Analysis: State of Nevada budget deficit growing as 2015 legislative session nears

State officials — especially in the governor’s office — aren’t talking much about it, but Nevada’s budget expenses are growing far beyond the revenue that will be available for the rest of this year and the next biennium.

First, there’s the fact the current $6.6 billion General Fund budget is balanced on the backs of $1.184 billion worth of temporary tax increases and revenue diversions. Those are all set to sunset June 30, 2015.

Although he has twice extended those revenue increases, Gov. Brian Sandoval hasn’t said what he plans to do for the 2016-2017 fiscal year budget cycle.

Sandoval said Friday he and his staff have been aware of the problems in Medicaid, K-12 education and other areas but he said he wasn’t ready to say how he plans to address them at this point.

The current budget took its first hit when the revenue from the Net Proceeds of Mines tax fell $70 million short of what was budgeted in Fiscal 2014. It probably won’t be quite as bad for Fiscal 2015 — but likely some $50 million less than projected.

So even if the sunsets are extended, there’s at least a $120 million shortfall.

Then there’s the portion of the K-12 education funding the state is on the hook for. When enrollment falls short of projections, the state gets money back from the Distributive School Account but, when enrollment is higher than budgeted, the state is required to make up the difference.

Clark County School District’s enrollment came in higher than projected in Fiscal 2014, which will force the state to move money budgeted for Fiscal 2015 back to fill in a nearly $30 million hole. But Fiscal 2015 enrollment in Clark also is expected to be higher than budgeted for, further increasing what the state owes.

Just fixing this biennial budget will cost upward of $60 million.

Since that larger student population isn’t going to just disappear in the next biennium, the state will have to add millions of dollars to the 2016-2017 biennial budget. How much hasn’t been worked out, yet.

That’s not all

Projections for the growth of Nevada’s Medicaid population under the Affordable Care Act have turned out to be significantly underestimated this budget cycle. There are already more than 560,000 enrollees — about what was expected by the end of this budget cycle nine months from now.

The state pays just more than a third of the cost for most of those Medicaid recipients. The federal government currently pays 100 percent for those made newly eligible by the Affordable Care Act but, starting in Fiscal 2017, will begin reducing what it pays until, four years later, the state will have to pay 10 percent of the cost.

Then Health and Human Services Director Mike Willden, who has since joined the Governor’s Office, said in June he sees Medicaid’s budget increasing by as much as $400 million in the next cycle, about a third of which — $130 million — would be on the state to pay.

Whether the number of enrollees continues to increase depends on whether there still is a backlog of people who are eligible but haven’t yet signed up. State officials are hoping the vast majority of those eligible have already signed up and the growth of Medicaid will slow dramatically.

That’s still not all

Two years ago, the actuaries said the Public Employees Retirement System should increase its premium rate by 2 percent — a 1 percent hit to employee paychecks and an equal amount from the state. PERS is expected to seek another similar increase this coming biennium.

If the PERS rate does increase another 2 percent, the state’s share of the cost would be about $8.7 million a year. But that doesn’t count what the state would have to pay the 17 school districts in which, typically, the employee doesn’t pay half the retirement premiums. The school district does and, in most cases, that cost is budgeted through the Distributive School Account and actually paid by the state. That would be a much larger number.

These projected shortfalls don’t include the large number of roll-ups in the cost of doing business the state has little or no control over. One of the biggest of those is medical and prescription drug cost inflation which, alone, could add millions more to costs.

That list also includes a laundry list of case loads in different programs for which the state is, at least, partly responsible. Others include contractual increases for rent, supplies and services.

On top of everything else, the Nevada System of Higher Education has submitted a budget that requests $97.5 million more in Fiscal 2016 and $101.5 million more in Fiscal 2017.

Combined, all of those factors leave the governor and lawmakers with far less cash than they need to maintain existing services for the upcoming biennium.