Agencies told to plan for potential 5% budget cuts

State agencies were told Wednesday they should plan flat budgets for the next biennium and to recommend spending reductions of 5 percent below that.

The announcement came during the Sandoval administration’s first presentation on the next budget cycle and to veteran agency heads it must have felt a lot like deja vu — the same thing they were told during the depths of the recession.

“There is no intent to cut the agencies,” said Finance Department Director Jim Wells.

But he said revenues are coming in at or a hair less than projected and the state must be prepared to make reductions if necessary. He told a crowd of agency officials at the briefing it’s up to them to decide what programs would be reduced and, if necessary, by how much. He said preparing those decisions in advance would make things a lot easier and better than at the last minute if the Economic Forum tells the administration the money hoped for won’t be there.

He said hopefully no cuts will be needed but the administration doesn’t want a repeat of what happened when the economy collapsed in the fall of 2007, leaving the state almost no time to react.

Wells said the current General Fund budget of $7.3 billion will probably grow to $7.5 or $7.6 billion, but that doesn’t mean there will be room for enhancements.

“Any increase in revenues would be eaten up by the roll-ups,” he said referring to cost increases such as in medical services that are beyond state control. One big category in which there’s a projected decrease is the percentage of Medicaid the federal government pays. Even a fraction of a percent reduction there costs the state millions since Medicaid is the state’s largest single budget at $5.3 billion.

In addition, there are the ongoing costs built into the current budget that have to be paid next cycle including the employee raises and the 100 added officers at state prisons among others.

So Wells and Sandoval’s Chief of Staff Mike Willden said proposed budgets for the 2018-2019 cycle can be no more than twice the amount budgeted for fiscal 2017.

Wells emphasized his office doesn’t want across the board cuts but prioritized reductions targeting low priority programs.

Willden said the 2015 session was about fixing Nevada’s revenue system.

“2017 is going to be about cost controls, efficient government, those kind of things,” he said. “We’re looking for better ways to manage your resources.”

There are, however, exceptions to that limit including caseload growth, agency specific inflation, federal and court ordered increases and any enhancements authorized by the governor’s office. Generally, the caps apply to state General Fund and Highway Fund spending, not to federal and other revenue sources.

The budget plan also laid out a list of new and tighter deadlines for submitting budget plans and bill draft requests, most placed in statute by the 2015 Legislature.

The first of those deadlines is April 15 when agencies have to submit legislative summaries to the governor’s office. Non-budget bill draft requests are due August 1 at the Legislative Counsel Bureau and budget bills are due at the budget office September 1.

Also this time, LCB won’t accept “placeholder” bill draft requests — a blank request that doesn’t specify what would eventually be in the proposed legislation. He said BDRs must contain enough information to tell what the bill is going to be about.

Wells said since the governor only has 110 BDRs next time, they have to keep a tight rein on the requests for statutory changes.

The governor is also clamping down tighter on the portion of the budget cycle known as the “Agency Request” budget. The agency request budget came in at about $8 billion at the start of this current cycle, which Sandoval tried initially to keep from becoming public — and even from the legislative fiscal staff.

This time, he has set strict rules requiring agencies to get permission before including any enhancement above two-times-current-spending in their proposed budgets.

That will frustrate advocacy groups and government watchers for a long list of agencies who see the agency request budget as a view into what the agency believes it needs as opposed to what the governor’s office thinks.

Willden described the change as “formalizing the enhancement process.” He said the governor’s office would be providing “some pretty firm directions” as to the kinds of enhancements it intends to include in the budget.