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September 30, 2014

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state of the state address:

Governor presents mostly status quo budget

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AP Photo/Rich Pedroncelli

Lawmakers and guests give Gov. Brian Sandoval a standing ovation for remarks made during his first State of the State address given before a joint session of the Nevada Legislature in Carson City on Monday, Jan. 24, 2011.

State of the State

Nevada Gov. Brian Sandoval delivers the State of the State address at the Legislature in Carson City, Nev., on Wednesday, Jan. 16, 2013. Launch slideshow »

Gov. Brian Sandoval proposed a mostly status quo budget today that keeps up with an expected flood of Nevadans getting health care through the state and has small, targeted bumps in funding for early-education initiatives.

Sandoval’s budget of $17.6 billion for the next two years is an increase of 11 percent over the current amount approved by the Legislature in 2011 — largely because of an anticipated increase in Medicaid.

The budget relies largely on increasing federal funds to Nevada — an extra $1.2 billion over two years. He also proposed extending $650 million in state sales and business payroll taxes that would otherwise go down this year.

State general fund spending would increase under Sandoval’s budget from $6.2 billion to $6.5 billion, an increase of 5.5 percent.

State employees will continue to see salary reductions but will see furlough days reduced from six days a year to three and merit pay restored in 2014.

His budget includes small increases for K-12 education, higher education, and health and human services in terms of real dollars. But the state has to deal with thousands more Nevadans expected to seek health care through the state and a school system that education officials and the state teachers union say is woefully underfunded.

Sandoval Chief of Staff Gerald Gardner and Budget Director Jeff Mohlenkamp provided a 40-minute media briefing Wednesday afternoon. They declined to say what areas were cut from agency directors' recommendations.

In a break from past years' practice, they did not provide more than a one-page copy of budget highlights until Wednesday evening.

That still leaves many of the details yet to to be sorted through. Here’s a look at what we know.

    • How does he pay for it?

      Sandoval has made some ambitious promises to both cut some taxes while significantly increasing spending on education and Medicaid, the government health insurance for the poor. He'll meet those promises by capping spending in most state agencies and extending nearly $650 million in tax increases that would otherwise expire.

      Under Sandoval's proposed budget, Nevadans would continue to pay higher sales taxes and more to register their cars, which would infuse the general fund with $648 million.

      But Nevada businesses subject to the state payroll tax would see a $24 million tax cut and an additional 2,700 small businesses would be exempted from the payroll tax entirely.

      Sandoval also would ask the mining industry to continue pre-paying its net proceeds on minerals tax, infusing the budget with $112 million. The mining industry also would not be able to deduct such costs as health insurance premiums from their taxes for another two years.

      Sandoval also plans to infuse the state’s general fund with $151 million from the state’s highway fund and $271 million from a special room tax increase originally meant to fund education exclusively.

      The state’s teachers union has called for a return of that room tax money to education. Some had also hoped the highway fund would be replenished with money that could be used for highway projects to generate needed construction jobs.

      Both initiatives likely will be debated during the legislative session.

    • Public schools

      Spending on K-12 education would increase by $135 million statewide next year under Sandoval’s budget, mostly to deal with the increased number of students, employee costs and the governor’s initiatives trying to help younger students.

      Whether it’s enough to satisfy a system that education officials say is already underfunded is unclear. The Clark County School District, which has seen class sizes rising and tense labor negotiations, has said it would cost $30 million to $40 million just to deal with inflationary costs.

      But Sandoval, in his budget briefing and his speech, emphasized the programs that he’s funding.

      The two major initiatives are:

      • Spending $20 million to expand full-day kindergarten. This would increase the number of “at-risk schools” with full-day kindergarten to 160 from 114, Mohlenkamp said.

      • Putting $14 million toward English language learning programs for students in kindergarten to third grade. The state estimates that 35,000 to 40,000 students are not proficient in English, though administration officials did not immediately have an estimate of how many students would be helped with the additional money.

    • State employees

      Sandoval intends to restore only a part of the salary and benefits taken away from some 17,000 state workers two years ago.

      He plans to continue the 2.5 percent salary reduction imposed in 2011. But starting this July, employees will have to take only three unpaid furlough days a year instead of the six now in effect.

      The three furlough days means a reduction in 1.5 percent of the pay.

      And starting in July 2014, the longevity and merit pay will be restored in full. That equals about a 4 percent increase. Sandoval also said the state will pick up increases in retirement and health premium expenses.

      “It’s still a takeaway,” said Aldo Vennetilli of the American Federation of State, County and Municipal Workers.

      Senate Majority Leader Mo Denis, D-Las Vegas, said the governor’s plan restores less than one-fourth of their pay and benefits.

      There are no planned layoffs in state agencies in this proposed budget, but several hundred workers will be added in the social services area.

    • Higher education

      Sandoval proposed a $29 million increase in higher education spending, using the money mostly to restore some employee pay increases.

      Sandoval also would use the additional money to help restructure the way state funds are distributed among Nevada’s higher education institutions. In a proposal backed by Chancellor Dan Klaich, funding would be awarded according to growth in graduation rates rather than enrollment rates. Under the plan, Southern Nevada institutions would see a significant bump in funding while Northern Nevada institutions — particularly rural community colleges — would see less money.

      Sandoval’s budget would direct $2 million to help ease the pain for those institutions that would see funding reductions. That’s less than the $10 million Klaich had requested. But Gardner said the new funding formula would be adjusted to smooth the funding loss for those institutions.

      Sandoval also is recommending the state sink $10 million into the Knowledge Fund to help universities fund research that could be put to commercial use. That fund, which has sat empty for two years, has become an ironic metaphor for how well state leaders value higher education.

    • Health and human services: Poor, sick, vulnerable

      The biggest driver of increased costs in the overall budget is health and human services, the state’s safety net for the poor, disabled and elderly that is porous at best.

      Sandoval proposed an increased general fund spending of $136 million over two years to deal with increased caseload costs, employee costs and some targeted initiatives.

      Mohlenkamp said the wait list for early intervention services, which helps newborns to 3-year-olds with disabilities, would be eliminated. The wait list for autism services would be “significantly reduced.”

      Sandoval, in his State of the State speech, touted his expansion of Medicaid, which allows about 78,0000 more Nevadans access to coverage through the state. It also allows Nevada to shift mental health and other state spending to Medicaid sources, saving the state’s general fund almost $25 million over two years.

      He said the state “provides additional funding for our state’s most vulnerable citizens.” That includes an around-the-clock mental health care facility in Southern Nevada, which Gardner said would cost an additional $800,000.

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    1. "Sandoval also plans to infuse the state's general fund with $151 million from the state's highway fund"

      Sounds like what the Congress has done to Social Security.

      Sounds like we are treading water. Privatization on the way.

      Until we have new, good paying, jobs, and an end to stagnant wage growth, the economy will crawl or worsen.