CARSON CITY – State Budget Director Andrew Clinger yesterday painted a bleak picture of Nevada’s next two-year spending plan, saying under current tax and spending levels every single program and agency except for education would have to be eliminated to balance the budget.
“You could eliminate everything, and have nothing but K-12 and higher ed, and you would have a balanced budget,” he said. “So the magnitude of the problem that we face, or the challenge that we face going into the next biennium, is huge.”
Higher and lower education together make up about 55 percent of the state budget each year.
The state appears to be at least $3 billion short right now on what is expected to be a $6.5 billion two-year general fund budget, or about 46 percent less than what is required, Clinger said.
As a result, the Gibbons Administration has embarked on a fundamental review of state programs to determine what services can be continued and which ones may have to be eliminated, he said.
“Is there a better way to do it, is there a different way to pay for it, or is it a service you simply no longer provide,” Clinger said.
The revenue shortfall is due to myriad factors, including:
- Tax revenues coming in far below the levels seen in prior boom years;
- About $1 billion in temporary tax increases approved by the 2009 Legislature that are set to expire next June 30;
- The loss of one-time federal stimulus funds that have helped balance the current budget;
- The elimination of employee furloughs and restoration of employee benefits that were cut in 2009 to balance the current budget. Ending furloughs and restoring benefits would cost about $500 million.
The Legislature can decide to extend the expiring tax increases or look to alternative tax increases, and it can also extend the furloughs and benefit cuts as ways to cut into the shortfall in the 2011 legislative session, Clinger said.
The 2009 Legislature temporarily raised the sales tax by 0.35 percent and nearly doubled the modified business tax on the state’s largest employers to help balance the budget. The tax was reduced for smaller employers.
Any tax increase or continuation would require a two-thirds vote in each house of the Legislature. Neither of the two major party candidates for governor has gone on record as supporting tax increases as a way to balance the budget.
“This is a challenge that this state has never faced before,” Clinger said.
The comments came as the Public Employees’ Benefits Program Board began to look at ways of saving $111 million in the health insurance program for state employees and retirees, made necessary because of the state’s budget problems. The board considered raising deductibles and cutting benefits to reach the target. The plan is not expected to see any taxpayer-paid funding increases in the two-year budget that will begin July 1, 2011.
Jim Wells, the executive officer overseeing the program, yesterday told the board it must make decisions on how to best make the cuts because the preliminary budget is due to Clinger’s office by Sept. 1.
“We do need to make some relatively significant decisions today,” he said.
Clinger said that as a percentage basis, Nevada is in worse fiscal shape than any other state in the nation.
Nevada is collecting the same amount of sales tax right now as in 1999, adjusted for inflation, he said. This despite large population increases since that time, Clinger said.
“I hope at least January of this year represents the bottom of this, and we’re starting to grow,” he said. “Even though revenues are doing better it’s not going to bring us out of this hole we are in anytime soon.”
Gaming revenues, unlike in previous recessions, have also been hurt in this economic slowdown that some are calling the Great Depression, Clinger said.
For the 12 months ending in May 2010, casino revenues were down nearly 5 percent compared to the same period a year previously. And for the 12 months ending in May 2009, revenues were down nearly 13 percent from the same period in 2008.
Another way to see the effect is to look at the amount casinos take in each year per visitor.
“We are at historic lows on the amount the casinos win per visitor, $170 per visitor,” he said.
The figure also is inflation adjusted, and reflects the amount casinos take in, or win each year, divided by total annual visitors. The $170 figure puts Nevada below any prior low seen in records dating back to the late 1970s, Clinger said.
The two revenues make up the majority of the state’s annual general fund budget.
State Budget Director Andrew Clinger says budget situation is dire:
Clinger says that is why a fundamental review of the budget is under way: