CARSON CITY – Nevada state agencies and public education have submitted budgets calling for nearly $8 billion in spending for the upcoming two years, about $3 billion more than what is expected to be available with current tax revenues.
State Budget Director Andrew Clinger said the gap will exist in large part because of the expiration of temporary tax increases approved by the 2009 Legislature, the loss of one-time federal stimulus funds and some increased caseloads, particularly for Medicaid.
The spending plans submitted by state agencies and education by a Sept. 1 deadline assume that the current furlough program and merit pay freezes will not be continued when the new budget takes effect on July 1, 2011. If the governor and Legislature decide to continue the pay freezes and one-day-a-month furloughs, the nearly $8 billion in spending would be reduced by about $480 million.
That still leaves about a $2.5 billion gap in anticipated tax revenue and potential agency spending, Clinger said.
About $1 billion of the gap is related to taxes that will expire on July 1, 2011 unless extended by the Legislature. Lawmakers in 2009 increased the sales tax and the modified business tax on the state’s largest employers to balance the current budget. Car registration fees were also increased.
The American Recovery and Reinvestment Act funds that will not be part of the next budget total nearly $600 million, Clinger said. So the loss of the temporary tax increases and federal stimulus funds contribute about $1.6 billion of the $3 billion difference between anticipated revenues and spending, he said.
The remainder of the difference has not been completely analyzed yet, but much of it is due to seeing more people becoming eligible for Medicaid, which will require an increase in state general fund spending, Clinger said. Medicaid provides health care for low income people, many of them children and the elderly. The costs are shared by the federal government and the state.
Caseload growth in Medicaid and related programs is expected to require $150 million in new spending over the life of the new two-year budget.
If the spending level for the 2011-13 general fund budget ends up at $7.5 billion because furloughs are extended, it would be an increase of about $1 billion over the current two-year budget where spending is expected to total $6.5 billion by June 30, 2011, Clinger said.
But those numbers don’t paint a full picture, he said. The nearly $600 million in lost federal stimulus funds will have to be made up with general fund revenue in the next budget, so that is a major factor in the increase.
But there are some actual proposed spending increases in the new budget, particularly the $150 million in increased Medicaid spending, Clinger said.
“It is going to be important that we outline how you get from $6.5 (billion) to the $8 (billion),” he said. “I haven’t gone through the process of comparing the current $6.5 billion to the $8 billion to sort of give you a reconciliation of that but that is one of the things we will do.”
A number of legislative leaders have already said taxes have to be on the table as a potential solution to the budget shortfall, but both leading party candidates for governor have rejected the idea of new or increased taxes to bridge the gap between revenue and spending.
Assembly Majority Leader John Oceguera, D-Las Vegas, said he believes lawmakers must first look to find efficiencies and implement reforms where possible. After that process is completed, there will likely still be a gap between revenues and what is needed to fund the operations of state government for the next two years, he said.
“But I think we ought to work on the checkbook side of things first, on what we’re spending money on,” Oceguera said.
The amount or revenue available to fund state programs and services won’t be known for certain until after the Economic Forum meets in December. The group’s projections must be used by lawmakers in adopting a balanced budget.
Clinger’s office has also embarked on a review of the programs being offered by state government with an eye to identifying the core services that must be provided. Programs that do not meet the priority criteria would then be on the table for potential cuts or even complete elimination as part of the budget balancing process.
The Legislature has also created a committee to perform a fundamental review of some state agency budgets with an eye towards finding savings and efficiencies. The panel meets again on Wednesday.
Budget Director Andrew Clinger says the proposed state spending levels will have to be reconciled with the current budget:
Clinger says the potential of $1.5 billion more in spending in the next budget must be explained:
Assembly Majority Leader John Oceguera says Legislature must first look to efficiencies in state government before considering new revenues: