State confronts $3 billion shortfall

Gov. Jim Gibbons and his staff will brief legislative Democrats today on the growing revenue crisis and the $3 billion budget shortfall that will face the 2011 Legislature.

Director of Administration Andrew Clinger said Republican lawmakers were told Monday that $2 billion-plus is the projected shortfall to maintain existing services, even if revenues come in at levels projected by the May Economic Forum. He said revenues fell nearly

$20 million below those projections in just the final two months of the fiscal year, which ended in June.

But that doesn't count "roll-ups" - unavoidable increases in cost to the state caused by inflation, rising prices for goods, especially pharmaceuticals, and services as well as contractual increases in such things as office and equipment rental.

Roll-ups this past budget cycle were more than $1 billion, which would bring the shortfall for 2011 to more than $3 billion.

Gibbons' Chief of Staff Robin Reedy said one reason for the meetings with lawmakers is to give them all the information the Governor's Office has and get their input on how to handle the situation if the economy and revenue collections don't rebound. She said the governor wants to get politics out of the decision on whether, or when, a special session should be called.

"It's really going to be the numbers that will tell all," she said.

Asked when the administration will have the answer to whether a special session is required, Clinger said the end of November. That's how long it will be before actual revenue collections for the first quarter of this fiscal year are available.

The quarter ends September 30 but businesses have 30 days to report to the Department of Taxation or Gaming Control, and those agencies have another month to compile all the data from thousands of reporting businesses.

Reedy said the majority of the projected budget shortfall comes from federal stimulus money and the tax increases approved by the 2009 Legislature - neither of which will be there for the next biennium.

Nearly $1 billion in stimulus money was used this session to support or expand programs such as Medicaid.

The tax increases, nearly $800 million worth including the sales tax increase and the near doubling of the Modified Business Tax, also all sunset at the start of the 2011 biennium unless lawmakers vote to remove the sunsets.

Those increases were passed over Gibbons' veto with the support of some Republican lawmakers who asked for concessions, including the sunsets.

"When you take all those things away, it does come up to a really big number," said Reedy. She acknowledged that lawmakers may decide to remove the sunsets, "but you build your budget based on current state law."

She said bringing lawmakers into the process was a good way to make sure their questions about state finances are answered and give them a chance to give their input.