In the face of a budget shortfall that could reach 50 percent of current General Fund spending, the Gibbons administration is moving to dramatically change how the state builds its budget.
Estimates set the potential shortfall as high as
$3.25 billion in a $6.9 billion biennial budget.
"I know we can't cut that out of every agency," said Director of Administration Andrew Clinger.
Instead, he said, the state needs to change its entire approach to the budget.
"What I'm asking agencies to do is take a new look at the way they lay out their budget and present it to the public in a way they can understand," he said.
Deputy Chief of Staff Lynn Hettrick said that means moving to something he advocated for years in the Nevada Legislature - a zero-based budget that ranks spending and programs and requires all programs justify themselves to the governor and lawmakers rather than assuming they will get at least what they got in the last budget cycle.
The current budget plan sets a base budget for each agency, adds on what is called maintenance - the amount needed to offset inflation and maintain current service levels. After that, a list of enhancements requested by the agency is considered. As a result, Hettrick said, there is no critical examination of what an agency does and how it does it.
"There is never a requirement to justify your existence," he said.
In an all-agency memo last week, Clinger directed administrators to consider such questions as the role of the agency and what services it must provide. He said then they must look at the best way to provide those services - and pay for them.
He said some services currently funded by the state might be more appropriately paid for through a user fee.
Clinger said they also need a way to measure how well the agency is doing its job. That, he said, will help the state prioritize functions and decide what should stay, what should go and what should be changed.
"That's where we're going to have to start making decisions on the budget," he said. "Instead of cutting 40-50 percent off everything, let's look at our priorities, continue the things we can do and eliminate the things we can't - or maybe make a change in how we pay for them."
Clinger said the state has handled its deepest fiscal crisis in history during the past three years through budget reductions, temporary tax increases, one-time fund transfers and increased federal funding.
"While these solutions have helped keep the state's budget balanced, many of them are temporary fixes," said Clinger in the memo.
"Our long-term economic forecasts show that the last three years was not just a temporary downturn but a permanent economic correction," the memo states. "Given this, we can no longer afford to create budgets by just taking last year's actual expenditures, adjusting for one-time expenditures and adding for inflation and caseload growth. We must create a budget process that looks first at the outcomes citizens expect."
"You have to completely re-engineer the way you're doing things, focus on what is the outcome we want and how do we achieve it," Clinger said Friday.
Hettrick said the high priorities are mandates from the state constitution and the federal government - things which can't be changed. After that, he said are those policies and laws requiring certain programs - which can be changed.
"Then we fall to the optional," he said. "The things we've done when we could afford it that now we can't afford."
Clinger said the process, which goes by several names including priorities-based or zero-based budgeting, isn't new. Washington State is already doing it. But he said it won't get completely done in the next six months.
"This is going to be an evolution. It's going to take more than this biennium to get us where we want to be but, if we don't start now, it'll never happen," he said.
A training session for agency officials is scheduled for later this month.