Budget director calls state's economy 'ugly'

The other shoe dropped late Friday as the budget office warned agencies to prepare for an additional 20 percent budget reduction in the upcoming two-year budget cycle.

That follows Thursday's memorandum which told agencies to prepare scenarios taking up to 11 percent more out of this fiscal year's budget " a total of $358 million.

The Friday memo from Director of Administration Andrew Clinger advises agencies the reduction targets are only for planning purposes, primarily to get a clear picture of what impact they would have on agencies.

But if ordered, that would chop executive agency budgets, already reduced by 14 percent, to two-thirds of what the Legislature and governor originally approved for fiscal year 2009.

That is a total reduction of $1.26 billion in General Fund spending each year of the 2010-2011 biennium.

"That's an annual number," said Clinger on Saturday. "And that's without rollups."

The rollups are the unavoidable increases in spending including inflation, contract price increases for everything from printer supplies to rent, step increases in employee pay and growth in caseload for such things as Medicaid and school enrollments.

Rollups, Clinger said, will add nearly $1 billion to the biennial budget.

The cuts are necessary unless revenues are somehow increased to get the budget within the projected $5.8 billion in General Fund revenues projected for the coming biennium.

Altogether, the reductions, if ordered, would take $848.7 million out of the money budgeted for public schools. The Health and Human Services Department would lose $705.8 million and the university system $450.5 million. The prison system's budget would be cut $193.7 million.

"It's ugly," said Clinger.

Veteran analysts have said they've never seen a situation as bad at this before.

It's the reason Assembly Speaker Barbara Buckley, D-Las Vegas, has held several town-hall style meetings around the state to explain the crisis and ask for ideas.

She is also calling special meetings of legislators in December to hear agency recommendations on what to do.

While neither legislative leaders nor the governor's office is calling for a tax increase, even Gov. Jim Gibbons has said that all options are on the table, including ways of raising revenue. Lawmakers and Gibbons are planning to meet this coming week to continue looking for solutions.

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