Gibbons resumes budget shortfall talks

Nevada Gov. Jim Gibbons will resume private talks with legislative leaders on Monday in efforts to find more ways of reducing state spending beyond the 4.5 percent cutbacks he ordered in January to deal with a revenue shortfall now projected to hit $900 million by mid-2009.

The Republican governor, who held two closed-door meetings last week with GOP and Democratic lawmakers to discuss the shortfall, has said he hopes to avoid layoffs of state workers.

However, there's still a possibility of additional budget cuts of up to 3 percent for some agencies next fiscal year.

The projected $900 million shortfall amounts to 13 percent of the nearly $7 billion state budget approved last year for the current two-year budget cycle - and if the revenue slump continues, the shortfall estimate will grow even larger.

Nevada economist Jeremy Aguero says the slump could bottom out at the end of the year or in early 2009. He's predicting an upward economic trend in the state by 2010.

Gibbons, who ran for office on a no-new-taxes platform in 2006, won't call a special legislative session to find new revenue sources. Instead, Gibbons has said there are various moneysaving options including delays in state building and other one-shot projects, use of reserved and "rainy day" funds and other steps to deal with the looming shortfall.

The governor has said he'll try to avoid any more cuts in public school, human services and prison or other public safety budgets. All those areas were hit when the earlier cuts were imposed. He also said scheduled pay raises for state workers and teachers won't be canceled.

Adding to the shortfall woes is a state Supreme Court ruling in a major tax case that threatens to push the $900 million shortfall closer to $1 billion. Lawyers working for Gibbons and Attorney General Catherine Cortez Masto have been reviewing the decision to see whether there's a way to ease its impact.

An obvious option is a rehearing request. But as of Saturday, there was no confirmation from Cortez Masto's office that such a request would be filed with the high court.

The Supreme Court held March 27 that food provided for free by businesses to customers or employees isn't taxable. The ruling favored John Ascuaga's Nugget in Sparks, but similar claims have been filed by many major hotel-casinos.

State Taxation Director Dino DiCianno said Saturday he hasn't completed a list of businesses besides the Nugget that have filed claims for refunds of taxes paid on "comped" food, and the dollar value of those claims.

Once that amount is calculated, it will be added to the latest $900 million revenue shortfall estimate. DiCianno has said it's possible that existing claims and any new ones could approach $100 million but he's not going to venture a guess until his list of claimants is complete.

John Bartlett, the attorney who represented the Nugget in the tax case, has said that as far as the Nugget is concerned, "we're willing to sit down and talk about how best to handle this" so that the state isn't harmed even more during the current economic downturn.

Bartlett said options for refunds could include deferrals or tax credits for any of the businesses with refund claims. That would enable the state to could avoid immediate payments.