State contingency funds low after unexpected costs

The state of Nevada's piggy bank - the cash set aside for unexpected costs between Legislatures - is nearly gone after less than half the two-year budget cycle.

The situation has raised concerns not only with Gov. Kenny Guinn and the budget office but also Senate Majority Leader Bill Raggio, R-Reno.

When the 2005 Legislature adjourned, they left $12.8 million in the Interim Finance Committee's unreserved general fund account to handle interim needs. In addition, they put $3 million into the Statutory Contingency Fund, which the executive branch uses primarily to pay for special litigation costs; and $3.5 million in the Stale Claims Fund to pay bills owed by the state that arrive after the end of the fiscal year.

But in just the past nine months, the IFC general fund account has been drawn down to less than $2.8 million, and most of the money in the other two accounts is used up as well.

If the state runs out of money to pay for the next emergency - such as a bad fire season this summer - the only legal way to get it will be to call a special session of the Nevada Legislature.

Both Guinn and Raggio made it clear the state will do everything possible to prevent that from happening. But, Guinn admitted, "something could push us to the brink."

He said the most likely scenario is a bad fire season because there's no way to control costs in that situation.

"Everything else, we can find a way to handle," he said. "But we're going to be watching this very carefully."

Raggio said he, too, has seen the numbers. He said he has asked legislative fiscal staff to check with state agencies to see if any unexpected costs are likely.

"We're still in the positive, but we don't know what else is coming up," he said.

But Raggio pointed out the state doesn't have to make it all the way to June 30, 2007 - the end of the two-year budget cycle. He said once the 2007 Legislature convenes in February, it can appropriate the money to fix any shortfall.

In just nine months, unanticipated costs - primarily involving litigation - not only spent the first $3 million in the Statutory Contingency Fund but half the $2 million allocated to replenish it. The biggest bills came from legal battles over the Southern Nevada Veteran's Home. But the account also covers sick leave, publication costs, post- conviction relief and a variety of other costs. As of Friday, the account was down to $892,000.

In that same period, late claims from state contractors and vendors ate up all but $413,857 of the $3.5 million Stale Claims Account.

The only source for more money to replenish those accounts is the $12.8 million general fund account.

In addition to $2 million already moved to the Statutory Contingency Fund, that account has already paid out $2.5 million for fire suppression last summer, $1 million plus to relocate Kinkead Building workers to new offices and $1.4 million to open some 56 new mental health hospital beds in three state facilities.

Just this past week, the Board of Examiners recommended taking out another $1.9 million to cover heating oil, natural gas and electric shortages in the Department of Corrections and $872,202 mostly for higher gasoline costs for Nevada Highway Patrol.

When all those items, plus several smaller allocations, are deducted, the fund was down to $2.8 million as of Friday.

Clinger said by the end of this fiscal year June 30, he anticipates the Contingency Fund will need at least $1 million of that and claims another $750,000.

That would leave the state with a bit more than $1 million in its piggy bank with a full year including fire season ahead before the end of the budget cycle. And the only way to get more is by an appropriation from the Legislature in either a regular or special session.

Guinn agreed it's not a pretty picture. But he and Raggio said the state may get some reimbursement money from the federal government from last summer's fire season to pad the account.

And both said there are always ways to cut spending and move existing funds around to stretch existing money until the Legislature convenes.

"I doubt we'll call a special session to augment the fund because there are probably other things we can do to cover it," Raggio said.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.

Unreserved General Fund

Beginning balance: $12.34 million

Plus reversions: $478,340

Total available: $12.8 million

Expenditures:

AG administration: $30,000

Forestry Division: $230,000

Fire suppression: $2.5 million

Kinkead relocation: $1.03 million

Mental Health beds: $1.4 million

Contingency Fund: $2 million

Administrative costs: $24,207

Prisons shortfall: $1.9 million

NHP shortfall: $872,202

Total: $10.01 million

Projected expenses:

Contingency Fund: $1 million

Stale Claims Account: $750,000

Remaining Balance: $1.03 million

Due to rounding, totals may not be exact.