rates that are too high which results in liabilites that are unrealistically low. Research by Associate Professor Joshua Rauh of Northwestern University and Assistant Professor Robert Novy-Marx of the University of Rochester, reported in the New York Times today, indicates liabilities of all the state pensions of approximately 5 trillion (using more realistic and lower treasury rates to discount the pension obligations) with only approximately 2 trillion of assets on hand. Last month a huge sell off in muncipal bonds. Hedge funds currently looking for ways to bet against (sell short) the riskiest state pension funds. Knowledgable individuals such as Felix Rohatyn, formerly of Lazard Freres investment bank and credited with helping New York City navigate its way out of its financial crisis in the 1970's, and others believe a failure in one of these state systems could have a cascading effect, which would significantly raise the cost of state borrowing. Should that happen and no one knows exacty when it will happen, it could have a huge negative impact on state and municipal budgets nationwide. Moody's and other ratings agencies have recently changed the way they rate state governments based on their belief that the Federal government will backstop any state that is teetering on the financial abyss. Given the ratings agencies performance prior to the sub-prime crisis, I'm not that confident that will be the case.
Much is written by the "experts" on the economy. For those experts and many wealthy American's to thrive, requires shoring back up the very system that just collapsed. Change cannot happen unless those at the top of the economic heap want it to. That unfortunatly would mean a business not government driven redistrubution of money. I really don't see that happening. Greed (which allows and promotes cheap imigrant labor to thrive) has been our undoing. The butcher, the baker and the candle stick maker can no longer earn a living wage in the U.S. . Every able person has to have a job ( a real job they can actually survive on) for any society to exist. Jobs,even seemingly simple task jobs have to pay enough so that worker can in turn spend his income on daily needs, food , shelter etc.. This new world economy everyone speaks of, can't ignore basic principles of economics. Leave the masses in the situation they are in now and I can assure you the long term result will not be pretty. Desperate people with time on their hands is probably the most potentially dangerous situation I can imagine. Hope we find a peacful way to initiate change, the alternative could be catistrofic.
Patrick R. Gibbons continues to blog on this site without identifying himself as part of NPRI, a right-wing group, and stating that he is getting paid to share his opinions.
His fiscal conclusions are based on NPRI's conservative, anti-government ideology, and not on an either bi-partisan or non-partisan examination of the numbers.
Thank you to the Sun for providing a true, even-handed look at our fiscal situation.
Mr. Hilton,
First, you don't pay attention... at all. Emails, posts, go ignored.
Second, who are you?
PS,
My fiscal conclusions are based off the same numbers the Las Vegas Sun has... and are also supported, now, by Clinger and others... and if you paid any attention, you'd know I'm 4 for 4 on budget predictions now.
Btw, the Las Vegas Sun's numbers actually come in line with Governor Gibbons' own numbers.
Patrick,
It's pretty obvious that WilliamHill is William Hilton. Maybe pick up a Nevada phone book and give him a call?
William is however correct when he states, "Patrick R. Gibbons continues to blog on this site without identifying himself as part of NPRI, a right-wing group, and stating that he is getting paid to share his opinions.
His fiscal conclusions are based on NPRI's conservative, anti-government ideology, and not on an either bi-partisan or non-partisan examination of the numbers."
Unfortunately, NPRI ignores any numbers it doesn't see as benefiting it's ideological approach to statistical analysis. (A very valid reason for why NPRI's policy proposals get completely dismissed in committees.)