Nevada Agencies Fear Cuts as Shortfall Nears $800 Million

CARSON CITY, Nev. (AP) - As Gov. Jim Gibbons and top Nevada lawmakers prepare for a private meeting on revenue shortfall estimates nearing $800 million, educators and others who already faced 4.5 percent budget cuts aired concerns Monday about more reductions.

The shortfall projected by mid-2009 would be four times what Gibbons had estimated last fall. When he imposed the 4.5 percent cuts in January, the figure has grown to well over $500 million mainly due to lagging sales tax and other revenue collections.

It's likely that Gibbons will soon look at more budget cut plans, and leaders of Nevada's K-12 public schools and university college systems are concerned because the January reductions are costing them nearly $151 million.

"With the first go-around, we pretty much exhausted all the easy-type cuts," said state public schools chief Keith Rheault. He added that more cuts could lead to reductions in staffing for athletics or other non-teaching programs.

Jim Rogers, chancellor of the state university-college system, said the system can't take more cuts because "at this point, we're standing on the ledge of absolute destruction and permanent injury."

"You can't close peoples' learning down," said Rogers. "The issue is much more fundamental than the amount of money. When are we going to stand up and do what's right?

Rogers favors a renewed push for a special legislative session to find new funding sources. That's something Gibbons, who ran on a no-new-taxes program in 2006, has repeatedly opposed. Senate Majority Leader Bill Raggio, R-Reno, has joined Gibbons in opposing a special session on taxes.

Howard Skolnik, director Nevada's prison system which had to reduce prison spending by $25 million under Gibbons' 4.5 percent cuts, said he hopes that a move to lease out the state's 500-bed prison in Jean will generate revenue that would help in the event of more cuts.

Without a viable lease in the coming fiscal year, Skolnik said a shutdown of some other institution "is the only way realistically to absorb additional reductions." He added that staffing cutbacks would create unsafe conditions for inmates and employees.

The state's Department of Health and Human Services had to cut about $82 million under the 4.5 percent plan, and Mike Willden, head of the big agency, stated Monday, "Certainly with additional cuts we would have to look at a possible reduction in present client services." He didn't elaborate.

Gibbons, Raggio, Assembly Speaker Barbara Buckley, D-Las Vegas,
and state Budget Director Andrew Clinger are among those expected
to meet Monday to discuss the looming shortfall.

Raggio said Friday that the estimates, based on a continuation of the current slump in tax collections so far this fiscal year, could even go over the $800 million - but even at that the state wouldn't be as bad off as more than two dozen other states facing economic problems.

The majority leader also sided with Gibbons in opposing the idea of a special session to get more tax revenue, saying, "When the revenue isn't there, you need to cut. You don't tax your way into profitability during any kind of an economic downturn."

Gibbons press secretary Ben Kieckhefer has said it's unlikely the first-term Republican governor would call a special legislative session to find new revenue sources because of his "long-standing political philosophy that it's inappropriate to tax or fee your way out of economic difficulty."

While some lawmakers could press for a special session, Gibbons
has final say on whether to call one.

In developing their shortfall projections, analysts for the governor and state lawmakers have tracked gloomy reports on major revenue sources, including a March 7 Gaming Control Board report showing a 5 percent drop in the casino win in January compared with the same month a year ago.

By the end of next week, a critical report on January sales is expected. The most recent sales report, showing a 1 percent decline in December, came out at the end of February. Taxes based on gambling and sales are the main state revenue sources.

Once the latest sales tax report is in hand, along with reports on the state's interest income and other revenue sources, Keickhefer said the shortfall projection will be finalized. As of Monday, he said Gibbons hadn't told agency directors to start planning for more cuts.

Besides gambling and sales taxes, an update at the end of February showed that insurance premium, real estate transfer and business taxes also are down.

In the July-December 2007 period, the insurance premium levy was down nearly 14 percent while the real estate transfer tax was down
about 25 percent and the business tax was down about 9 percent
compared with the same period a year earlier.

Despite the various reports, Gibbons has said he's hopeful that the state's economy will turn around. Economists say a new boom in Las Vegas megaresort construction could dramatically improve revenues starting in 2009.

(Copyright 2008 by The Associated Press. All Rights Reserved.)