Regents don't want to balance budget by killing estate tax fund

University of Nevada Regents and campus administrators agreed Wednesday it doesn't make sense to use up the estate tax fund as a short-term fix for a budget crunch.

The committee chaired by Regent Dorothy Gallagher voted to recommend the full board retreat from what it, the governor's office and lawmakers did in 1999 and 2001.

The long-standing budget practice used only $2.5 million a year in interest income from the estate tax money, letting new money received each year build up. The money was then used primarily to support research and student aid.

But seeing some $150 million in the fund, regents, lawmakers and Gov. Kenny Guinn dipped deep into it to balance the budget in the 1999 and 2001 legislative sessions. A total of $75 million is committed in the current two-year budget to pay for everything from upgrading computer systems on campus and gender equity in athletic programs to pay raises in the medical school and support for systemwide library purchases.

Vice Chancellor for Finance Dan Miles told the committee Congress has voted to eliminate the estate tax and, if regents continue funding all those items from the money remaining in the fund, it will be gone in this next budget cycle.

Miles said in order to preserve the fund as an endowment for such expenses as research and student aid, they must cut spending to no more than the interest it earns each year. He said that means cutting the estate tax budget of $75 million this budget to about $10 million for the next budget cycle.

He said that would leave about $77 million in the fund -- enough to generate at least $2.5 million in interest each year.

Gallagher said the problem is that, in a tight budget year, the $77 million will look very attractive to the governor and lawmakers. Guinn has already advised state agencies including the university system to plan their budgets at the same level as this year.

Regent Tom Kirkpatrick pointed out many of the costs paid with estate tax money should be in the regular, state supported general fund budget. And he said money appropriated this past legislative session for many of those things including the dental school was supposed to be "one-time funding."

He said the spending for the past two legislative sessions was a mistake.

Committee member Paul Thistle, of UNLV, said spending the estate tax endowment to zero would be shortsighted.

"It just postpones the problem," he said.

Chancellor Jane Nichols said she and Miles will make a presentation to the governor's tax policy committee, which is looking into the needs of different state agencies including the universities.

But she said protecting the estate tax fund is important because, historically, lawmakers have resisted putting much money into research or student aid. In fact, the estate tax contributes more to student aid this budget cycle than the general fund does.

While Gallagher said she has her doubts lawmakers will be willing to use scarce general fund money to cover those programs now funded with estate tax money, she made the motion to cut estate tax funding to no more than $2.5 million a year and to protect and develop the fund as an endowment for research and student aid projects.

"It's important to let them know where we are," she said. "The Legislature could say the estate tax is going to be gone so we're going to spend it for this, this and this. But we have to say what we want."

Other members of the committee, along with regents Howard Rosenberg and Mark Alden, who attended even though not on the panel, agreed.

The recommendation will be presented to the full Board of Regents next week.