Analysis: The real budget crunch hasn't arrived yet

The 24th Special Session of the Nevada Legislature ended at 10:20 p.m. Friday after approving legislation which will take another $275 million out of the current budget.

That brings the total reductions this year to just under $1.2 billion.

The budget, for now, is balanced without major layoffs or taking back state worker and teacher raises that go into effect in two days.

But the way they worked it out will almost certainly come back to haunt both lawmakers and the governor as they attempt to build the next two-year budget.

As in January and April, the biggest share of the cuts are from one-time sources, such as reserves or things which will have to be restored by the 2009 Legislature.

The first two rounds of cuts totaling $913 million included the $267 million Rainy Day Fund plus $36 million set aside for a potential tax refund to Southern California Edison, $188 million in capital-improvement projects and $56 million from highway and road projects. The remaining reductions " about 4.5 percent overall " also came mostly from one-shot projects and new programs, such as expansion of all-day kindergarten and the empowerment schools program.

When the economy continued to go south, the governor and lawmakers agreed they needed to cut an additional $275 million.

But again, they found ways to take most of that from reserves and other one-time sources, including $48 million from the fund providing textbooks, instructional supplies and computers to schools, $27.3 million from the public health trust and another $50 million from road and highway funding. And they drained a dozen different reserve accounts held by different agencies.

Once gone, those sources can't be tapped again and, in the end, only $106 million was listed as cuts to ongoing agency budgets " an additional 3.3 percent.

Details of some of those reductions remain unresolved. The plan is to have agencies and staff work out those reductions, then bring them to the Interim Finance Committee in a month or two for action.

"This is probably the saddest bill of the day," said Assemblywoman Sheila Leslie, D-Reno, when she presented the resolution implementing those cuts.

She may find the scenario facing the 2009 Legislature more distressing because the fact so much of the reduction came from one-time sources leaves a huge hole going forward to the 2010-2011 budget cycle.

Director of Administration Andrew Clinger has estimated agencies will have to cut ongoing budgets $500 million a year below what the 2007 Legislature approved unless the economy rebounds much faster than expected.

And Gov. Jim Gibbons made it loudly clear Friday night that while "compromise is the name of the game," he won't compromise his opposition to increased taxes or fees.

Gibbons called for a zero growth budget for the next two years, which will mean significantly reduced governmental services as inflation " especially in areas such as health care and energy prices " and "roll-ups" " scheduled increases in everything from seniority raises for workers to rental agreements for state office buildings " reduce what existing funds can do.

Rollups and inflation for the current budget totaled nearly $1 billion.

When those problems are combined, the state may wind up as much as $1 billion a year short of what it needs just to provide the same services it now provides.

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