Governor, lawmakers need the same budget script

Sunday, Feb. 20, 2011 | 2:01 a.m.

The document could not have a more prosaic name: “Public Finance Report.”

But its title belies its utility, which is as a kind of fiscal Esperanto, providing what so far has not come from the capital, an opportunity for all parties to speak the same language on Gov. Brian Sandoval’s budget.

The report is a product of two inestimable firms — Applied Analysis and Hobbs Ong — and they neatly lay out the governor’s “$2.46 billion in extraordinary fiscal measures” and the escalating human service costs that have caused a drift “toward budgeting by default.”

And this conclusion: “Votes are already being counted as the Legislature, or two-thirds thereof, begins determining whether this budget offers public services sufficient to attract new business growth and remake the state’s economy.”

Beyond all the static that characterized the first two weeks — will mining lose its eminent-domain power or will garages be mandated to check tire pressures? — and the cacophony to come — demonizing public employees, drawing new districts, playing tax games — that is the central issue.

The Public Finance Report is only three pages but it has more salient information than the rhetoric-clogged Legislative Building has provided thus far, especially on the metrics that should be used to measure the deficit and the frightening trend that could leave the state with almost as many Medicaid recipients as K-12 students.

The report points out that while the Sandoval budget has $1.2 billion less than what was approved by the 2009 Legislature, “direct state general fund revenues and expenditures are only about 40 percent of the budget; and all-inclusive estimates of the total deficit exceed $2.0 billion, including all state and school district funds, and the loss of federal stimulus.”

As some conveniently forget, those school funds are, by constitutional fiat, a state responsibility, which is why the governor’s gimmick of lifting those capital reserve funds from the districts is a way for him not to add another

$400 million to his budget. That is, technically, the state is on the hook for $6.2 billion, not the $5.8 billion cited by the administration — it’s only by changing a law to allow the one-time transfer at the school district levels that the governor absolves himself of responsibility to fund education to the level he desires.

The report lists those nearly $2.5 billion in gimmicks — one man’s gimmicks are a more diplomatic fiscal analyst’s “extraordinary fiscal measures.” Remember this is not a political document; this is how Jack Webb would have said it, pointing out the “diversions, borrowing, advance payments, and other measures to boost general fund revenue.”

And it comes down to this: “ … by any reckoning, the fact the governor’s budget includes over $2.0 billion in ‘fixes’ requiring legislative action indicates the magnitude of the hard decisions to be made.”

Indeed. And that is, in essence, what the session will be about, and just how willing lawmakers are to make tough decisions, just as the governor has by submitting a budget. But the greater significance here, the report argues, is that the state no longer can “control our fiscal destiny,” that any notion of Nevada exceptionalism has become a myth.

This has less to do with education, which the report rightly points out “attracts media,” but health and human services expenditures. They have grown from 24.8 percent of the general fund in fiscal year 2001 to 32.8 percent in the Sandoval budget, “a migration of $467 million in just a decade.”

The report makes no value judgment on the spending, but says it shows Nevadans are “increasingly reliant on government assistance for health care.” How reliant? Nevada Medicaid is projected to have 308,000 enrollees in two years, while K-12 enrollment will be 424,000 students. And guess which is increasing at a greater clip?

That is as stark as it gets, and shows how shortsighted past decisions have been. Or, as the fiscal diplomats put it:

“The rationality of Nevada’s state budget process has suffered as much from the short-term remedies admixture to it as from our narrow tax base. We have so far neither reduced expenditures nor raised revenue sufficiently to achieve sustained equilibrium. The governor now recommends the budget be balanced largely with pay reductions throughout education; sweeps of debt funds and general fund borrowing (that) ‘kick-the-can’; devolution of state responsibilities to counties, and other transfers.”

That says it: A narrow tax base has hampered smart budgeting, and evanescent solutions have been crafted to circumvent the narrow tax base.

The window is closing fast. Unless lawmakers and the governor find a way to break this dysfunctional cycle, Nevada will not be, as they say in Sandovalese, Nevada again.

And maybe, just maybe, it’s time to set our sights a little higher.