Shortfall hits $898M, forcing more cuts

Gov. Jim Gibbons called for new budget cuts Monday, saying the most recent projections show the state revenue shortfall will be $898 million.

That is $333.2 million more than January's projections, which forced the administration to cut a total of $564.7 million from state spending this biennium.

Unlike January, Gibbons said this time he has invited members of the Legislature to help work out the exact cuts, a process he said should take about two weeks.

But he said from his point of view, a special legislative session and any tax increases are still off the table.

"One thing that would exacerbate problems is a tax increase," he said, adding that Nevadans and Nevada businesses can't afford that when they too are stressed by the weak economy.

"This is not about raising taxes," Gibbons said. "This is about spending."

He said the reality of the situation facing the state is that it must deal with the economic slump just as the average family is dealing with it, by reducing spending.

Although he didn't want his specific proposals released until he and lawmakers agree on exactly what to do, Gibbons talked about them throughout Monday's press briefing.

He said one issue completely off the table is any suggestion he might to reduce or cancel next year's 4 percent cost-of-living raise for state and school employees. The reason that is off the table is because the Supreme Court ruled in 1991 the only way state worker raises could be cut is by action of the Legislature and Gibbons doesn't want to call a special session. Those raises will cost $130 million in 2009.

The total state shortfall includes not only the revenue shortfall but an estimated $60.7 million Medicaid shortfall due to increased caseloads and the $272 million Local School Support Tax shortfall, which the state is required by statute to make up.

At this time, he said he hopes to avoid any further operating cuts to Health and Human Services, prisons or K-12 education. But the university system would get hit for another $19.5 million, bringing its total reduction to $77.1 million.

And, he said, "we are doing everything we possibly can to avoid layoffs."

But the proposed cuts he and lawmakers are discussing include an additional $52.5 million in operating cuts, which, excluding K-12 education, would be another 3 percent general fund reduction to the rest of state agencies and higher education.

Of that total, $27.3 million would come from Human Resources. Gibbons said the goal is to find other places to take those reductions rather than Human Services.

"And we're very very close in terms of reaching our goals," he said.

January's across-the-board 4.5 percent reduction took a total of $230.8 million from ongoing operational budgets, including K-12 education.

The biggest chunk of the $333 million will come from delaying or changing the Capital Improvement Projects budget. Of the $192 million appropriated by the 2007 Legislature, his tentative plan would pull back $185.4 million. That is $150 million more than he ordered cut from CIP's in January.

"We're not canceling these projects," he said. "We're pushing them off into the future."

He said that includes both University system and Department of Corrections projects.

Another $40 million would come from the Department of Transportation's I-15 contract by pulling highway fund money out of other projects and putting it into the I-15 project to free up general fund money.

Just under $10 million will be pulled from excess reserves at the Public Employee Benefits Program and $36 million from the pot of money set aside in case the state loses its appeal of the California Edison tax case. And $35 million would come from draining the rest of the state's Rainy Day Fund.

That means the entire $267 million in that fund is now committed to cover the shortfall.

The revenue problem has been growing steadily as sales and gaming taxes continued to fall behind projections used to build the 2008-2009 biennial budget. Between the end of December and now, the sales tax shortfall alone increased from $40 million to $61 million.

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

"I've been through four of these (budget shortfalls) and now is not the time to panic. Every governor has faced this."

Randolph Townsend, R-Reno, a state Senator since 1983

"We just have to make this adjustment to whatever fits the economy. It always hurts. Eventually it corrects itself but this is as bad as I've ever seen."

John Marvel, R-Battle Mountain, an Assemblyman since 1979

"Dire times. Just as families have to make sure they're not spending as much, the state has to so the same."

James Settelmeyer, R-Gardnerville, completing his first term

"I'm glad we have a group think going on, that we have a chance to have some input."

Debbie Smith, D-Sparks, an Assemblywoman since 2001