Nevada Legislature: Plan could cut education stimulus strings

The Gibbons administration is studying a way to get around the strings attached to stimulus money for education, with a bit of creative budgeting that a university spokesman said subverts the intent of the federal law.

The stimulus package contains $324 million for K-12 and higher education, and $72 million more for other education programs. But, in order to get that money, the state must either match the amount the state appropriated for the system in Fiscal 2006 or budget each of the coming two years so that education gets at least the same percentage of the total budget as it is getting this year.

The problem is the first of those options would require adding up to $267 million to the university system budget recommended by Gov. Jim Gibbons. The second option would require an estimated $315 million more.

According to revenue projections by the Economic Forum, the state simply doesn't have that money, and Gibbons has made clear he won't change his opposition to any new or higher taxes.

But there is apparently a way around that problem " a fiscal shuffle dreamed up in Hawaii, which has a similar shortfall problem.

According to Nevada Director of Administration Andrew Clinger, the idea is to lower the percentage of state General Fund money that goes into education this year by slashing the higher education budget.

The result: A much lower Maintenance of Effort target for the coming two-year budget cycle.

Clinger said public schools and the university system wouldn't be hurt, though, because the state would then use the stimulus money to restore this year's education budget.

"We'd use the stimulus money to backfill education," said Clinger.

He said Nevada can apply for and quickly receive up to 90 percent of the money " $291 million. K-12 and higher education are budgeted for 55.78 percent of the total General Fund this year. The budgetary shuffle, nicknamed the Hawaii Plan, would reduce that by up to 4 percent, which would dramatically lower the amount Nevada must budget for education in 2010 and 2011.

Clinger said Hawaii has already received initial approval from the U.S. Department of Education, where officials said it appears to be within the law.

University system Executive Vice Chancellor Dan Klaich termed the plan unconscionable.

"If this is the way it works, this takes us to an absolute new low," he said. "If that's the kind of manipulation someone wants to use to meet federal guidelines, I think it clearly subverts the statute and shows no interest in supporting higher education."

University officials have a reason to be upset by the plan. They not only stood to get the $267 million budget increase to qualify Nevada for the federal money, the requirements in that law would have funneled nearly all of that $324 million to the system as well. Public schools would have received only a small percentage of the federal cash.

If Gibbons and the legislature adopt the Hawaii Plan, the potential difference to the system is more than $500 million.

"If we're using a portion of that $324 million in 2009, it's not going to be available in 2010 and 2011," said Klaich. "It ultimately disappears and reduces the amount available to fund higher education in the coming biennium. Unconscionable."

Clinger, however, said the state may not have any choice because without additional revenue for the budget, there's no other way Nevada can meet the stimulus requirements.

Assembly Speaker Barbara Buckley, D-Las Vegas, said she has reviewed the plan with legislative fiscal staff and confirmed that it is being considered.

"While it's creative financing at best, it would give us additional flexibility," she said.

But she said she would oppose doing what Hawaii is, which is to use cash freed up by reducing the education budget to fix other parts of its state budget.

She said the added flexibility would, however, allow lawmakers to spread any remaining money between K-12 and higher education instead of putting it just in the university system.

"If people want to subvert the statute and find ways to fund higher education at a lower level, then they should be judged accordingly," said Klaich. "Why not just do things the straightforward and honest way, meet the funding requirement and go forward?"